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Finance

Mars’ $36 Billion Deal Faces Tough Review by Lina Khan’s Federal Trade Commission

Horizonstocks

Background on Lina Khan and the FTC

Before she became the chair of the U.S. Federal Trade Commission (FTC), Lina Khan expressed concerns about a lack of competition in the candy industry. In 2013, while working as a junior staffer at New America, a progressive think tank based in Washington D.C., Khan wrote an article for Time Magazine blaming the "chocolate oligopoly" for limiting the number of candy makers.

At the time, she noted that her local Safeway carried only 40-odd brands of candy, with almost all of them produced by one of three companies: Hershey, Mars, and Nestle. This limited competition would eventually become a key issue in Khan’s tenure as FTC chair, where she has prioritized promoting competition in industries that have experienced significant consolidation.

The Deal and Antitrust Concerns

Mars is set to acquire Kellanova, the parent company of KIND bars and RXBAR, for $36 billion. While Mars and Kellanova have little overlap in chocolate products, they compete heavily in snack bars and protein bars. This potential antitrust issue has raised concerns that the deal could harm competition and drive up prices for consumers.

FTC Review

The FTC is currently reviewing the deal to determine whether it will pursue an in-depth investigation. The agency has 30 days after Mars and Kellanova submit their required antitrust review to decide if they want to proceed with a probe. If approved, the deal could lead to significant changes in the snack bar and protein bar markets.

Industry Response

Kellanova CEO Steve Cahillane downplayed concerns about antitrust risks, stating that there is little overlap between Mars and Kellanova’s product lines and that the company expects no issues with regulatory approval. Mars also expressed confidence in its ability to resolve any competition concerns through divestitures or other means.

Advocates Push for Blockage

However, some antitrust advocates are pushing the FTC to block the merger due to concerns about consolidation in the grocery industry and potential price gouging. The deal comes amid historic levels of grocery inflation, with food prices a key driver of economic discontent among households that shop for groceries multiple times every week.

Implications

The outcome of this review will have significant implications for the snack bar and protein bar markets, as well as the broader grocery industry. If approved, the deal could lead to further consolidation in the industry, potentially driving up prices for consumers. However, if blocked or subject to significant divestitures, it could promote greater competition and innovation in these markets.

Conclusion

The FTC’s review of Mars’ $36 billion deal with Kellanova is a critical moment in determining the future of the snack bar and protein bar industries. As Lina Khan’s FTC prioritizes promoting competition, this decision will set an important precedent for antitrust enforcement in the U.S.

Additional Background on the Industry

The snack bar and protein bar markets have experienced significant consolidation in recent years, with many brands acquired by larger companies. This trend has led to concerns about reduced competition and potential price gouging among consumers.

Key Figures

  • Lina Khan: Chair of the U.S. Federal Trade Commission
  • Steve Cahillane: CEO of Kellanova
  • Jennifer Rie: Antitrust analyst at Bloomberg Intelligence