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One of the biggest economic stories of 2023 was the comeback of labor unions. Hollywood screenwriters, Detroit auto workers, and UPS delivery drivers all walked off their jobs (or threatened to)- and scored massive wins. That power is now surfacing in corporate boardrooms. Plenty of forces can disrupt or seal a merger — antitrust regulators, fickle debt markets, unruly shareholders — but it’s been years since unions were credibly on that list outside of major corporate crises, like the auto bailout in 2008 or airline bankruptcies in the 2000s, when unions made major concessions to save their companies. An interesting case is playing out in the $25 billion Kroger-Albertsons deal, where the second and fourth largest grocery store chains in the U.S. are seeking to combine operations. The Federal Trade Commission has taken a particular interest in the deal, blocking it on grounds of potential consumer price hikes. But the FTC has also stated an unusual argument- it defined unionized grocery store workers as a market in which both retailers compete, right alongside selling food. With most of their 700,000 combined workers unionized, the FTC claims that the merger could weaken workers' bargaining power and hinder strike effectiveness. The argument draws parallels from the successful strategy used by United Auto Workers last year when its members strategically walked out of competing factories to negotiate 25% wage increases. This is not the first time a federal agency has challenged a deal based on effects on workers. But this is undoubtedly the first time any a deal has been challenged based on a theory of harm to a unionized labor market. If the FTC succeeds in blocking the deal over these concerns, the case could spur more worker-focused antitrust complaints and reinforce the overlapping goals of antitrust and labor law in protecting competition and collective bargaining power. But it can be argued that the union’s winning streak is temporary- the product of a historically tight labor market. Also considering that union membership rates remain in long-term decline —falling from 20% in 1983 to 10% last year. Finally, add the fact that younger generations care less about salary or corporate paternalism and expect to switch jobs more than their parents did.

Amidst rising healthcare costs in the United States, patients find themselves increasingly vulnerable to the hidden complexities of out-of-network charges. A recent New York Times investigation has shed light on a little-known data analytics firm called MultiPlan. The company works with big insurers to determine how much out-of-network medical providers should be paid using independent analysis. MultiPlan and the insurers claim that they are combating overbilling by some doctors and hospitals, a severe trend that has been linked to rising health costs. An estimated $1.2 trillion, or as much as 30% of U.S. healthcare expenditures, are attributed to some form of waste or abuse that leads to overcharges. However, according to the NY Times investigation, MultiPlan's system has resulted in patients having to pay more out-of-pocket, as the difference between what they advise a plan sponsor to pay and the total bill gets passed along to the patient. To us, the MultiPlan story is another reminder of the friction inherent in the US healthcare system. Healthcare spending totals $3.8 trillion in the US every year (a staggering 18% of GDP). The US spends nearly twice as much as other developed countries, but its health outcomes are similar. There is a lot of waste and inefficiency in the system, which we believe will have to come out to keep it viable. We have held stakes in two managed care companies, UnitedHealth Group, and Elevance, for many years. Managed care companies have become the gatekeepers of spending and are increasingly moving downstream to become more involved in healthcare delivery. We believe both are on the “right” side of this very complex issue and constitute an important part of helping solve the healthcare spending problem in the United States.