Mergers like this create less competitive markets.
In such a world, if your competitors are doing greed-flation, it might prove that you are leaving money on the table unless you also join.
Sadly this logic effectively yields collective action between competitors without any illegal agreements.
I think the few number of grocery, food and consumer packaged goods companies, artificially create the feeling or appearance of competitive markets with many brands.
And companies don't compete solely against existing companies. They compete against the possibility of new entrants. So a duopoly can't price much higher than the cost of a couple of their customers getting together to launch a competitor.
Anecdatally what I've noticed is that branded food has increased much faster than bulk or generic items. But that's not really a bad thing. That's market dynamics rewarding a company for being good at what they do.
Why can't the government intervene? Because these companies have gotten so large they have literally hundreds of millions of dollars to spend preventing intervention.
Perhaps something to make customers more price-sensitive by making price comparison easier or by forcing more disclosure around when price-increases happen.
The best solution is to stop high inflation. That lengthens the window you can keep prices lower than your competitors, to take market share. But inflation is very difficult to affect.
NPR seems to agree with both of us.
> SCOTT MORTON (Yale economist who focuses on anti trust): In a concentrated market, one firm could announce it's going to raise prices because of inflation. And its rivals might look at that and say, oh, this is a good excuse to raise prices. They're raising prices, so we should match. And we should announce we're raising prices also. We call this tacit collusion. And in a setting like this one, where inflation might be giving firms permission to raise prices and then they follow each other, that could cause price increases.
> WOODS (host): So bottom line - companies raise prices when they can. That's what companies have always done. And what keeps them from doing it is usually competition. But even when we have uncompetitive markets like in the meat industry where prices are high, that is not the big driver of inflation in the economy right now. But that does not mean that it is a good thing to let monopolies keep their monopoly power. Fiona says it is good public policy to crack down. That means scrutinizing mergers, investigating possible collusion and splitting companies if needed.
> SCOTT MORTON: Is it a good idea to do? Absolutely. Because it brings down prices in general because markups are lower when there's more competition. It raises quality. It raises innovation. It increases productivity. It increases the efficiency of the economy. So there's many, many ways in which antitrust enforcement and competitive markets benefit consumers. More vigorous antitrust enforcement is a long-run project. It's not going to change prices in 2022.
My understanding in reading the article is that the economist was making a distinction that doesn't make sense to me, which is that the cause is distinct from what enables it.
It seems that what was said is that supply chain shocks and tacit collusion are the cause, but they are enabled and amplified by lack of competition.
Company pays for candidates advertisements so they can win primary -> can only vote on candidates that companies voted for first -> politicians are responsive to their benefactors -> politicians de-regulate/ignore mergers/grid lock themselves -> companies are able to centralize more power -> company increases their influence over the government to get even more influence...
This un-virtuous cycle means the only way out is unions (or french-ery).
We have openly corrupt supreme court justices who laugh in our face and say "what are you gonna do about it?" Pelosi said "I can trade stock on companies I regulate" and basically said "what are you gonna do about it?"
Government intervention can only come after we have an answer for corrupt politicians saying "what are you gonna do about it?"
Kroger and Albertsons are gonna merge... "what are you going to do about it?"
On either side of the aisle.
Sales tax is a perfect example of how the government will never give up tax revenue it has come to depend on. The original proposal is that sales tax was fair, because the local business is using local resources (land, employees, infrastructure). Obviously not true with an out-of-state web store. Delivery companies already pay local taxes for the actual shipping, so there shouldn't be any claim against the retailer itself. Use tax, in many areas, was already designed to handle this case, but the government decided that it's easier to go after Amazon than to rely on taxpayers being honest.
You might think this is a bad idea, but it's not a downside of the regulation.
If vertical integration is illegal, does that mean: 1) Farms can't sell directly to customers via their own store? 2) A restaurant or grocery store needs to use Uber or Door Dash to deliver? 3) A logistics company can't own any warehouses 4) A store can't own any distribution centers or logistic systems. 5) A website can't self-host, either on their own server or via a dedicated server. It must be hosted via SaaS.
I'm sure there's more examples that blur the line of vertical integration that can be hard to determine in a fair, just manner.
Might be the kind of thing where more nuanced legislation helps, e.g. allowing vertical expansion if there are few existing competitors but disallowing it for healthy markets.
Established companies are always free to create a new company which is structured in a way that it is not vertically integrated. And so what if a large investment is required? If established companies cannot integrate vertically, the field is open for investments by people who cannot subsidize their prices to beat the competition.
"You must do this" style regulation like GDPR does raise barriers of entry.
"You can't do this," style regulation like trust busting doesn't seem like it would involve raising barriers to entry. It seems like it would lower them.
For example if something requires producing 10 000 pages of legalese it will block new companies and be not so problematic for large ones.
Or when company needs to heavily research what exactly they can offer/sell and it requires massive effort (it technically is "you can't do this" one).
Don't keep people's data and you're fine.
Granted, some businesses need to keep some data as a matter of doing business. But the problem that pre-gdpr businesses have with the rules is that they were set up with the mindset that keeping everything is free.
A startup need merely nuke stale accounts. So it's an advantage over the incumbents, who have to figure out deletion in databases that weren't designed for it.
Conversely a big corporation will lose some % of profit to dealing with the regulation (or perhaps it will just raise prices if it’s not competitive). But it’s not an existential concern.
Forcing companies to report on any effort above 1 mil might make reporting on big companies so horrible they prefer to split up?
But I do very much like the idea.
It's real simple. Want a lower tax rate? Do a demerger.
Greed has to be restrained by brute force or capitalism fails through monopololization/collusion.