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Comment by sremani | Hacker News Reader

<Quote> "While we do not oppose the merger at this time, we are concerned what this merger could mean for African American communities across the country already suffering from a lack of affordable healthy food options from grocers," </Quote>

Did the Democratic representative forgot the grocery in question is Whole Foods? Affordability is not the strong suite of Whole Foods, and the representative from Ohio should know that! This merger means nothing to people looking for affordable grocery. NOTHING.

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That statement had nothing to do with the investigation, it was a chance to play up her constituency - this is what politicians do.

Here, let me translate for you:

"I, as a representative of a majority African American district, am making the public and my voters aware that I am involved in a popular issue that they will remember. I can also tie this to the real concern of food deserts because Whole Foods is a grocery store, and it allows me to find relevancy even if only marginally."

I would imagine the argument for concern (not saying I agree with it) goes like this:

If Amazon Whole Foods is freed from the need to be profitable (like the rest of Amazon), and has the access to all of Amazon's other infrastructure, it will have a powerful competitive advantage against all other major grocery chains. Even if Amazon Whole Foods continues to focus on the upper end of the grocery market (which they may not), that will still make it even harder for other chains to compete in those markets, which I assume are more profitable than markets full of poor people.

If a given chain is only able to compete in the markets with the least purchasing power, that could have the effect of causing those chains to go out of business, which would in turn mean store closures in the poorest places. If I'm in charge of Ralph's as they're getting outcompeted in wealthier urban areas with high rents, I have to make up that profit by closing the least profitable stores, right?

Also, why assume that Amazon will keep Whole Foods' pricing or even brand alignment? Maybe they are simply buying a massive infrastructure for Amazon Fresh or whatever, and they intend to compete further down the line? I don't think there is any reason to assume that Amazon Whole Foods will have the same price range as Whole Foods.

By definition, there is no great business to be had selling groceries in poor areas. That's why there are food deserts now. If Amazon drives down margins and helps consolidate the grocery market, there may be even less likelihood that stores in poor areas will open or stay open.

Edit: read the actual letter, which makes very direct points about the potential pitfalls and merely asks for them to be studied (not for the merger to necessarily be blocked):

http://www.ufcw.org/wp-content/blogs.dir/61/files/2017/07/Lt...

Driving down costs isn't an argument against a merger.

It is the opposite. It is the argument that Amazon would make IN FAVOR of the merger.

I'm not talking about driving down consumer costs, I'm talking about driving down profit. In addition to the usual benefits of any consolidation, Amazon is generally not expected to be profitable in the way that grocers are. How can a company trying to maintain profitability compete with a giant who doesn't have to?

But it DOES drive down consumer costs. Less profit for for-profit businesses means more money for consumers because prices are lower.

I don't care about if a bunch of for profit businesses lose money.

What I care about is consumers and low prices.

It doesn't matter if it is fair. What matters is what is best for consumers.

What you are effectively arguing is "Amazon is too awesome, and too good for consumers. Their prices are so low, that other companies, that offer a WORSE product for a WORSE price, are unable to compete". And that to me makes no sense.

Oh i'm sure consumers will love getting their expensive whole foods groceries at bargain prices for 5 years, until amazon has pushed everyone else out of the business, solidified a monopoly, and jacks up prices.

People keep saying that the inevitable Amazon price raise will happen.

Amazon has been around for 20 years "monopolizing" every market that it enters. And those doomsday price raises have yet to materialize.

Wait, but here's the argument:

- Whole Foods no longer needs to be profitable because it's a subsidy of Amazon

- Whole Foods will thus drive down prices

Hold on, why? Because driving down prices will drive out competition. There's ample historical evidence for the inevitable result of this, which is

- Whole Foods leverages its new monopoly after murdering all competition by raising prices.

https://en.wikipedia.org/wiki/Predatory_pricing

Can you provide a few examples of the ample historical evidence for that "inevitable result"? I'm looking for one or two cases where a private monopolist entered a competitive market, managed to shut down competitors with predatory pricing, and then raised prices afterwards to higher levels than when they entered the market.

This is one of those claims that sounds plausible, but I've yet to encounter a historical case of it actually occurring.

Microsoft and Internet Explorer is pretty close. Browsers sold for money. Microsoft entered the browser market and undercut it. Through market dominance they owned the market requiring anyone that wanted to access some parts of he web intact on Windows.

As a consumer now, is the problem that I have to save up my money and carefully choose which expensive web browser to "buy"?

At most, that's evidence of a new dynamic coming to a market, but I don't see the evidence of consumer harm from the phase 2 raising of prices in the browser market.

Ok, internet explorer.

At what point in history did microsoft drive out all its competitors, and then raise prices?

Oh wait. Never. They never raised prices and kept internet explorer free forever.

That's because it hasn't happened. It is simply a highly-plausible fantasy used to justify government interventions in fully-functioning markets. Economist Thomas DiLorenzo has actually studied this, and has found that, in the vast majority of cases, monopolies are associated with a dramatic (edit: permanent) reduction in prices. He found only two cases that actually followed the "predatory pricing" script (edit: that is, where prices dropped over time and then rose when monopoly power was achieved) — and those were trivial monopolies in the markets for matches and castor oil in the early 20th century.

(Edit: remove FTC comment, as it is besides the point and not strictly accurate)

This can apply to any monopoly that undercuts on price to destroy competition. Can't you imagine the danger of a scenario in which super-high capitalization + magical shareholder expectations = "awesome" enough to destroy competitors? Is regulating markets to protect competition ever a good idea?

Also, the premise that "consumers" are a monolithic group is mistaken. What's good for comfortable consumers in wealthy places is not necessarily also good for poor consumers. Is Amazon Whole Foods going to serve 100% of the United States? Can you imagine them destroying the business of a company and then choosing not to serve all of that company's customers?

Amazon's "awesome" prices are artificially low (like Uber's, for example) due to subsidy from investors. This indicates an intent to compete and then raise prices.

Amazon has been monopolizing markets with low prices for 20 years.

And people have been saying that the inevitable price increase is just around the corner.

And yet those price increases have yet to come.

So tell me, when will THESE price increases come around?

Maybe in Another 20 years?

> I don't care about if a bunch of for profit businesses lose money.

> What I care about is consumers and low prices.

You are being short-sighted then. Come in, drive the others out of business, then feel free to raise prices with no competition. It has happened multiple times before.

Your statement only makes sense in with the US antitrust laws. The proxy for consumer harm the US uses is prices which is a very narrow view. This is the reason why Amazon with 90% of the ebook market could be the victim of Antitrust vs Apple. Long term competition matters even if consumers have low prices right now. EU for example works differently. These articles will give more nuance: https://stratechery.com/2016/antitrust-and-aggregation/ https://stratechery.com/2017/manifestos-and-monopolies/

> Driving down costs isn't an argument against a merger.

True, but the restriction of choice is. And Amazon is NOT going to stay upmarket long. They're going to wipe out smaller players.

This merger drives down some consumers costs (generally the wealthier who already have plenty of choice) while increasing the costs of others (wiping out marginal stores in areas that are less affluent).

WalMart is a good analogy. When WalMart comes into an area costs go down--until all the alternatives are driven out of business. And, quite often, WalMart isn't even the cheapest. In addition, by wiping out those businesses WalMart wipes out jobs and those people don't care that groceries are 10% cheaper because they now have no income at all.

So, it basically boils down to the people who already have plenty, get things cheaper, while the people already hurting, hurt worse.

> If a given chain is only able to compete in the markets with the least purchasing power, that could have the effect of causing those chains to go out of business

This is the status quo today, it's not like we have incredible diversity of grocery chains serving each and every market out there. Whole Foods, Wegmans and Bristol Farms dominate the top tier, Costco inserted itself to serve upper middle class suburban communities, Safeway and equivalents vie for middle and lower-middle markets, while Walmart Supercenters, 7-11s, corner bodegas and Chinese/Korean grocers operate in lower-income markets.

Haha yeah I was thinking the same thing. What does any of this have to do with your average consumer. Whole Foods was never about that.

Regardless, Amazon might cut Whole Food prices if they do anything with prices. There's no way they'll ever raise them.

Even though Trader Joe's* has so far catered to certain people, if that was the company in question of merging, there would be a case.

*I know Trader Joe's is a subsidiary of one of the Aldi companies.

It's a near certainty that Amazon will lower prices at Whole Foods (by accepting lower margins and targeting faster growth and expansion), so if anything, it'll improve affordability.

This is correct; and, it helps eliminate the issue of so-called "food deserts"[1], because geography/neighborhood will no longer be a barrier to higher-quality foods.

[1] https://en.wikipedia.org/wiki/Food_desert

You need to afford a computer of some kind, afford the premium for food delivery, and have a debit card in order to have fresh food show up in your food desert. Most people for whom living in a food desert is a problem are impoverished, and therefore don't have a car, don't have a phone/tablet/computer, and often don't have a debit card, and certainly won't pay the delivery premium. So this is not in any way going to help those living in fresh food deserts.

Poor people have smartphones at a rate far higher than you would expect, partly because it's practically necessary these days, but also because you can get one on a plan from your carrier.

Delivery costs are a real issue, but I have a hope that we will get self-driving trucks in the near future and delivery prices will fall.

Amazon has a gift card system (Amazon Cash I think?) and as a full blown grocery store could accept EBT.

Doubtful.

The kinds of foods needed in those areas are fresh, cheap, high spoliage items aka unprofitable to touch unless in bulk.

by accepting lower margins

That is, by lower quality standards and working conditions.

If its own internal (non technical) sectors are to be taken as any indication.

That's not how it works.

If Whole Foods is currently getting a 10% margin on a product and Amazon says we'll sell it for a 5% margin, nothing else has changed in the store or the product, but the price and margin are lower.

I'm not African American/Black, but Amazon already partners with a similar grocery store in my area called Sprouts. I.e. I can order through Amazon Prime Now my groceries from Sprouts. I don't have a car and the nearest store to me would be a long bus/Uber ride, so having Amazon's help to deliver my groceries saves me not only a lot of time, but money, too. I am very grateful for it

Reminds me of how the Congressional Black Caucus pushes for billionaires' repeal of the estate tax under the guise of racial equity. I think they try to make it into social issues, racial justice, just to divert the conversation from the indefensible root of their positions.

> “Full repeal of the estate tax would allow African Americans to pass the full fruits of their business success to the next generation and thereby laying the foundation for a permanent minority ownership class that can contribute to the economic growth and development of the United States economy,” Robert Johnson, whose worth has been estimated at more than half a billion dollars, wrote to the House Ways and Means Committee last week.

While I agree that happens, in your quote just to be clear, Robert Johnson isn't a member of the Congressional Black Caucus (or of Congress), he's just a very wealthy black businessman (founder of BET) who wrote his opinion opposing the estate tax in a letter to the House Ways and Means Committee. I haven't been able to find whether any members of the CBC actually agree with it. Most of the Caucus's members tend to vote fairly "left" on taxation-related issues.

I'd like to see a 50-year hiatus on inheritance taxes for black people.

In limited, specific markets, Whole Foods is definitely entering markets with a lack of affordable, healthy options:

>Since it was announced in 2013, Whole Foods' plan to open a store in one of Chicago's most economically depressed South Side neighborhoods has drawn praise, excitement, scrutiny and some doubt. The big questions — Will the community support it? Will the store be affordable to residents but still turn a profit? Will it work? — won't be answerable for months or even years.

>But Wednesday was reserved for exuberance and unchecked optimism. Many shoppers applauded the store's presence in a community with few options for fresh, healthy food. And more than 35 South Side vendors sampled their wares that will be sold in the store. Whole Foods is hoping that local connection, plus significantly lower prices on select items, keeps shoppers coming back after the hoopla has died down.

http://www.chicagotribune.com/business/ct-whole-foods-englew...

(edit quote marks)

Yeah... I don't get it. Maybe I'm not seeing it from disadvantaged/poor communities, but I don't actually see how this would impact them. The Whole Foods-Amazon merger will do either one of the following:

1) Whole Foods will continue to keep its prices as high as it does. Poorer/disadvantaged communities will continue to not shop at Whole Foods as it is out of their price range.

2) Amazon lowers Whole Foods prices. Whole Foods becomes affordable for more communities. If Whole Foods expands into poorer communities with these lowered prices, it will give poorer communities more access to groceries. If Whole Foods does not expand into these poor communities, storefronts like Smart & Final, Walmarts, Big Lots!, Ralphs, VONS, etc will continue to exist.

I really fail to see the problem here.

And wouldn't the merger increase delivery options?

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