When a government blocks a merger between two businesses, it denies consumers the benefits of the competitive response to the transaction.
That’s what the Federal Trade Commission (FTC) is doing. This week it sued to block Sysco SYY +2.85% Corp.’s $3.5 billion acquistion of US Foods , Inc. There will be an administrative trial this summer.
The FTC contends the combination would “violate the antitrust laws by significantly reducing competition nationwide and in 32 local markets.”
The combination would have a national footprint of a 75 percent share in something FTC calls the “national broadline foodservice market” for food and supplies distribution to institutions like universities, schools, and restaurants.
Past narrowly defined “markets” in federal antitrust adventures have included “intense mints,” “jarred pickles,” which is instructive. Imaginary market niches are the fuel of antitrust.
Merger’s don’t always work out of course; ask AOL AOL +0.39%-TimeWarner. But when government forcibly blocks free enterprise between consenting adults, the beneficiaries are competitors, not consumers they claim to represent.
It is the FTC that is “reducing competition” here. Competitors who would otherwise need to sweat, to jump in to vigorously compete with a more efficient foodservice entity can now kick back and relax. Online rival Restaurant Depot (already formidable), and who knows who else–Amazon, or Costco or Walmart–might’ve responded, all to the benefit of consumers. But now they can relax.
If the merger were expected to actually raise prices, rivals would be happy and sell more. That’s instructive in the way FTC’s market definition is.
Some had thought this was “a done deal“: Southern food chain Lizard Thicket’s owner told the Wall Street Journal, “There have been a lot of new distributors coming into town to try to snatch up business because of it.”
The fact that one entity, the FTC,wields such sweeping distortionary power over an entire economy, and can interject itself into any business transaction to create entire industry structures that free enterprise never intended, is not questioned as it should be by Congress.
Antitrust regulation substitutes a large entity with limited economic power, for an even larger coercive entity. The bureaucracy and antitrust bar are enriched–as are competitors.
The capital markets in a $17 trillion economy are perfectly capable of reacting to a sub-$4 billion deal. Sysco and US Foods have suppliers who would punish so called “monopolization” that the FTC claims to be concerned about. We should welcome an enterprise like this in our economy, and many more such transactions.
It’s ironic that he government is at this very moment re-considering the Staples-Office Depot merger; that should have consummated back when my now-adult son was a baby.
The divestitures that pleadings with antitrust authorities create are a scandal. Sysco was forced into offering to sell of a chunk of itself to a rival, which still was not enough for FTC’s commissioners. That Performance Foods, the number three player, got the offer, isn’t fair to you and me. Forced divestitures are another way antitrust picks winners and losers that the free market would not have done. It’s manipulative.
Merger opponents and proponents operate from very different, irreconcilable conceptual frameworks in terms of understanding of what consumer benefits depend upon. It’s not particularly helpful to engineer coerced public benefits while simultaneously disrupting market processes by which firms provide that benefit voluntarily.