Beer, baby food, and antitrust
An article that recently appeared in the New York Times Dealbook section has some good insight into the changes in US antitrust policy. Entitled "Beer and Baby Food: An Antitrust Lesson" (10/10/07), the article discusses the recent Miller-Coors announcement with relation to the case of H.J. Heinz and Beech Nut in 2001. Both deals can be described as "3-to-2" deals, where the main competitors in a market segment are reduced from three to two players.
Like Miller-Coors, the merger of the baby food operations of Heinz and Beech-Nut was a joining of the #2 and #3 in the market. Gerber was #1 in baby food, with an utterly dominant 65% market share. By contrast, Anheuser-Busch has slightly less than 50% market share.
Together the combined Heinz and Beech Nut would have accounted for 33% of the US market, while a Miller-Coors deal will account for 19%.
But while most think that the Miller-Coors deal with attract little antitrust attention, the union of the two baby food companies was summarily turned down by antitrust regulators. As the Times article notes:
A lower court initially approved the deal, only to have it overturned by an appeals panel in April 2001. At the time, Robert Pitofsky, the departing chairman of the F.T.C., now in private practice at Arnold & Porter, told The New York Times that the decision was one of the most important antitrust cases during his six years leading the agency 'If this deal got through you would have seen a land rush of 3-to-2 proposals,' Mr. Pitofsky told the Times. ''The court just knocked this one out of the park.'
Well, they just moved back the fences since 2001. It's highly unlikely that the Bush administration will have more than a few minor conditions for accepting the deal. It's indicative of a major change in antitrust, and basically, an abandonment of any principles of maintaining competition.
