The Federal Trade Commission, in all its majesty, seems
bent on resurrecting the structure-conduct-performance paradigm only with new actors. Not too long ago, the Jarrett regency's appointees blocked a merger of Albertsons with Kroger, to the
predictable hallelujahs from Common Dreams types.
Antitrust advocates on Tuesday welcomed a pair of court rulings against the proposed merger of grocery giants Kroger and Albertsons, which was challenged by Federal Trade Commission Chair Lina Khan and multiple state attorneys general.
"The FTC, along with our state partners, scored a major victory for the American people, successfully blocking Kroger's acquisition of Albertsons, "said Henry Liu, director of the commission's Bureau of Competition, in a statement. "This historic win protects millions of Americans across the country from higher prices for essential groceries—from milk, to bread, to eggs—ultimately allowing consumers to keep more money in their pockets."
"This victory has a direct, tangible impact on the lives of millions of Americans who shop at Kroger or Albertsons-owned grocery stores for their everyday needs, whether that's a Fry's in Arizona, a Vons in Southern California, or a Jewel-Osco in Illinois," he added. "This is also a victory for thousands of hardworking union employees, protecting their hard-earned paychecks by ensuring Kroger and Albertsons continue to compete for workers through higher wages, better benefits, and improved working conditions."
I'm not sure which price scissors are at work in order that Kroger and Albertsons simultaneously compete wages up and grocery prices down. The genealogy of Albertsons suggests things might not be that easy. Direct your attention, dear reader, to that "Vons in Southern California." Years ago,
Vons attempted a merger with another Southern California grocer called Shopping Bag.
In the 1950s, competition in the Los Angeles grocery market intensified. Small grocers were acquired by large companies, and large companies greatly increased their numbers of stores in the city. From 1948 to 1958, for example, the number of stores owned by Von’s Grocery Co. (Von’s) (defendant) increased from 14 to 27. Shopping Bag Food Stores (Shopping Bag), which competed with Von’s, increased its number of stores from 15 to 34. Together, Von’s and Shopping Bag controlled 7.5 percent of the grocery market. In 1960 Von’s acquired Shopping Bag by purchasing all its stock and assets. The United States government (plaintiff) sued Von’s, alleging that its acquisition of Shopping Bag violated § 7 of the Clayton Act. The government argued that the acquisition was likely to worsen the trend of large grocers obtaining greater market share to the detriment of small grocers. The government sought a temporary restraining order, which the district court denied. Eventually, the district court held that the acquisition did not violate § 7 because there was not a reasonable probability that it would create a monopoly or substantially lessen competition. The United States Supreme Court granted certiorari.
I take issue with that "competition intensified" passage. It changed in form, with sole proprietorship grocers served by
Commission Row distributors or jobbers being replaced by vertically integrated grocery chains that organized their own logistics.
To the Supreme Court of the era, the disappearance of the sole proprietors and the combinations into chains were the substantial lessening of competition the authors of the Clayton Antitrust Act had in mind.
Held. The merger of two of the largest and most successful retail grocery companies in a market area characterized by a steady decline, before and after the merger, in the number of small grocery companies, combined with significant absorption of small firms by larger ones, is a violation of § 7 of the Clayton Act. Pp. 384 U. S. 274-279.
(a) By the enactment of the Celler-Kefauver amendment to § 7 in 1950, Congress sought to preserve competition among small businesses by halting a trend toward concentration in its incipiency, and, thus, the courts must be alert to protect competition against increasing concentration through mergers especially where concentration is gaining momentum in the market. Pp. 384 U. S. 276-277.
(b) This case presents the precise situation which Congress intended to proscribe, where two powerful companies merge to become more powerful in a market exhibiting a marked trend toward concentration. Pp. 384 U. S. 277-278.
(c) Section 7 requires not only an appraisal of the immediate impact of the merger on competition, but a prediction of the merger's effect on competitive conditions in the future, to prevent the destruction of competition. United States v. Philadelphia Nat. Bank, 374 U. S. 321, 374 U. S. 362. P. 384 U. S. 278
(d) Since the appellees were on notice of the antitrust charge, the judgment is reversed, and the District Court is directed to order divestiture without delay. P. 384 U. S. 279.
233 F. Supp. 976, reversed.
Page 384 U. S. 271
Forty or so years ago, economists, particularly those of the creative-destruction-competition-is-discovery school scorned the Court's analysis as missing, completely, the irrelevance of those sole proprietor groceries to the real action, which was the emerging supermarket chains. Where Vons and Shopping Bag were relatively minor players compared with Safeway. And yes, a previous generation of structure-conduct-performance economists raised precisely the same objections to Safeway that
they raise today about Wal-Mart.
[Once upon a time] there was a middle-class-friendly economy in which large manufacturing firms produced goods in unionized factories. Wal-Mart is the leading edge of a proletarianized economy in which large retailers squeeze those manufacturers while doing everything possible to drive down wages. Tapped's Ezra Klein spells out those behaviors in more detail.
Perhaps I'm showing my age, but at one time the populist political economy saw those large manufacturing firms as building blocks of a monopoly capitalism that practiced conscious parallelism, which reduced efficiency by restricting output and raising prices, and the unions as accomplice residual claimants to the monopoly profits thereby obtained. The retailers of the era were complicit in that monopoly capitalism, with a concentrated food packing industry and often vertically integrated supermarkets profiting by the inflated price of bread, although, again, food and commercial workers' unions participated as residual claimants. Because firms could practice conscious parallelism without calendars to keep track of the phases of the moon or meetings in the back room at Dirty Helen's, antitrust action could do nothing about the resulting inefficiencies, although Wal-Mart could.
But when Wal-Mart goes after those inefficiencies, that's bad. Mr Klein summarizes in a few sentences what several chapters of the book spell out in more detail.
What's funny about the case at hand today is what happened to yesteryear's Wal-Mart. Safeway are (
checks notes) an Albertson affiliate, part of one of those vertically integrated grocery chains I alluded to at the start of this post. "We support our stores with 22 distribution centers and 19 manufacturing plants."