Published on: August 21, 2007
user had some thoughts about my backing of Whole Foods’ proposed acquisition of Wild Oats:I have a concern about your singular basis for why this merger should be allowed to go through - that the judge must/must not shop for food.
Personally, I have no problem if the merger is allowed to happen or is blocked - I am on the sidelines on this. However, your focus on current shopping habits is very short sighted, and perhaps could result in a decision that you don't agree with. You see, I DO shop for my own groceries and I have tons of alternatives, including a Whole Foods that
is not far away. Every time I have been to Whole Foods, the place has been packed. And I have asked a few of the customers if they shop for food elsewhere (a good number do not - but my study is far from thorough). I also go to a number of other stores including members of the big three who have dedicated organic and natural food sections. Rarely are those sections populated with shoppers - again, not a thorough study. However, I am SHOPPING FOR MY OWN FOOD and if the judge is seeing the same thing that I am seeing, then perhaps he may decide differently than you would like him to decide.
Another point is that anti-trust is not solely about current alternatives but it is also about future alternatives. It's called barriers to entry. I would refer you to the research work of a current member of the FTC - Dennis Carleton. He has written extensively on barriers to entry and how to define them - including "Why Barriers to Entry are Barriers to Understanding,” which evaluates a lot of the historical research on defining barriers to entry, from Bain's work in the 1950's to research conducted in the very recent. In retailing, it is hard to assume that there are any barriers to entry - which is why I based my early contention that this merger should be allowed. But in reading some of Carleton's work, you see that barriers to entry can involve suppliers
and I believe that even you have commented that there is a lack of organic and natural foods available some segments of the industry (look at milk for example).
All I am asking from you, and from others who are commenting on this issue, is to base your argument on more than just the anecdotal evidence that you happen to have. You can say that the FTC is a bunch of minions, but take a look at the credentials of some of the folks there (Professor Carleton for example) and compare them to yours and see if
the term minion still applies. Furthermore, I encourage you to read up on some of the research that has been done on anti-trust issues and then formulate your opinion.
Personally, I think that it would add more weight to your commentary.
Lastly, regarding prices, if I am a Whole Foods shareholder, I sure would hope that raising prices is considered if this merger goes through. If raising prices increases value of the shares of Whole Foods, then would think that shareholders would not only be for it, but would demand it.
All interesting points. If I may, let me respond…
When I write about the judge doing his own shopping, all I’m really suggesting is that it would be nice if the person making the decision had some exposure to the marketplace beyond what is presented to him in legal briefs. In this case, I just think that if he bought organic products in places other than Whole Foods or Wild Oats, it would give him a better understanding of market realities. It isn’t a matter of whether Whole Foods is busy and the smaller competitors are not – it is a matter of whether there are smaller competitors at all.
(At least, I think this is the case. I plead guilty to not being an antitrust scholar. Nor am I likely to become one.)
When I referred yesterday to “FTC minions,” I was attempting a clever turn of the phrase, and certainly did not mean to characterize everyone who works at the FTC as minions. I assume that like any organization, the FTC has leaders and it has minions. But I obviously wasn’t being as clever as I thought. (This happens a lot.)
Finally, if I were a Whole Foods shareholder, I would want it to pursue whatever pricing policies that seemed destined to 1) bring more people into the store, 2) sell more product consistent with the store’s image, and 3) create a more viable long-term
entity. I would not want the company to pursue a pricing policy that would increase the short-term share price if that meant creating potential long-term problems. The immediate or short-term share price, in fact, would be a lesser concern. But that’s just me.MNB
user John Lloyd had another thought on the antitrust issue:There used to be laws (Robinson-Patman) and a prevailing philosophy in this country that there should be a level playing field in the cost of goods to retailers. It is up to the federal government to enforce these laws and to ensure that ultimately there is enough margin for more that just the big guys. Sure, we small format stores can out service the corporate giants, but without margin how do we pay staff. Long live the FTC!
Regarding the reports that Wal-Mart is considering testing two new formats – a health services and supply concept, and an urban, food-driven c-store – MNB
user Bob Vereen offered some perspective:Wal-Mart tried developing home centers years ago, and had 3 or 4 before closing them. I think the slow stock-turns and big inventory required were the factors.
They also tried some craft-type stores, and as I recall, used Helen Walton's name (Sam's wife) on them. And I have a vague recollection they even tried a few drug stores, but am a bit hazy on that.MNB
had a story yesterday about a new federal study issued by the President’s Cancer Panel that says that lifestyle changes – specifically eating right, maintaining an optimum weight, exercising, and not smoking – could have an enormous impact in trying to continue the decline in cancer deaths in the US.
One interesting part of the study was the panel’s call for a “culture of wellness” in America – and that includes coordinating agricultural and nutrition policies in the US. This would mean doing things like curtailing corn subsidies for farmers, when that corn often is used in unhealthy things like high fructose corn syrup.
That’s interesting logic, I commented. It doesn’t seem to take ethanol into account, but actual coordination of policies by the US government sounds like it might be worth pursuing. Unlikely, of course. Because it actually would make sense…
user had a perfect example of this disconnect:If 30% of cancer is due to tobacco, why does the government still subsidize tobacco farmers?
Because the tobacco industry still has enough blood money to pay for really expensive and really effective lobbyists.
At least, that’d be my entirely biased guess.
user wrote:You may have read this article from the NY Times. It makes reference to the link between our current farm bill and the poor nutrition of Americans … I believe it's our responsibility to push the government to address disease as a result of nutritionally vacant foods they are "helping" provide to the general public …
To quote from the article, "... the current farm bill helps commodity farmers by cutting them a check based on how many bushels they can grow, rather than, say, by supporting prices and limiting production, as farm bills once did. The result? A food system awash in added sugars (derived from corn) and added fats (derived mainly from soy), as well as dirt-cheap meat and milk (derived from both). By comparison, the farm bill does almost nothing to support farmers growing fresh produce. A result of these policy choices is on stark display in your supermarket, where the real price of fruits and vegetables between 1985 and 2000 increased by nearly 40 percent while the real price of soft drinks (a k a liquid corn) declined by 23 percent. The reason the least healthful calories in the supermarket are the cheapest is that those are the ones the farm bill encourages farmers to grow."
I joked yesterday that any report saying that eating right, maintaining an optimum weight, exercising, and not smoking could have an enormous impact in trying to continue the decline in cancer deaths seems like it should be relegated to the Department of the Painfully Obvious.
But as MNB
user Lisa Everitt pointed out, this isn’t a joking matter.Five years ago I finished treatment for a nasty case of breast cancer. When I asked my oncologist “What do I do now?” he said, “Exercise and eat your broccoli.” It was exceptionally hard to do, and that was with the vivid recent memory of 11 months of chemo and radiation, baldness and scars to motivate me. I spent two years making excuses before I joined a gym, and I am never going to be a person who cheerfully goes for a jog or turns down dessert.
I think there’s huge cognitive dissonance when part of the solution for something so deadly is something so simple. Maybe part of the dissonance is the fact that cancer is random — we all know somebody who embodied the motto “Eat Right, Work Out, Die Anyway.” I don’t like to think about the likelihood that if I had spent more of my twenties and thirties (any of my twenties and thirties, really) on the treadmill and less time eating cheeseburgers, I might have avoided cancer in the first place.
So yeah, it’s patently obvious, but we still need to hear it over and over (and watch people we love dying) before we get it through our thick skulls.
Thanks for starting with my thick skull.