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    Published on: November 29, 2022

    I love the notion that media companies pursuing proprietary content can serve as a metaphor for retail businesses focusing on private label and differentiated services.  And now, the latest example … a deal that likely will be worth billions of dollars.

    Published on: November 29, 2022

    Kroger CEO Rodney McMullen and Albertsons CEO Vivek Sankaran are scheduled to testify today about their proposed $20 billion merger before the US Senate's Subcommittee on Competition Policy, Antitrust and Consumer Rights.

    Sen. Amy Klobuchar (D-Minnesota) and Sen. Mike Lee (R-Utah) lead the subcommittee;  both have questioned the impact the merger on competitive balance.

    The Wall Street Journal writes that "Kroger and Albertsons have said the proposed merger would give them a more national reach with a bigger network of stores, distributors and suppliers. The companies have said they expect to invest $500 million in keeping prices low, along with spending $1 billion on wages and benefits and $1.3 billion on improving Albertsons stores.

    "The chains have said they expect the regulatory review process to take as long as two years, with the deal closing in early 2024. They have submitted information on the proposed deal to the Federal Trade Commission for review and have said they expect to sell stores to secure approval. In grocery-sector deals, regulators typically have focused on examining market share and overlaps in specific geographic regions."

    The Journal notes that "the proposed merger has drawn opposition from elected officials, independent retailers and some union groups over its potential impact on workers’ jobs, as well as on industry competition and food prices for consumers. Some lawmakers in Washington, including Ms. Klobuchar, and state-level officials have said they worry the merger could hinder competition."

    The Journal reports that "also scheduled to testify are Michael Needler Jr., CEO of regional grocer Fresh Encounter Inc.; Sumit Sharma, senior researcher at Consumer Reports; and Andrew Sweeting, professor of economics at the University of Maryland."

    The CEOs testify amid criticism of a planned $4 billion dividend that Albertsons wants to distribute to its shareholders, which has been delayed three times by a Washington State court.  Albertsons maintains that the dividend would have been distributed regardless of whether it had a deal with Kroger, and was part of an extended effort to increase shareholder value.  Washington Attorney General Bob Ferguson, along with a number of other attorneys general who filed separate suits in federal court, argues that paying out the dividend would hurt Albertsons' ability to compete in the event that the acquisition is not allowed to take place by the Federal Trade Commission (FTC).  But Albertsons has disputed that notion.

    KC's View:

    Expect that dividend to be a major subject of conversation today at the hearing, which I think should be interesting.

    McMullen and Sankaran are going to have come in loaded for bear - there are considerable resources being put against the goal of stopping the merger.

    Yesterday, I received an email making the opposition case from Carter Dougherty of Americans for Financial Reform (a coalition of several hundred labor and consumer groups), and Jonathan Williams of United Food and Commercial Workers Local 400, which said in part:

     "…the proposed merger has drawn intense opposition from a bipartisan group of elected officials, organized labor, consumer advocates, and antimonopoly groups. They have asked the Federal Trade Commission to reject the proposed combination. 

    "These are the nation’s two largest standalone grocery chains. They overlap in many markets, including the Washington, D.C. area where Kroger’s Harris Teeter and Albertsons’ Safeway compete, and across large swaths of the West. (Albertson’s other brands, active around the country, include Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s.)

    "The inevitable result of a monopolistic merger of this magnitude often results in store closures, laid-off workers, surging prices – which already rose at double-digital rates over the last year –, and proliferating food deserts in lower-income and rural areas.

    "As part of the merger agreement, Albertsons is paying a special $4 billion dividend to its shareholders – 57 times the size of any previously paid dividend – before the sale to  Kroger. This payment has been engineered by Cerberus Capital Management, the private equity firm that heads a consortium of shareholders that controls Albertsons and has seats on its board. The company has already extracted $4 billion in dividends from Albertsons without the proposed payment.

    "If this payment is made, it will wipe out virtually all of Albertsons’ liquid assets and force the company to borrow extra money. Afterward, the company will be left without cash on hand and saddled with a mountain of debt—$4.9 billion owed to worker pension funds and $7.5 billion to creditors."

    Let's stipulate that McMullen and Sankaran will disagree with some of those numbers and conclusions.  But I think it is fair to suggest that they are going to have to be both aggressive and comprehensive in making their case.

    Published on: November 29, 2022

    The Hill reports that "fifty of Twitter’s leading 100 advertisers have stopped advertising on the site as of Nov. 21, according to a recent report from the left-leaning media watchdog Media Matters for America … The 50 companies that halted advertising on the platform accounted for more than $750 million in spending on Twitter in 2022 and almost $2 billion overall since 2020."

    The story points out that the abandonment of Twitter by these companies - which include Chevrolet, Chipotle, Ford, Jeep, Merck and Novartis, as well as a number of "quiet quitters" that stopped or slowed down their ad spend there but didn't make a big deal about it - coincides with Elon Musk's $44 billion purchase of the social media site, which has raised concerns about content moderation.

    The Hill writes that "Musk laid off about half of Twitter’s workforce in his first week, claiming he had 'no choice' amid the company’s poor financial condition. Several hundred more employees resigned in mid-November when Musk gave them an ultimatum — commit to a 'hardcore' work environment or leave.

    "The billionaire has also made changes to the social media platform itself, unsuccessfully attempting to roll out a paid subscription service for Twitter’s blue check verification and reinstating former President Trump’s account. Musk has also indicated that he plans to reinstate other suspended accounts in the near future."

    KC's View:

    It seems to me that the concerns about Twitter's policies are well-founded.  After all, the company currently seems to be managed by someone who, while admittedly brilliant and innovative, also has all the impulse control of a third grader who has consumed way too much sugar.  This has led to an environment in which he seems to have sacrificed strategy in favor of visibility - Musk seems willing to do anything for a headline, even if it means giving air to things like hate speech and anti-semitism.

    To be clear, Twitter is now Musk's company, and he can do anything he wants with it.  He paid for the privilege.  In fact, way over-paid for the privilege.  But that means companies that traditionally have done business with Twitter can do what they want to do, too.  (I've gotten a number of emails suggesting that Musk is making progressives crazy.  This may be true, but he's also offending a far larger constituency - people who decry hate speech and anti-semitism.  At least, I think it is a far larger constituency.)

    Musk currently is taking on a more formidable opponent - Apple.

    The Wall Street Journal reports that "Apple and its Chief Executive Tim Cook have the ability to hold great sway over Twitter’s potential success, as the iPhone maker is a major advertiser and tightly controls the software on its App Store.

    "In a string of tweets accusing Apple of stanching free speech and claiming that the tech giant had threatened to kick the Twitter app off the iPhone, Mr. Musk introduced a new wrinkle in Apple’s efforts to maintain control over software distribution, acting as a megaphone for critics who say the company holds too much power through its App Store.

    "By calling attention to Apple’s role as a gatekeeper for the App ecosystem, Mr. Musk is picking up the mantle in the yearslong fight developers have waged against Apple and its fees. Mr. Musk could bring new focus to the company from lawmakers and regulators around the world, including politicians who have expressed concern that Silicon Valley is silencing conservative voices."

    And the New York Times writes:

    "Mr. Musk has been poised to confront Apple since taking over Twitter. His business plan is predicated on shifting its revenue from a dependence on advertising to a greater reliance on subscription sales. But any new subscription revenue will be subject to Apple’s practice of taking as much as a 30 percent cut.

    "Mr. Musk’s complaints also come at a pivotal time for Apple. There’s a push in Congress during the final months of the year to advance a series of antitrust laws. Among the bills under consideration is the Open App Markets Act, which seeks to give developers more control over their apps and allow them to skirt the fees that Apple and Google charge."

    Seems to me that while Musk wants to do what he wants with Twitter, he really doesn't want other companies to enjoy the same privilege.

    One of the things that Musk wrote on Twitter (natch) was that Apple “has mostly stopped advertising on Twitter," and then he asked, "“Do they hate free speech in America?”

    Memo to Musk:  Not advertising on Twitter is every bit as much about free speech as advertising on Twitter.  I exercise free speech on MNB every day when I choose - freely - what to say and what not to say.

    (Quick memo to anyone pulling their ads from Twitter:  You can find a non-toxic, civil, content-moderated home here on MNB.  Just sayin'.)

    I'm no expert, but it seems to me that Apple's 30 percent cut on App Store revenues is the company's margin - it gets to set the terms based on what it thinks the market will bear, in the same way that every retailer sets margins based on what seems appropriate and acceptable.  Now, Apple's market power may give it an unfair advantage, and it is possible that in the long run it will have to reduce its App Store margins.  But it also is ironic that Musk seeks regulatory redress in a way that he almost certainly would resist if it were aimed at him and Twitter.

    If I were running a brand, I'd stay as far away from Twitter as possible.  The potential for collateral damage is just too great.

    It is like the old joke about why it never makes sense to wrestle with a pig - you both end up filthy, but the pig enjoys it.

    Published on: November 29, 2022

    •  From the Associated Press:

    "Days after flocking to stores on Black Friday, consumers are turning online for Cyber Monday to score more discounts on gifts and other items that have ballooned in price because of high inflation.

    "Cyber Monday is expected to remain the year’s biggest online shopping day and rake in up to $11.6 billion in sales, according to Adobe Analytics, which tracks transactions at over 85 of the top 100 US online stores. That forecast represents a jump from the $10.7 billion consumers spent last year.

    "Adobe’s numbers are not adjusted for inflation, but the company says demand is growing even when inflation is factored in. Some analysts have said top line numbers will be boosted by higher prices and the amount of items consumers purchase could remain unchanged — or even fall — compared to prior years. Profit margins are also expected to be tight for retailers offering deeper discounts to attract budget-conscious consumers and clear out their bloated inventories.

    "Shoppers spent a record $9.12 billion online on Black Friday, up 2.3 percent from last year, according to Adobe. E-commerce activity continued to be strong over the weekend, with $9.55 billion in online sales."

    Published on: November 29, 2022

    •  From the Wall Street Journal:

    "Prosecutors in Buffalo, N.Y., said the man who killed 10 people during a racist massacre at a supermarket there faces a mandatory sentence of life in prison after pleading guilty to state charges on Monday.

    "Payton Gendron, 19 years old, pleaded guilty to 15 counts, including first-degree murder and domestic terrorism, Erie County District Attorney John Flynn said. Gendron admitted to shooting 13 people during the May 14 attack on a Tops Friendly Market in a predominantly Black neighborhood … Gendron will be sentenced on Feb. 15, according to Mr. Flynn. The domestic terrorism charge carries a mandatory sentence of life in prison without parole."

    The story reminds us that "Gendron donned body armor and opened fire with a semiautomatic rifle, police and prosecutors said, and he live-streamed the attack on social media. Gendron killed 10 people and left three others wounded. In an online diary, he described himself a racist. The document included the writer’s goal to kill as many Black people as possible."

    Published on: November 29, 2022

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  US Foods announced that it has hired Dave Flitman, most recently president-CEO of Builders FirstSource, to be its new CEO, effective January 5.

    •  Oregon-based drive-through coffee chain Dutch Bros. said yesterday that it has hired Christine Barone, a former Starbucks executive who most recently has been CEO of the True Food Kitchen restaurant chain, to be its new president.  

    The Oregonian notes that Joth Ricci remains Dutch Bros’ CEO.  In addition, the story says, "the coffee and energy drink chain has more than 640 shops and is on track to open well over 100 this year, expanding in California, Oklahoma and Texas. Dutch Bros aims to have 4,000 shops nationwide within 15 years."

    That's why you hire someone with Starbucks in his or her resume - they tend to know something about expansion.

    Published on: November 29, 2022

    Last week, we reported that there was a mass shooting at a Walmart in Chesapeake, Virginia, last night, which resulted in six fatalities.  The killer, who committed suicide, was a an overnight supervisor at the store.  The six people who were murdered were all employees.

    I commented:

    This is madness.

    I'm sure there will be people who will offer "thoughts and prayers," but that is not enough.  Not even close.

    When I write about these stories, I'm always careful to explain that I do not come from a gun culture, so I do not have any sort of emotional connection to the ownership and use of firearms.  But I'm tired of offering that caveat.

    I'm sure I will get criticized for saying this, but I don't much care.  There are mass shootings in churches and schools and clubs and stores, and all I can think is that there are way too many guns out there.  I have no idea if the Walmart shooter got his guns legally or not, but I don't much care.  It just seems to me that there is something deeply flawed in the American psyche that we allow this to happen, and that we've gotten so used to it happening.

    Retailers and schools and churches and clubs are going to have to turn themselves into armed camps in order to defend their people, and I think there is something deeply flawed in a culture that somehow thinks that this is permissible.

    To be clear, I have no solution.  But there has to be a middle ground on which reasonable people can agree that will allow for the continued enshrinement of "the right to bear arms" and yet create an environment in which only qualified people can get them.  And I do wonder what the tipping point will be, and wonder why we haven't reached it yet.

    There were two more shootings at Walmarts in different parts of the country subsequently, which led me to comment:

    Three Walmart shooting in less than a week?  Jeez.

    In September 2019, responding to a series of recent mass shootings - including one in an El Paso Walmart store that resulted in 22 deaths - CEO Doug McMillon wrote, "We want what’s best for our customers, our associates and our communities. In a complex situation lacking a simple solution, we are trying to take constructive steps to reduce the risk that events like these will happen again. The status quo is unacceptable."

    I have no doubt of McMillon's sincerity.  But I also have no doubt that the status quo remains firmly in place, that people continue to die, that politics and culture seem unwilling and unable to deal with current realities, and that one of the hallmarks of American exceptionalism seems to be that America can be an exceptionally brutal place to live, to be educated, to worship, and to shop.

    Not surprisingly, there was email.

    One MNB reader responded:

    KC, I’m quite certain no one can predict how they will react when faced with an active shooter situation till it happens. However, the frequency of these stories has me considering that I should conceal carry.   

    I have a small pistol perfect for concealed carry and I’m practiced and proficient with it, but out of sheer laziness rarely if ever carry.   

    Given you’re view on guns.  I’m not sure this is the reaction you are looking for or if you’d even feel safer knowing more Sheepdogs are out there? 

    I’ve actually spoken with several local officers about their thoughts on concealed carry and to my surprise were are all for it.  “We can’t be everywhere all the time” was the sentiment.  Rather than being concerned about more guns they seemed to welcome it as added backup.  

    I’ve heard you mention that you did not grow up in a “gun culture,” but as I own several guns, I presume you would place me in that category.  So let me explain, I grew up in the suburbs and started deer and turkey hunting at age 13 because my uncle, a retired cop, thought it would be a good idea.  Until recently I owned a deer rifle and shotgun.  Funny thing is I started bow hunting and now hunt more today with bow and arrow than a gun just for the challenge.  I purchased my first handgun 10 years ago for home protection as it was cheaper than an alarm system.  I’m not a gun nut, each of my weapons has a purpose for either hunting or home protection.  I did purchase a second handgun recently for home protection because it would accept larger capacity magazines because you never know how many bad guys there might be.  And I’m considering an AR-15 to add to my tool kit because I remember the incident in St. Louis where a lawyer defended his property with an AR-15 as angry protestors threatened to burn his house down.  He and his wife were unharmed, and his show of force prevented it from happening.  The weapons I currently own are insufficient for a mob scenario.   

    There are more than just good guys and bad guys.  There are Wolves (bad guys), Sheep (defenseless good guys) and Sheepdogs (prepared/armed good guys).  Cops are in the Sheepdog category defending the flock from the Wolves, and I plan to be a Sheepdog also.  You’re welcome! 

    I acknowledge your perspective.  But just for the record, I didn't say, "Thank you."  I just want to be clear about that.

    From another MNB reader:

    I don't generally engage in this type of forum though I have been reading your blog for years.

    So, to provide a little background - I grew up hunting with my dad and brothers in law in rural Michigan.  I still own guns.  So, I guess by your definition, I would be someone that does come from a "gun culture."

    I also am extremely frustrated and concerned about all of the mass shootings.  It makes me want to carry all the time for protection.  (Which I don't believe is a perfect solution - but may be the best for a lot of people at this time)  We do have the ability to conceal carry in Michigan, but I am not a permit holder..... yet.....

    It is an extremely complicated issue.  I believe a very high percentage of these mass shooters are young white men.  Personally, I believe the cause is not guns or a gun culture.  I believe it is the breakdown of human relationships.  I think this is partially caused by the destruction of the family structure.  A lot of young men spend all of their time locked in their bedrooms playing video games 16-18 hours a day.  Though I don't blame it on video games directly, I think it is causing incredible disconnection from human relationships.  Dads are often not in the picture.  If dads are around usually both parents are working full time.  Kids are simply not nurtured the way they were 30-40 years ago.  These kids do not have the human connections that we had when we were young.  I don't know how to fix that.  "The horses are out of the barn" and I am not sure we will ever be able to put them back.  I actually think this explains the problems with drugs in our society as well.

    I am open to more restrictions on guns.  I think most people are.  But, what does that truly mean?  Buy backs?  More background checks?  Have those things worked?  Outright outlawing guns?  Not realistic and Not constitutional......  

    It is complicated and frustrating.  I guess I just wanted to tell you that I feel your pain on this subject even though I probably come from a very different perspective.

    Have a great Thanksgiving.  Love your blog - I appreciate it.

    From another MNB reader:

    Couldn’t agree with you more.  As a mother of two kids, 4 & 6, I fear what this country will be like for them in 10 years.  It terrifies me to my core.  We went to the Bentonville square earlier this week for the lighting of the square, half of the time I was only thinking about how I would protect both kids if something starts happening.  All I should have been thinking about is how much fun they were having.  What will I do when they are teens and I can no longer use my small 5’1 frame to cover their bodies?  I’m so tired of thoughts and prayers with zero action.  You are so spot on with your comments.

    And I do wonder what the tipping point will be, and wonder why we haven't reached it yet.  How have we not reached it yet?  If we haven’t by now, there is most likely nothing that can be done because no one who can make a difference actually cares.  This is beyond tragic.

    MNB reader Steven Ritchey wrote:

    First off, I totally agree with you on guns and gun legislation.  I'm not sure what all the steps we need to take are, but what we're doing now obviously isn't working.

    One example I use that gun activists say has no bearing, but I think that's because they want unfettered access to guns is automobiles, trucks and cars.

    I have to register both of my vehicles for them to be legal to drive, both have to have current safety inspections.  To have a drivers license, I had to pass a written test and a road test.  Hard to believe that's been almost 50 years ago now.

    Now, every so often, when it's time to renew my drivers license I have to go to a DMV office and take a vision test, you know to make sure I still see well enough to drive.  In some states I'm at an age where I may be required to take a road test.  That's for a car or truck whose sole purpose is to get from point A to point B, it's reason for being is for transportation.

    Now, I know lots of people drive poorly, horribly, we have lots of auto accidents, sometimes people die.  It's a consequence of when we drive poorly or make bad decisions, but killing isn't the purpose of a vehicle.

    However, a firearm has only one purpose, to kill.  Doesn't it make sense we would have stringent background checks for owning one.  Doesn't it make sense we might even have some restrictions on what kind of guns people like you and I might purchase.  I mean, if I drove a large truck or bus, I'd need a commercial license.

    I know the gun lobby says that they have a right to own a gun, or a hundred.  Every right we have, has limits.  We have a right to a free press, but, news media still can't deliberately, knowingly make false statements about someone.

    There are vehicles made in other countries that can't be legally sold here, because they don't meet standards in one way or another.  So then, why can't we have a law that says automatic weapons, and large capacity magazines cannot be sold except to law enforcement or for military use.  Don't try to to tell me a rifle that's automatic fire with a 30 round clip is a hunting rifle.

    The elephant in the room I've not brought up is politics, because I know yours is not a political site.

    Anyway, just my two cents worth, for what it's worth.

    And from another reader:

    As a nation there have been 600+ mass shootings this year-to-date. Over the years we have seen mass shootings at thousands of schools, churches, Walmarts, workplaces, nightclubs, restaurants, etc. It seems that Americans are simply fine with deranged individuals, often no more than children,  buying military weapons and using them to murder fellow Americans.  

    What will it take for reasonable Americans to say enough is enough. Thoughts and prayers clearly are not working. 

    And from yet another:

    Bravo on your statement about our ridiculous gun culture. The Repugs lost me after Sandy Hook. Uvalde sadly continued the tradition. If right wingers can't muster enough compassion to take action after the massacres of first graders they are truly lost souls.

    MNB reader Barb Grondin Francella wrote:

    I appreciate you speaking up and calling out the madness surrounding this country's gun culture.

    It's horrifying  -- and very few have the courage to take a stand.

    MNB reader Patrick Smith wrote:

    I share a non-firearm background with you, but am supportive of all constitutional rights. I would attempt a parallel with the right to vote. I live in a state with primaries run by parties. To vote for a party member one must be registered to vote in that party and you may only vote for your parties’ candidates. For those who live in walk in voting states you are told when you can vote, only during specific hours for your state, at which precinct you must cast your vote and you only get to vote once. Nothing free and unfettered about voting rights. They are quite specific, yet there is a portion that attempts to curtail voting rights by closing some precincts, shortening hours and the removal of some drop boxes in mail in states. Yet some gun owners expect their rights to be free and unfettered. There will be those who posit that no law will work as criminals will simply pay no attention. By that reasoning we need no laws at all as almost every law is occasionally broken. Reasonable gun safety laws, while protecting the rights of legitimate ownership, should be the focus of all. Clearly thoughts and prayer may offer comfort, but they bring no solution.

    MNB reader Paul Gibbons wrote:

    As I’m sure you know, it’s all about gun SALES.  Gun makers sell more guns and pay lobbyists to disperse a message of “2nd Amendment” and “tyrannical government”.  It’s all bull, and constituents of lawmakers “on the take” eat it up.  Whenever I get into a debate with someone on this (which is usually futile), I always state the following: If big tobacco had used the same playbook as gun manufactures, there would still be ash tray cans at the end of every aisle in the grocery store.

    MNB reader Rich Heiland wrote:

    To their credit, somewhat, Walmart did in 2020 announce it would stop selling guns in what amounted to half its stores. Not sure what the criteria was for deciding which stores were exempt. But it would strike me as a horrible irony that a Walmart employee could be shot with a gun he or she sold to the shooter. As long as Walmart profits from guns and ammo I take any comments about dealing with violence in its stores with a grain of salt.

    And finally, from MNB reader (and one of our faves) Beatrice Orlandini:

    A few days ago I went to an event for international people (mainly women) in Como, Italy.

    I ended up chatting most of the evening with an American lady from Chicago who moved here a couple of years ago with her Italian husband and two pre-teenage boys.
    I was very curious about her experience and the sons' as well.

    She said they loved it and enjoyed the freedom of walking to school and feeling safe.

    No active shooter drills at school, none of the threats that families are facing everyday in the US.

    I had never thought of here as "safe", there are safer places no doubt, but - so far - yes, we can still do everyday very mundane things feeling relatively "safe".  That's a lot.

    I hope we can go on that way.

    Hate to say it, but I am reasonably sure that the US is culturally and politically incapable of resolving this issue in a way that will reduce the number of mass shootings here in any appreciable way.  The fact is that any resolution will mean that everybody will have to be a little bit unhappy with the solution, but will live with it in the interests of saving people's lives.

    To reference the Warren Zevon song, there are way too many lawyers, guns and money, all of them working against any sort of nuanced solution.

    I'm also very sure that we're never going to resolve the issue here on MNB.  (Much as I'd like to.)

    Which leaves me conflicted about how much time and space to dedicate to the conversation.  I'm in the business of content moderation, and I don't want to go down a rabbit hole from which there is no escape, with the conversation becoming toxic.  But, I also recognise that this is a relevant issue for the MNB constituency - when mass murders take place in retail environments, it means that the issue has come to the MNB community's front door.  Ignoring it is not an option, even if my take on the problem leaves some people unhappy with me.

    So I'm going to try to be both measured and vigilant about the conversation, allowing for different points of view without letting the topic overwhelm us in a way that is counter-productive.  That's what makes sense to me, and I hope it makes sense to you.

    Published on: November 29, 2022

    In Monday Night Football, the Pittsburgh Steelers defeated the Indianapolis Colts 24-17.