retail news in context, analysis with attitude

The Orange County Register has a piece about the Federal Trade Commission (FTC) approval of the sale of 146 stores - that needed to be divested as a result of the Albertsons acquisition of Safeway - to Haggen, which to that point was operating 18 stores in the Pacific Northwest. “This settlement will ensure that consumers in those communities continue to benefit from competition among their local supermarkets," Edith Ramirez, chairwoman of the FTC, said at the time.

"But you cannot force competition," the Register writes. "Nor do you need to. The FTC’s anticompetitive assertions are particularly absurd for an industry that operates with razor-thin net profit margins, which typically average 1 percent to 3 percent – and are not helped by government policies such as farm subsidies, which raise the cost of food, and minimum wage laws, which raise the cost of labor.

"Consumers have more grocery choices than ever. The FTC ignores competition from retailers such as Walmart, Target, 99 Cents Only, Costco and even Amazon, which offers same-day grocery delivery service in Southern California. Walmart is the top-selling grocer in the nation, and Target and Costco also join Safeway (Vons) and Kroger (Ralphs) in the top five."

The piece goes on:

"While such large deals can always get messy, they are much more likely to do so when the government creates an antagonistic relationship between the parties by forcing one company to sell its assets to a competitor. So in an attempt to maintain an arbitrarily determined 'sufficient' level of competition, the central planners at the FTC forced grocers to sell to a competitor that went bankrupt and had to close stores, leaving consumers with less choice and less convenience."
KC's View:
The degree to which these regulatory moves have created unfortunate and unforeseen results can be seen almost every day in the news coverage. For example, there's a piece in the Arizona Daily Sun this morning about closing Haggen stores, laid-off employees, and empty shelves.

I don't think there's any question that the FTC screwed up on this. (Though, let's not take the Haggen and Comvest folks off the hook ... there was a lot of hubris here.) What this situation suggests is that we have to start rethinking traditional approaches to regulation in this country ... not deregulating, but understanding that new paradigms apply because there is so much more competition coming from so many different directions.

You can't apply old models to new competitive situations. Simple as that.