Recent days have seen news regarding two proposed mergers. In one, the satellite radio networks XM and Sirius announced plans to become a single company. In the other, Whole Foods announced plans to swallow Wild Oats.
When I was growing up in America a half century ago, it was my impression that the idea of government playing an Anti-Trust role was taken very seriously. The legacy of the progressives who gave us the Sherman Ant-Trust Act was still very much alive. If a merger was foreseeably going to impair the competitiveness of the market, and thus be contrary to the public interest, the government would likely block the merger. The anti-trust division of the Department of Justice had an important job to do.
So how about these mergers. Do they have any implication for competitiveness? Do these mergers threaten to have an adverse impact on American consumers?
The answer to these questions seems evident from the way the business media were discussing the merits of the proposed mergers. In both cases, it was expected that the newly combined firms, no longer constrained by competition from its former rival, would be able to raise prices.
Which is hardly surprising-- particularly in the case of XM and Sirius, which together comprise the ENTIRE satellite radio business. With Whole Foods and Wild Oats, the monopoly would be less complete. But surely between them they constitute enough of the natural foods market to represent substantial market power.
The analysts see this market power, and forecast that the new companies will be able to raise prices. Presumably what these analysts can see, so also can the anti-trust authorities.
But despite these grounds for regarding these mergers as injurious to market competitive and to the public interest, does anyone nowadays expect the U.S. government to block these deals the companies have worked out?
I wish I could say that I see a force out there to protect the public interest, but I don't.
When I was growing up in America a half century ago, it was my impression that the idea of government playing an Anti-Trust role was taken very seriously. The legacy of the progressives who gave us the Sherman Ant-Trust Act was still very much alive. If a merger was foreseeably going to impair the competitiveness of the market, and thus be contrary to the public interest, the government would likely block the merger. The anti-trust division of the Department of Justice had an important job to do.
So how about these mergers. Do they have any implication for competitiveness? Do these mergers threaten to have an adverse impact on American consumers?
The answer to these questions seems evident from the way the business media were discussing the merits of the proposed mergers. In both cases, it was expected that the newly combined firms, no longer constrained by competition from its former rival, would be able to raise prices.
Which is hardly surprising-- particularly in the case of XM and Sirius, which together comprise the ENTIRE satellite radio business. With Whole Foods and Wild Oats, the monopoly would be less complete. But surely between them they constitute enough of the natural foods market to represent substantial market power.
The analysts see this market power, and forecast that the new companies will be able to raise prices. Presumably what these analysts can see, so also can the anti-trust authorities.
But despite these grounds for regarding these mergers as injurious to market competitive and to the public interest, does anyone nowadays expect the U.S. government to block these deals the companies have worked out?
I wish I could say that I see a force out there to protect the public interest, but I don't.
