The Amazon Whole Foods acquisition is under scrutiny by the US regulators. Some groups have raised anti-trust issues, and the regulators are taking more time to review the purchase. Some Democrats have asked the regulators to look more closely at the $13.7 billion purchase. They believe that the acquisition may result in a restriction in consumer choice.
Whole Foods expected the deal to be completed during the second half of this year. However, it may now drag on until May of next year. Nevertheless, it is expected that the deal will still go through – it will just take a bit longer than expected.
There will still be consumer benefits, such as reduced prices for foodstuffs, multiple delivery options and continued competition from other stores. Amazon will have competition from nationwide stores such as Target, Costco, Kroger and Walmart. So what concerns are behind this delay? It’s more than just about competition and the impact of the takeover on the consumer.
Earlier in July, Rhode Island Democrat, David Cicilline, called for a congressional hearing on the matter. He claims that the deal may result in Amazon becoming too powerful, thus violating competition laws. He also claims that the deal could impact on workers’ pay and affect innovation in the ‘grocery-delivery’ sector. Another of his claims is that Amazon’s ability to automate would mean a cut-back in jobs and wages.
Robert Riegel, a shareholder of Whole Foods, claims that the share offer undervalues Whole Foods. He has filed a class-action lawsuit in Texas stating that the deal was misleading. It also claims that the company did not keep stakeholders
clear about the offer. Important information was withheld from shareholders.
There have also been complaints regarding the way Amazon compares prices to show how customers can save money. These complaints had led the Federal Trade Commission to look into the matter. They began the investigation to the price comparison issue. It is not yet a formal investigation but could be if the initial probe indicates that it should be.
There has been a trend for smaller stores to fold under the pressure of consolidation of supermarkets becoming too competitive. Many believe that Amazon’s experience of online marketing and ability to cut prices could enable it to dominate the market. This would, in turn, lead to many more small grocery stores to close and increased market dominance by Amazon.
Other issues have been raised by the potential Amazon Whole Foods acquisition. Marcia Fudge, a democrat representative for Ohio, raised the situation of African Americans. They already suffer from a county-wide insufficient choice of healthy foods from grocers she claimed. She said that the regulators should look beyond the competitive impact of the merger. For the past 40 years, that has been the only aspect of American anti-trust law that has been considered.
There is more to it that, she implied. She said: “While we do not oppose the merger at this time, we are concerned what this merger could mean for African American communities across the country already suffering from a lack of affordable healthy food options from grocers.” Comments have also been made about share prices of potential Amazon rivals in the US grocery industry
In fact, one immediate result of this news was a significant drop in share prices of potentially competing stores. However, it is not yet a done deal. It is highly likely that it will be, although there are some roadblocks in the way. Amazon has the reputation and experience to get past these.
The only bugbear is the fact that such mergers have not always been successful. Banking and telecom mergers have failed in the past. However, most of those involved believe the Amazon Whole Foods acquisition will happen and will be successful.
The Federal Trade Commission will receive a resubmission of documentation regarding the Amazon Whole Foods acquisition this week. This will result in a new deadline for a preliminary government review of the agreement. This was disclosed by Whole Foods in a filing made Friday with the Securities and Exchange Commission. The smart money is on the acquisition going through in the first half of 2018.
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