Edwards, Antitrust, and the Return of Von's Grocery?

Josh Wright —  3 October 2007

AAI continues its series of antitrust policy statements from presidential candidates with a submission from John Edwards. Again, I’m very pleased that the AAI was successful in getting this series of submissions together and inducing candidates to share their thoughts on antitrust policy. So what does Edwards have to say?

Edwards’ statement has in common with Obama’s the desire to do something to reinvigorate antitrust enforcement, criticizing the current administration and unnamed “forces in Washington” for seeming “to have forgotten that antitrust law even exists.” I assume this will link between activity level and “good” antitrust policy will be a fairly standard refrain from the Democratic candidates after hearing it from both Obama and Edwards.

The statements that reveal the most about a potential Edwards antitrust regime come in the form of assertions that antitrust policy should focus on the protection of small businesses and not the competitive process. Here’s how the statement begins:

Now, more than ever, we desperately need strong antitrust law enforcement in America. We need it to protect fair competition for small businesses and family farmers.

To his credit, Edward does offer some specifics.  Its just the content of the proposal that is a bit troublesome in my view.  But the following statement is quite revealing about Edwards view that antitrust should be used as a tool to protect individual competitors, especially small ones:

Today, the small farmers who are the heart of rural America have been put at the mercy of big agribusiness. It used to be that on market days, an Iowa hog farmer could go to five different packers to sell his hogs. Today the same farmer is down to just one buyer, and often that buyer is playing games to drive hog prices down. Even worse, the big meat packing companies are trying to integrate vertically by buying and raising live livestock. As president, I’ll launch a new initiative that I call “Fairness for Farmers” – the toughest, most aggressive enforcement of fair competition laws since Teddy Roosevelt rode into Washington – and impose a national ban on packer ownership of livestock.

Protection of small businesses and “mom and pop” outlets, vertical integration as a monopolistic evil, and attacks on marginal increases in concentration without a theory for how those changes will impact consumers.  Looks like we’ve got all of our bases for an antitrust theory reminiscent of the 1960’s covered.  It is not worth re-hashing here the rather large literature on the problems associated with using antitrust to protect small businesses rather than focusing on consumer welfare. But the excerpt above reminded me of a portion of the infamous Von’s Grocery decision (in turn citing U.S. v. Trans-Mo. Freight Assn, 166 U.S. 290, 323 (1896)) so much that I thought I would post it here for our readers:

“this Court emphasized this policy of the Sherman Act by calling to attention the tendency of powerful business combinations to restrain competition ‘by driving out of business the small dealers and worthy men whose lives have been spent therein, and who might be unable to readjust themselves [to] their altered surroundings.”

As discredited as the theoretical underpinnings of Von’s Grocery and similar decisions are in today’s consumer-centric antitrust world, I should not be too critical of Edwards views here. It is never too late to change his mind. After all, none other than Richard Posner argued Von’s Grocery on behalf of the DOJ before later conceding that case was not based on sound economics.

NOTE: If you’re really, really interested in an economic and legal critique of Von’s Grocery and its theoretical underpinnings, I wrote a law review note on the subject with some empirical analysis of the Los Angeles grocery retail market at issue in the case (Von’s Grocery and the Concentration-Price Relationship in Grocery Retail, 48 UCLA 743 (2001)) (sorry, no SSRN link available).

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