Food Fight

Thomas J. DiLorenzo (“Turning Back the Clock,” Nov.) called the Bush administration’s antitrust policy a retreat from the economic common sense championed by the Reagan administration. Mr. DiLorenzo uses as his sole support the Federal Trade Commission’s action challenging Red Food Stores’ acquisition of the Chattanooga Kroger supermarkets.

President Reagan appointed all of the commissioners who voted to challenge the acquisition. Later, Bush appointees approved a settlement of the complaint that the Reagan-appointed commission had issued.

Additional inaccuracies and half-truths fill the article. For example, the FTC never alleged that competition and low prices kept new supermarkets from entering the Chattanooga market. The FTC challenged the acquisition because it unduly increased concentration in the Chattanooga market and made entry difficult. Indeed, Red Food Stores’ internal documents showed that it made the acquisition to preempt entry and expansion by its competitors. Red Food did not have any efficiency reasons for buying additional stores.

In addition, the commission did not overlook past entry by “grocery giants” A&P, Wint-Dixie, and Giant Foods into Chattanooga. These and other chains were not successful, suggesting that entry into the market was not easy.

Finally, Mr. DiLorenzo refers to a Chamber of Commerce survey for one quarter in 1988 showing low grocery prices in Chattanooga. Yet before that quarter, surveys usually showed that Chattanooga’s grocery prices were higher than its general cost of living index. In fact, in 1987, Chattanooga’s grocery prices were higher than the nation’s average.

The FTC is committed to enforcing the antitrust laws in ways that make economic sense and benefit consumers. The commission places great weight on the 1982 Department of Justice Merger Guidelines when deciding whether to challenge an acquisition. As the guidelines note-and our actions support- concentration figures alone do not make a merger anticompetitive. The commission made the right decision to challenge the acquisition and to accept a settlement that will increase competition in the Chattanooga market.

Kevin J. Arquit Director Bureau of Competition Federal Trade Commission Washington, DC

Mr. DiLorenzo replies: Rather than defending the Bush appointees to the FTC, Mr. Arquit has damned them with his faint praise of their actions in the Red Food case. He boasts that the only action taken by the Bush appointees “was to approve a settlement of the complaint.” But the “settlement” was apparently forced on Red Food after a district court judge had thrown the case out, arguing that “the FTC has not shown a likelihood that Red Food, if it acquires the Kroger stores, will be able to exercise market power.” The judge also noted that the merger would save 400 jobs.

Former FTC chairman and Reagan appointee Daniel Oliver strongly objected to bringing the case in 1989 on the basis that it “was not supported by commission precedent, applicable case law, economic theory or the realities of the Chattanooga market .... It’s a throwback to an earlier era when the commission was more concerned with abstract measures of concentration than with competitive realities and consumer welfare.”

Bush antitrust appointees have reverted back to the “bad old days” when market concentration was used (and abused) as a measuring rod of competition. Mr. Arquit’s reference to “unduly increased concentration” implies that he possesses special knowledge of the “correct” amount of market concentration. The idea that any individual can possess such knowledge is an example of Hayek’s “fatal conceit,” which pervades antitrust thinking, especially among lawyers.

Mr. Arquit’s condemnation of Red Food on the grounds that its “documents showed that it made the acquisition to preempt entry” suggests he believes that a company can be found guilty of violating the antitrust laws merely by having the “wrong” intentions, as defined by government overseers, regardless of the effects of its actions. It is ominous that antitrust regulators like Arquit believe in prosecuting businesses based on presumptions about the businesses intentions rather than their actual behavior.

Mr. Arquit displays a misunderstanding of basic economic principles when he says that Red Food “did not have any efficiency reasons for buying additional stores.” Voluntary trade is efficient whenever both traders are better off-otherwise they wouldn’t trade-and no one is worse off. The Red Food merger was certainly efficient in this sense.

The grocery business also has significant economies of scale. Red Food uses a low profit margin/high volume pricing strategy; the merger would have increased its volume, making it easier to pursue this low-price strategy, all to the benefit of consumers.

Because several large food chains have left Chattanooga, argues Mr. Arquit, “entry into the market was not easy.” But the exit of those firms is evidence of what a low-price competitor Red Food was. It was in fact widely reported in the local media that the FTC accused Red Food of charging excessively low prices. Consumers benefited because “entry was not easy,” for low prices made (and still make) entry difficult. If Red Food charged monopolistic prices, as Mr. Arquit suggests, entry would be very easy indeed.

As to Mr. Arquit’s statement that in 1987 grocery prices in Chattanooga were above the national average-so what? Relative prices are always changing in a competitive economy. Such aggregate statistics, uninformed by sound economic reasoning, are useless.

Not in the Plan

William D. Eggers’s article, “Pruning The Plan” (Dec.), about population growth and land-use planning in Fort Collins, Colorado, revealed his (and your) bias in the subtitle, “When No-Growth Sentiment Threatened To Choke Prosperity ....” There is a definite relationship between population growth and prosperity, but it is an inverse one. As an example, I cite the current winner in the “economic development” contest: Japan. It has one of the lowest population growth rates in the world and virtually no immigration. Switzerland is another example. There are no examples I know of that would prove growth produces prosperity. Certainly some land speculators and developers get rich, but the key question is, Who profits and who pays?

Mr. Eggers quoted me incorrectly and out of context in the beginning of his article. It would appear that was done intentionally to make me seem like an unreasonable extremist because later he strongly implies that those of us opposed to growth are zealots, closet racists, communists, misanthropes, and radical environmentalists.

Eggers was apparently bamboozled into thinking that the growth here is occurring in a free marketplace with minimal government interference. Nothing could be further from the truth.

Of course the Chamber of Commerce is pushing for more growth, and it is supported with thousands of dollars in tax money paid by the city, school district, etc. in the form of dues. Also, the real estate salesmen and developers are chasing smokestacks with their own self-styled “Fort Collins, Inc.,” which they fund with around a quarter of a million dollars a year in order to generate growth. The city has one full-time and several other deeply involved staff members paid with our tax money to work on ‘economic development,” which is ‘Chamberspeak” for “generate growth.”

Fort Collins is growing because it is profitable for developers. Our politicians are not making growth pay its own way and are forcing all of us to subsidize it. Recent bond issues for a new county jail and new schools are an example. There should have been an impact fee on new construction to collect up front from the newcomers who have generated the need for this new public construction. Instead, this debt is being spread to all of us and passed on to future generations.

The bonded indebtedness of Fort Collins in 1989 was over 41 times greater than it was nine years ago. That does not include our share of debt through the school district or the county. That does not include bonds issued for water, sewer, and storm drainage. It does include nearly $70 million in bonds issued to subsidize an Anheuser-Busch brewery. Are taxpayer subsidies like that your idea of a free-market economy? If we made growth pay its own way up front, with impact fees, we would find that growth is not so inevitable after all.

Thomas P. McKenna Fort Collins. CO

William D. Eggers's article is fraught with errors and misconceptions. Not only is it completely slanted in favor of the development community, it is patently unfair to the residents of Fort Collins who are concerned enough about the negative effects of growth to spend free time working on growth- and development-related problems.

Pikes Peak is 120 miles from my home and cannot be seen from any point in the subdivision, let alone the living room of my home. I am 56, not in my mid-60s, nor have I lived in Fort Collins for 42 years (28 actually). Developments ascribed to the Land Development Guidance System- Woodward Governor and Hewlett- Packard-were built years before the LDGS existed. In the words of a local resident not quoted in Eggers’s tirade and who is not a member of Citizen Planners, “The LDGS is a bureaucratic sop rather than an effective planning tool.” The system does have virtues, but it is not faultless. It is neither necessary nor sufficient for quality development.

Chuck Mabry was never mayor of Fort Collins. Citizen Planners is not anti-growth; group members represent a reasonable cross-section of the community. Many are concerned about the loss of quality of life in neighborhoods caused by the intrusion of noncompatible industrial and commercial development into the city’s residential neighborhoods. Mixed use has several benefits, but there isn’t any tangible evidence that it works as stated by planners or developers.

Eggers’s vicious character defamation of those who favor slow growth or those who think growth should pay its own way is completely unwarranted and unjustifiable. To characterize cautious, middle-of-the-road liberals as communists, racists, and radical environmentalists is silly and unconscionable. If Eggers would have presented the facts rather than one-sided fantasies, other articles in your magazine would be more credible.

Arthur Judson Fort Collins, CO

Mr. Eggers replies: I apologize for inaccurately reporting Mr. Judson’s age, and it was Longs Peak, not Pikes Peak, that I observed from the prairie near his home. Furthermore, former Assistant Mayor Chuck Mabry was misidentified as a former mayor due to an editing error.

I cited Woodward Governor and Hewlett-Packard as examples of successful mixed use. Nowhere in the article did I say that these developments resulted from the Land Development Guidance System.

Nor did I “characterize cautious, middle- of-the-road liberals as communists, racists, and radical environmentalists.” I did note, however, that the slow-growth movement in the United States has attracted many varieties of people, including leftist greens, communitarian conservatives, closet racists, and even two-car suburbanites. While Mr. McKenna or Mr. Judson may disagree with this assessment, surely it is not “silly and unconscionable” to observe that many growth controllers fit one or another of these profiles. In any case, I went out of my way to state that Mr. Judson is neither a misanthrope, a radical environmentalist, nor a racist.

Mr. McKenna’s implicit argument that slow population growth leads to prosperity-is unconvincing. Indeed, all the data indicate the reverse, that prosperous people tend, to have fewer children, both because they have better access to birth control and because the labor power of their offspring is not crucial to the family’s economic survival.

Most of the growth-promoting activity to which Mr. McKenna objects is privately funded and organized. As to the city’s role, my position is that government should not subsidize growth. But neither should it force developers to subsidize current businesses and residents. Developers should pay their own way, but they should not be forced to cover the cost of parks, schools, museums, and other facilities not directly related to their projects. (Incidentally, the Anheuser-Busch brewery seems to represent a net gain for the city, since the tax revenue it generates far exceeds the financing costs associated with the bond issue.)

Mr. McKenna and Mr. Judson are off the mark when they accuse me of pro-developer bias. In fact, as I indicated in the article, I have a great deal of sympathy for those who seek to preserve the integrity and livability of their neighborhoods. I believe the best way to do this is through private arrangements such as land covenants, not through political coercion. When land-use issues are dragged into the political arena, the result is often a taking of property. It’s ironic that, as Americans are telling East Europeans that private property rights are the key to economic reform, we are witnessing an erosion of those rights in our own country.