Thursday, April 24, 2003

Monopoly v. Monopoly

Antitrust officials often resort to shameful tactics, but arguing that a lawful company is intentionally “harming” children by acquiring another company is a new low, even for the Justice Department. Yet that’s just what top DOJ antitrust enforcer Hewitt Pate did today in announcing his decision to try and undo an already consummated merger between two dairy companies.

Last year, the Dairy Farmers of America acquired Southern Belle Dairy. Because the acquisition didn’t meet the minimum value required by statute, the merger was not subject to advance review by the Justice Department for antitrust concerns. Congress enacted the threshold (and later raised it) to ensure the DOJ spent their time reviewing only large mergers. Since taking power, however, the Bush administration antitrust leaders decided to ignore Congress’s mandate, and instead target smaller mergers in order to make examples out of certain companies. This seems to be what led the DOJ to the DFA-Southern Belle merger.

The major harm, according to Pate, is that DFA’s acquisition leaves only one milk supplier to about 50 government school districts in Kentucky and Tennessee:

Prior to the acquisition, the competitive rivalry between these two dairies produced lower prices and higher quality service, to the benefit of schools and school children. By acquiring Southern Belle, DFA has eliminated or reduced that competition for many school districts in Kentucky and Tennessee. The [Antitrust] Division seeks to restore this competition.

Pate says DFA’s acquisition “threatens increased prices and poorer services” for these school districts. He cites no evidence in support of this theory, and we’re unlikely to see any such evidence in the future. Even if true, higher prices do not constitute a legal injury to anyone, unless a contractual arrangement is violated, which is not the case here. The DOJ is simply trying to protect school districts from the inconvenience of potentially higher prices, which is not the same thing.

There is, of course, a sick irony in this case. The DOJ claims that DFA’s “milk monopoly” will harm school children, yet nobody at the Antitrust Division thought to point out that the government’s monopoly over local schools is a problem. Nor does the DOJ see the school districts’ status as monopoly buyers to be of any particular concern. Competition, it seems, is only valuable when it comes to milk.

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