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Thomas Lambert, Jun 14, 2007
One of the most maligned antitrust decisions in history involved a merger of grocery store chains. Even those voices inclined toward substantial antitrust intervention believe the Supreme Court erred in its 1966 Von’s Grocery decision, which condemned the merger of the third- and sixth-largest grocery store chains in Los Angeles. Indeed, even the president of the highly interventionist American Antitrust Institute conceded that the Supreme Court “probably went too far” and acknowledged that “if Von’s Grocery had remained the rule, all of our industries would be highly fragmented, and consumers would have lost out on many cost-cutting efficiencies.” The fact is, grocery retailing involves huge scale economies and low barriers to entry a combination that renders most consolidations beneficial to consumers.
The Federal Trade Commission (FTC) has apparently forgotten the lesson of Von’s Grocery. On June 5, 2007, the Commission filed a complaint seeking to block the merger of Whole Foods Market, Inc. and Wild Oats Markets, Inc., two high-end natural and organic supermarkets. This is bad news for consumers. If the FTC successfully blocks this merger, it will thwart consumer-friendly productive efficiencies without procuring any benefits in terms of constrained market power.
A consolidation of competitors is a classic “mixed bag” with the potential to create both negative and positi…