Doesn't 1 Divided by 1 = 2 Divided by 2?

Santa Catalina, the island of romance, has a population of 3,600 or so, 3,500 of whom live in the tiny city of Avalon. As of 1997, Avalon had two grocery stores -- a big Vons supermarket, and a little mom-and-pop joint called Fred and Sally's. The next year, Fred and Sally closed shop. The year after that, Vons opened a mini-outlet called Vons Express in the same location. So what did the state of California do?

Sue Vons for anti-trust.

Under terms of the proposed federal consent decree filed Wednesday, the Santa Catalina Island Co., which owns the building that Vons Express leases as well as 70 percent of all property in the one-square-mile city, would have to find a new grocer for the location. A judge must still approve the settlement. […]

As part of the settlement, Vons must pay $60,000 to the City of Avalon "to be used for the benefit of consumers who purchased grocery store products in Avalon," the consent decree states. Vons must also pay $25,000 to the state to pay for the investigation.

The Santa Catalina Island Co., by the way, basically owns the whole damned island. (Link via Martini Republic.)

Comments

[curious george]

Although this does seem like a monopoly, if it is too difficult for a mom and pop to contend with the costs of getting groceries across the ocean, and battling in price wars with such a large corporation is that Vons fault? I'm not saying I like the fact that the mom-and-pop store went out of business, but I'm pretty sure a lot of Walmart's across this country have monopolies in cities.

[thoreau]

A better question to ask is whether it would be OK if the old building had something other than a grocery store.

[Eric the .5b]

It was apparently OK for the year Vons had the only grocery store in town. It was only wrong when they had both grocery stores. This makes...a demented sort of sense.

[Ed]

Vons must pay $60,000 to the City of Avalon "to be used for the benefit of consumers who purchased grocery store products in Avalon".

If I owned the store I would quietly raise my prices across the board till that shakedown fee was recouped. But I imagine that's probably illegal in Kalifornia.

[Swillfredo Pareto]

Prosecutors...alleged...that Vons had violated a federal anti-monopoly statute by having the island's only grocery stores.

Where is it in the Constitution that we have a right to ANY grocery stores, let alone more than one? I wonder how many other goods and services there are on the island that come from only one provider? The fact that Vons is the only grocery chain on the island does not make them a monopoly.

[joe]

Swillfredo,

I think the point isn't only that Vons was the only grocery store but that, by buying out the only other grocery store on the island, they were acting to secure a monopoly.

No knowing about the availability of commercial real estate, or anything else, in Santa Catalina, I can't comment on whether this is a real problem.

[anonymous]

Fred and Sally should have been named as co-defendants. After all, they had to provide the same consent to the allegedly illicit acquisition that Vons did, and as there are no allegations of coercion, probably benefitted financially from it. Down with mom and pop!

[Deus ex Machina]

People seem to have forgotten that the whole point of anti-trust law is not to eliminate monopolies, but to punish those monopolies that violate the public trust. In other words, unless Vons were somehow undermining their competitors or were gouging customers after their competitors left, there isn't a case. While I don't know about the former, when I visited in 2001 their prices were somewhat cheaper than the rest of the island and not that much more than those of the mainland. Also, both the Vons stores there looked more like a large convenience store rather than a traditional grocer, so this isn't a case of a Wal-Mart megastore swallowing up a small town.

I'd like to add that my most precious memory of Catalina Island, is seeing my mother get visibly drunk for the first time ever.

[Stretch]

Our definition of monopoly continues shifting. Vons didn't buy out the mom-and-pop, they just bought the unused space a year after they went out of business. As far as I can tell, Vons is in no way really preventing anyone else from opening another grocery store except by providing cheap prices, which apparently is a crime if you make money doing it.

Joe's right that commercial real estate must be very difficult to lease there, as Catalina is both tiny and non-urbanized. But I'm not sure why that really matters in this case. Here's the question: If Vons is not allowed to open another store, won't Avalon be stuck with only one grocery location? Owned by Vons or not, having 2 locations to buy affordable groceries seems like a good thing to me.

On an unrelated note, I once met Bob Sagat on the boat to Catalina. He was drinking Bloody Mary's and then I saw his kids and him everywhere I went for the whole day. It was a little creepy.

[SR]

"I think the point isn't only that Vons was the only grocery store but that, by buying out the only other grocery store on the island, they were acting to secure a monopoly."

It's unclear to me that Vons "bought out" the other grocery store. Although the state AG describes Vons as "acquiring" the other store, the rest of the story makes it sound like the store went out of business and that property owner then offered the space to Vons (presumably because it was already zoned and configured for a grocery store).

[Swillfredo Pareto]

No they didn't Joe. Here is what is says above and in the article:

Fred and Sally closed shop.

[Vons]entered into a settlement with the state in which they agree to give up the Vons Express if another company wants to take it over.

Fred and Sally closed on their own and the Vons Express did not set up shop until the next year. The state government decided that the remaining provider was therefore a monopoly. There is a good bit more to being a monopoly than just being the only game in town. That is insipid. By this logic any company is at risk when their competitors voluntarily close shop and will instead have to act in a manner to prop them up. That will make for a really inefficient market.

[SR]

I actually started posting before Stretch's post had appeared, however the server squirrels were apparently on their lunch break.

[R C Dean]

Vons must pay $60,000 to the City of Avalon "to be used for the benefit of consumers who purchased grocery store products in Avalon,"

Yeah, like the consumers are going to see a nickle. Good one.

If I owned the store I would quietly raise my prices across the board till that shakedown fee was recouped. But I imagine that's probably illegal in Kalifornia.

Its only illegal if you get caught.

[Allen]

Funny how when a company owns 70% of the land it's a monopoly. But when the government controls that much land (Idaho, Nevada, et al.) it's called stewardship.

[Deus ex Machina]

So considering that the entire island is private, does this mean that the state is going after Disneyland next? After all, I didn't see any film besides Kodak being sold there, and they have an exclusive deal with Coke.

And Stretch, you should have covertly video taped him until he or his kids did something funny.

[Douglas Fletcher]

I think we need to look at joe's status as a poster, which I think may violate anti-monopoly provisions. He seems to be the only Boston-area liberal posting here, and by the sheer volume of his posts I think he tends to crowd out competition from other Boston-area liberal posters to this libertarian thread. I think this may be a possible de facto monopoly that he his conducting here.

[James]

I would close both stores and leave the island entirely. Let them take a boat to buy groceries.

[NoStar]

24 miles in a leaky old boat, makes for some soggy groceries.

[Matt Welch]

Funny how when a company owns 70% of the land it's a monopoly.

Actually, no one seems to have suggested that.

[joe]

OK, Swillfredo, "buying out the only remaining commercial space for a grocery store" would have been better phrasing than "buying out the only other grocery store."

But the point, the one that zoomed over Doug E. Fletch's head when he was making his inane comparison, still stands - their business operations foreclosed the possibility of a competitor coming into town. Were I to someone prevent other liberals from Massachusetts from posting here, his feeble analogy would make some sense.

[Douglas Fletcher]

It wasn't over my head, it was well under my ass. We understand what the point is, but we think the point is stupid. Hope that doesn't go over your head.