Monopolies across the grocery supply chain squeeze consumers, small businesses(prospect.org)
prospect.org
Monopolies across the grocery supply chain squeeze consumers, small businesses
https://prospect.org/economy/2024-06-12-war-in-the-aisles/
102 comments
There has been a weird thing going on with soda. Like cosmotic says in the sibling comment, they're often on sale.
But, like, really often and for a different deal each time. One week they may be at the full price, then the next it's "3 for $10.99 (Must buy multiples of 3)", then it'll be "$3.00 off when you buy two", then back to the crazy price.
It's annoying as hell, and all I can guess is that they're segmenting the market across time. The bargain hunters will wait for the sale and stock up (me), the normies will just put it in their cart each week without looking at the price.
But it's been this way for many years. Only in the last couple have I seen the craziness that is $10 for a 12-pack. It used to be ungodly expensive when I saw a 12-pack for $6.99.
So they've been doing this game for a while, and upped the limit when inflation provided cover.
But, like, really often and for a different deal each time. One week they may be at the full price, then the next it's "3 for $10.99 (Must buy multiples of 3)", then it'll be "$3.00 off when you buy two", then back to the crazy price.
It's annoying as hell, and all I can guess is that they're segmenting the market across time. The bargain hunters will wait for the sale and stock up (me), the normies will just put it in their cart each week without looking at the price.
But it's been this way for many years. Only in the last couple have I seen the craziness that is $10 for a 12-pack. It used to be ungodly expensive when I saw a 12-pack for $6.99.
So they've been doing this game for a while, and upped the limit when inflation provided cover.
This seems to effectively muddy the waters such that they can steadily raise the price without a ground truth for comparison. We learn to ignore the MSRP but each promotion becomes apples to oranges, and over time they're nudging things up.
That's why I only care about the per liter price. It's always comparable and by law it has to be on the sign in Germany (and probably EU)
If it's a certain formerly-cocaine-infused soft drink, the simple answer is that the vendor continually tests how much the market is willing to pay, and found that it will pay more.
I tried repeatedly to quit that particular product. I've tried grocery store generics. I bought a home soda maker and tried various craft soda syrups online. Nothing tastes the same, or even "close enough" for my palette.
I have managed to drink less of the stuff. I only buy the mini cans now (unless I'm treating myself to a bottle at a convenience store), and try not to have one at all on some days. But the sad fact is, as much as competition is supposed to solve this problem, there is really no alternative for people that are tuned into the taste of that particular brand, so they continue to pay out the ass for it when the vendor jacks up the price year after year.
I tried repeatedly to quit that particular product. I've tried grocery store generics. I bought a home soda maker and tried various craft soda syrups online. Nothing tastes the same, or even "close enough" for my palette.
I have managed to drink less of the stuff. I only buy the mini cans now (unless I'm treating myself to a bottle at a convenience store), and try not to have one at all on some days. But the sad fact is, as much as competition is supposed to solve this problem, there is really no alternative for people that are tuned into the taste of that particular brand, so they continue to pay out the ass for it when the vendor jacks up the price year after year.
>I have managed to drink less of the stuff. I only buy the mini cans now
If you're trying to save money, that's counterproductive. At least in my experience the mini cans are actually more expensive than the regular cans, even on a per can basis. This seems to be corroborated by others[1].
[1] "People seem to be happy to pay extra for the convenience of the mini can." https://www.npr.org/transcripts/1197959284
If you're trying to save money, that's counterproductive. At least in my experience the mini cans are actually more expensive than the regular cans, even on a per can basis. This seems to be corroborated by others[1].
[1] "People seem to be happy to pay extra for the convenience of the mini can." https://www.npr.org/transcripts/1197959284
That's true, but I'm weighing overall consumption with the cost of saving money. The fact is, if I buy 12oz cans of Soda, I'm going to drink 12oz of soda. They're not resealable like plastic bottles--I'm either gonna drink it in one sitting, or it's gonna go flat and get dumped out. So yes, buying the 7.5oz cans costs comparatively more money, but I'm drinking less of the stuff overall, and arguably decreasing my dependency on Soda Vendor.
I absolutely can't quit soda, so what I've done instead is go entirely on the sugar-free variants of all my favorites. I know it's still not good for me of course and I moderate my intake, but I legit cannot handle the mainline variants anymore, any time I have to get a full sugared Coke, holy fuck I feel like I'm just eating a bowl of raw sugar, I can't even taste the damn soda.
And yeah, we do the stock-ups when it goes on sale because I flat refuse to pay $10+ for fuckin soda.
And yeah, we do the stock-ups when it goes on sale because I flat refuse to pay $10+ for fuckin soda.
The sugar free ones mess with your body as well, we just don't know much about them excluding aspartame.
It is the real thing after all...
For several years, beverage companies have been complaining about CO2 supply being low. During the pandemic, I switched to a SodaStream, converted it to use a 10 pound CO2 tank and started buying the syrup for my preferred soft drink. It allowed me to increase the CO2 level of my drink while, over time, cutting the amount of syrup used by 80% (and greatly decreasing my sugar intake per day). It's pretty much lightly flavored sparkling water now.
> It’s either the caramel coloring or the water… Or the lack of competition.
There could be a lot of other factors involved.
Governments and unions can add a tremendous amount of artificial cost/overhead to goods and services, too.
A minimum wage increase or new collective bargaining agreements, for example, can increase costs throughout a supply chain, from manufacturing, to transportation, to retail.
A new or increased vehicle fuel tax, or a more general "carbon" tax, are examples of government policies that can also repeatedly distort pricing throughout a supply chain.
Also, keep in mind that the pricing of the lower-tier grocery products might not reflect the actual cost to the retailer. Such products are often sold as loss leaders. The actual cost may be much closer to the cost of the higher-tier products, but this isn't apparent to the customer thanks to the retailer subsidizing the product.
Cheaper grocery products can sometimes use inferior ingredients or lower-cost alternative ingredients, too. Comparisons with more expensive products may not be realistic because they're fundamentally different products, even if they may seem similar to the consumer.
There could be a lot of other factors involved.
Governments and unions can add a tremendous amount of artificial cost/overhead to goods and services, too.
A minimum wage increase or new collective bargaining agreements, for example, can increase costs throughout a supply chain, from manufacturing, to transportation, to retail.
A new or increased vehicle fuel tax, or a more general "carbon" tax, are examples of government policies that can also repeatedly distort pricing throughout a supply chain.
Also, keep in mind that the pricing of the lower-tier grocery products might not reflect the actual cost to the retailer. Such products are often sold as loss leaders. The actual cost may be much closer to the cost of the higher-tier products, but this isn't apparent to the customer thanks to the retailer subsidizing the product.
Cheaper grocery products can sometimes use inferior ingredients or lower-cost alternative ingredients, too. Comparisons with more expensive products may not be realistic because they're fundamentally different products, even if they may seem similar to the consumer.
> Cheaper grocery products can sometimes use inferior ingredients or lower-cost alternative ingredients, too. Comparisons with more expensive products may not be realistic because they're fundamentally different products, even if they may seem similar to the consumer.
The total cost of materials for a can of soda is negligible.
The total cost of materials for a can of soda is negligible.
Price of branding I imagine.
People are willing to pay the price so you may as well charge as much until sale revenue goes down.
People are willing to pay the price so you may as well charge as much until sale revenue goes down.
I agree. The demand curve has shifted as people have the cash and aren’t willing to substitute other products.
After you've sold to the entire addressable market then you should begin maximizing your revenue per customer.
2021 article from the Guardian:
“ A handful of powerful companies control the majority market share of almost 80% of dozens of grocery items bought regularly by ordinary Americans, new analysis reveals.”
https://www.theguardian.com/environment/ng-interactive/2021/...
“ A handful of powerful companies control the majority market share of almost 80% of dozens of grocery items bought regularly by ordinary Americans, new analysis reveals.”
https://www.theguardian.com/environment/ng-interactive/2021/...
Correct, the white label off brands are all the same products regardless of store.
Sometimes the same white label off product is different across the same chain.
E.g. in Canada, Costco toilet paper was produced/supplied by a different company between east and west coast.
E.g. in Canada, Costco toilet paper was produced/supplied by a different company between east and west coast.
Nowhere in the world spends a lower percentage of income on food than the USA.
https://ourworldindata.org/grapher/food-expenditure-share-gd...
So I would argue that other countries, if they want to tame inflation, should allow their smaller inefficient producers to get squeezed.
https://ourworldindata.org/grapher/food-expenditure-share-gd...
So I would argue that other countries, if they want to tame inflation, should allow their smaller inefficient producers to get squeezed.
That graph is misleading at best, especially for the US.
If total consumer spending in the US is 50k and in Italy 20k, then it seems rather obvious to me that Americans are gonna spend a smaller fraction of that on food...
If you run the numbers, those two countries spend, in fact, almost the same dollar amount on food (3.2k vs 3.5k).
If total consumer spending in the US is 50k and in Italy 20k, then it seems rather obvious to me that Americans are gonna spend a smaller fraction of that on food...
If you run the numbers, those two countries spend, in fact, almost the same dollar amount on food (3.2k vs 3.5k).
This is true but people will react negatively to this data regardless. The US does have this advantage, but you can also argue that the tradeoff is our food quality is much worse than other western countries.
This doesn't mean our food is cheaper. It could mean that we have other budget items that are larger than in other countries, such as healthcare costs. We almost spent more on childcare costs than countries further to the right in that graph.
Or the wealthier a nation is, the less political will exists to go after monopolies.
Makes me wonder why the governments only seem to care about tech power ... is there movement to break up these companies?
If you look at that linked guardian article (which I think is a great article BTW), it would seem that what is considered "highly consolidated" in the grocery world is still generally less consolidated than the tech world. E.g. if you look at the soft drink data, it's ~ 42% Coca-Cola, 27% PepsiCo, and 23% Keurig Dr Pepper, so then about 7% "other". That actually seems like a well-functioning market with competition to me (though I'm sure there could be regional areas where this is widely skewed).
Still, I do agree with you that there are some areas where a single company controls the vast majority of the market, and furthermore it got there by buying up a lot of brands, and this looks like there would be some pretty straightforward antitrust cases here. E.g. Grupo Bimbo alone controls nearly 2/3 of the bagel market, Danone controls nearly 80% of the refrigerated soy milk market, PepsiCo controls 87.5% of the dip market. Furthermore, I think the article does a great job exposing "the illusion of choice", i.e. in dips PepsiCo owns Tostitos, Lays, Fritos, and Doritos brands.
Still, I do agree with you that there are some areas where a single company controls the vast majority of the market, and furthermore it got there by buying up a lot of brands, and this looks like there would be some pretty straightforward antitrust cases here. E.g. Grupo Bimbo alone controls nearly 2/3 of the bagel market, Danone controls nearly 80% of the refrigerated soy milk market, PepsiCo controls 87.5% of the dip market. Furthermore, I think the article does a great job exposing "the illusion of choice", i.e. in dips PepsiCo owns Tostitos, Lays, Fritos, and Doritos brands.
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Seems we have reached 1910 again and need somebody like Teddy Roosevelt for some trust busting.
Consider how much people spent on food back then vs now.
Consider the percentage people in smaller countries without large efficient firms spend on food.
Consider the far high prices of Canadian milk, cheese, eggs, and chicken as the law caps production and provides no way to eliminate smaller inefficient producers by outcompeting them.
Nowhere in the world spends a lower percentage of income on food than the USA.
https://ourworldindata.org/grapher/food-expenditure-share-gd...
The system works for consumers. Tremendously well.
Consider the percentage people in smaller countries without large efficient firms spend on food.
Consider the far high prices of Canadian milk, cheese, eggs, and chicken as the law caps production and provides no way to eliminate smaller inefficient producers by outcompeting them.
Nowhere in the world spends a lower percentage of income on food than the USA.
https://ourworldindata.org/grapher/food-expenditure-share-gd...
The system works for consumers. Tremendously well.
In 2022, before the bulk of the current inflation materialized.
Saying it worked before is a bit like saying "I can't have diabetes, I played football in highschool!".
Saying it worked before is a bit like saying "I can't have diabetes, I played football in highschool!".
You know, you're right. We should be perfectly okay with things just the way they are. In fact, let's just keep going until there's only one big player in every market!
I'm not sure that data is super telling, all it means is the food is a lower percentage and giving the costs of education, housing, and insurance perhaps not that surprising.
This reads like whataboutism. Very disingenuous.
Exactly! We need a president who would appoint a radical trust-buster like Lina Khan to the FTC.
lol nice.
Lina Khan was a brilliant appointment by Biden, I just hope that her work continues and accelerates over another Biden term. In my opinion, America will only stay on top of we ensure robust multilevel competition in the marketplace.
If Trump is elected, Lina Khan is sure to be let go or FTC hampered.
I find it fascinating how MAGA republicans think Trump is there for the small guy, yet his appointment and policies really benefit the big corporate donors.
I find it fascinating how MAGA republicans think Trump is there for the small guy, yet his appointment and policies really benefit the big corporate donors.
"I find it fascinating how MAGA republicans think Trump is there for the small guy, yet his appointment and policies really benefit the big corporate donors."
Not that the democrats are much better but it's fascinating how the republicans are able to unite super rich capitalists and blue collar works into one movement although their interests are directly opposed. I think it's because they don't talk down on people like democrats like to do lately.
Not that the democrats are much better but it's fascinating how the republicans are able to unite super rich capitalists and blue collar works into one movement although their interests are directly opposed. I think it's because they don't talk down on people like democrats like to do lately.
Does anyone have any sources for differences by region?
I live in Florida currently, and my brother visited from Oregon. He mentioned that Publix was significantly more expensive for groceries than in Oregon.
Florida has a lot of retirees and vacationers, so I assume that Publix executives might say: "hey, if we bump the prices 10% in these tourist areas around Orlando, those midwestern snowbirds won't bother to shop around and will pay it without complaint. And, the German family on vacation won't know any better."
If true, this would be risky, because someone could figure out what prices are radically different in different areas at the same store. Pricing is so dynamic, and these production chains are so complex, it feels like an impossible task.
And, it would be fun to explore. Anyone know?
I live in Florida currently, and my brother visited from Oregon. He mentioned that Publix was significantly more expensive for groceries than in Oregon.
Florida has a lot of retirees and vacationers, so I assume that Publix executives might say: "hey, if we bump the prices 10% in these tourist areas around Orlando, those midwestern snowbirds won't bother to shop around and will pay it without complaint. And, the German family on vacation won't know any better."
If true, this would be risky, because someone could figure out what prices are radically different in different areas at the same store. Pricing is so dynamic, and these production chains are so complex, it feels like an impossible task.
And, it would be fun to explore. Anyone know?
Publix is expensive indeed. Aldi is usually a lot cheaper than Publix and Walmart.
That being said when I visited Seattle area, Fred Meyers was more expensive than publix for groceries, and Safeway was selling $50 Orchids.
That being said when I visited Seattle area, Fred Meyers was more expensive than publix for groceries, and Safeway was selling $50 Orchids.
Austin Frerick has had a number of really great interviews since launching his book. Among others:
Odd Lots had him on, which is where I first heard about his work. https://podcasts.apple.com/us/podcast/the-mega-corporations-...
And an Iowa Public Radio interview https://www.iowapublicradio.org/podcast/river-to-river/2024-...
Odd Lots had him on, which is where I first heard about his work. https://podcasts.apple.com/us/podcast/the-mega-corporations-...
And an Iowa Public Radio interview https://www.iowapublicradio.org/podcast/river-to-river/2024-...
Has this penetrated Aldi's, which uses in-house brands for the majority of their products?
Is Aldi's a good way to avoid these monopolies?
From the article, does Aldi's avoid?:
- Late delivery fees from vendors (or is it better than Walmart?)
- Slotting Fees
- Sundry wholesaler and retailer fees
- Price dependence on Tyson and other abusive suppliers
Is Aldi's a good way to avoid these monopolies?
From the article, does Aldi's avoid?:
- Late delivery fees from vendors (or is it better than Walmart?)
- Slotting Fees
- Sundry wholesaler and retailer fees
- Price dependence on Tyson and other abusive suppliers
Given that people in this thread are angry at vertical integration, I would bet that Aldi would be the first hit by many laws.
Would depend on what exactly 'vertical integration' is defined as. Most grocers' house brand items are produced by 'white label'/contract manufacturers that supply many different grocers. It's cutting one or at best two steps from the supply chain instead of true vertical integration.
HEB (the major player in the Texas market) is a notable exception that has true vertical integration, with in-house manufacturing and packaging facilities producing house brands, and its own direct relationship with raw goods/farm suppliers.
HEB (the major player in the Texas market) is a notable exception that has true vertical integration, with in-house manufacturing and packaging facilities producing house brands, and its own direct relationship with raw goods/farm suppliers.
I recently discovered this store. Literally seems to be half the price of my local grocery store and even more important I’m not overwhelmed with choices.
I don't know about Aldi's but Trader Joe's (which also uses a lot of in-house brands) seems to suffer from this but to a lesser extent and with some lag compared to the competition.
This is all anecdotal, but when egg prices went crazy it was several months before TJ's prices crept up (and even still they are reliably lower than major competitors). Same with meat products - for several months they're house-branded stuff was quite a bit cheaper than Vons/Albertons/Ralphs but they've slowly crept up and are now basically on-par.
This is all anecdotal, but when egg prices went crazy it was several months before TJ's prices crept up (and even still they are reliably lower than major competitors). Same with meat products - for several months they're house-branded stuff was quite a bit cheaper than Vons/Albertons/Ralphs but they've slowly crept up and are now basically on-par.
Doesn’t one of the Aldis own trader joes?
As I remember, German Aldi's split into Aldi Nord/North and Aldi Sud/South between the two brothers that owned the firm, over a conflict on cigarette sales.
If I am correct, U.S. Aldi's is owned by Aldi North; Trader Joe's is owned by Aldi South.
"The business was split into two separate groups in 1960, that later became Aldi Nord, headquartered in Essen, and Aldi Süd, headquartered in Mülheim...
"Internationally, Aldi Nord operates in Belgium, Netherlands, France, Luxembourg, Poland, Portugal and Spain, while Aldi Süd operates in Australia, Austria, China, Hungary, Ireland, Italy, Slovenia, Switzerland, United Kingdom and United States...
"Aldi Nord also owns the Trader Joe's grocery chain in the United States which operates separately from the group."
https://en.wikipedia.org/wiki/Aldi
EDIT: In the U.S., Aldi Nord owns Trader Joe's, and Aldi Sud owns the eponymous grocery chain.
If I am correct, U.S. Aldi's is owned by Aldi North; Trader Joe's is owned by Aldi South.
"The business was split into two separate groups in 1960, that later became Aldi Nord, headquartered in Essen, and Aldi Süd, headquartered in Mülheim...
"Internationally, Aldi Nord operates in Belgium, Netherlands, France, Luxembourg, Poland, Portugal and Spain, while Aldi Süd operates in Australia, Austria, China, Hungary, Ireland, Italy, Slovenia, Switzerland, United Kingdom and United States...
"Aldi Nord also owns the Trader Joe's grocery chain in the United States which operates separately from the group."
https://en.wikipedia.org/wiki/Aldi
EDIT: In the U.S., Aldi Nord owns Trader Joe's, and Aldi Sud owns the eponymous grocery chain.
Thanks for chasing down the details! I knew about the split and vaguely remembered that one of them had bought Trader Joe's a while ago.
Monopolies and cartels are basically the entire US economy.
At this point it's basically proven to be the end state of any "free" market in the real world.
Technological innovation is the only thing that truly disrupts monopolies and cartels.
At this point it's basically proven to be the end state of any "free" market in the real world.
Technological innovation is the only thing that truly disrupts monopolies and cartels.
There’s a legal mechanism to merge companies through aquisition. There is no legal mechanism to split a company up. Even bankruptcy is case by case and doesn’t always result in a split.
I don't know but I have heard about companies spinning off smaller companies.
I think this is particularly bad in Canada, where most of the brands are owned by two or three companies, and there has been clear evidence (and penalties) for price fixing.
Would love to hear what Canadians think about this + if they see any innovation on the horizon.
Would love to hear what Canadians think about this + if they see any innovation on the horizon.
Honestly I am always surprised how cheap food can be by mass producing it. How can pork chops cost 0.99/lbs or a whole chicken roasted but $5? I know these are sale items but I can feed myself so inexpensively and in general most of the food is pretty healthy (vegetables, some fruits, etc). These supply chains maybe squeezing profit but the likelihood a small business could even come close to the prices they have is small.
I really wish we could return to an era of congress that had appropriate mistrust in business and a strong desire for anti-trust busting. I think it’s one of the most important things we could do to prevent capitalism from going off the rails.
You make an important point. Not all capitalism is equal. When big businesses like Monsanto lobby politicians to have it their way, it’s not capitalism but rather corruption and coercion. This undermines the free market principles we value. In contrast, capitalism at the small business level is often more innovative and agile, quickly adapting to market changes and consumer needs. Supporting small businesses and ensuring a fair playing field can help prevent capitalism from going off the rails and foster a more dynamic and equitable economy.
I don't think for the small customer the wording has any significance. Is it capitalism or cronyism or you-name-it, they get shafted because that's the only criterion for a big business "success": grabbing all the money from the table for the goal of maximizing profits. All fine and nice and free in theory, but in the practice it works like this (look around). So I'm sorry I don't buy this "no true scotsman" argument, be it for capitalism or for communism or anything else. It only matters how it works in reality, and I don't like much how it works.
You know USA had capitalism in the 60s as well? That was also reality, capitalism often works really well in reality. And even USA today isn't a bad place to live, if that is a bad case of capitalism then that is a risk well worth taking.
This is all capitalism. Monsanto is the logical conclusion of capitalism. Everyone else is just playing catch up. Unfortunately, any politician who does try to do something about it gets vilified as anti-American, based on decades of cold war propaganda against other economic systems.
Out of curiosity, do you feel the same about unions, because it is the same exact problem and should be dealt with the exact same way.
I’m not sure exactly what you’re asking here as they’re so completely different and the effects on society are different as well. Are you suggesting there should be many unions and each one not allowed to get big?
In general I’m pro-union as I think they largely protect poor workers from getting fired and make everything more expensive. But you also have to recognize that sometimes society needs counter balance, even if inefficient.
In general I’m pro-union as I think they largely protect poor workers from getting fired and make everything more expensive. But you also have to recognize that sometimes society needs counter balance, even if inefficient.
There should be no unions because the base premise of a union (monopolizing labor supply to force higher prices) is straight up monopoly abuse in the exact same way any other monopoly/oligopoly is. the end result is the same (higher prices, lower output, smaller pie for us all to split, dead weight loss).
your 2 wrongs make a right argument is something I am sympathetic to but don't agree the solution is a union. The solution is identifying the monopsony being abused to push their wages down and fixing that or recognizing there is no monopsony abuse and their labor is actually that low value and looking for ways to shift some of that low value labor into higher value positions via a number of policy tools (retraining, relocation, etc).
your 2 wrongs make a right argument is something I am sympathetic to but don't agree the solution is a union. The solution is identifying the monopsony being abused to push their wages down and fixing that or recognizing there is no monopsony abuse and their labor is actually that low value and looking for ways to shift some of that low value labor into higher value positions via a number of policy tools (retraining, relocation, etc).
You don't see a difference between a monopoly on food and a union?
Of course not, one is a monopoly on labor and one is a monopoly on an end product. Monopoly is the key word and the problem in both situations.
Monopoly on labor
This is an interesting theory, but the state, via right to work laws alone, has weakened labor unions to the point where you obviously can't make this claim with a straight face.
This is an interesting theory, but the state, via right to work laws alone, has weakened labor unions to the point where you obviously can't make this claim with a straight face.
Pretty sure food is the key word here, seeing as people need that to live. A monopoly on swiss watches, for example, would be fine.
Now again, do you see a difference between a monopoly on food, and a monopoly on a particular form of labor?
Now again, do you see a difference between a monopoly on food, and a monopoly on a particular form of labor?
I say again, there is no difference. Both result in higher prices for the item being monopolized, lower output and dead weight loss for society (this has a specific meaning in economics, it's basically the worst thing that can happen). All deadweight losses should be fixed. There is probably a difference in urgency given that the deadweight loss on food will be a lot higher because everyone eats and only a few consume Swiss watches, but that is outside of the scope of my question. My question was just to verify whether the op understood the problem and felt the same about both common versions of the problem or if there was a lack of understanding, or if they understood the problem but are stuck in one of the common logic traps stopping a rational conclusion from being formed.
They don't necessarily result in higher prices for society or dead weight loss. Look up natural monopoly.
If anything, government intervention such as breaking up monopolies creates dead weight loss. Sometimes this price is worth it (such as for food production), sometimes it's not (for example luxury goods).
Even if one were to assume all monopolies are bad, that would not necessarily mean all are equally bad, or that the optimal strategy for reducing their harm would be the same.
Finally, unions are not monopolies on labor. Some unions are sufficiently large that they can be modelled as monopolies, but in general only a small fraction of the labor force is unionized and most unions are limited in scope. You could just as easily say employers have a monopoly on employment at their companies, which would be a true but not particularly useful way of looking at them.
If anything, government intervention such as breaking up monopolies creates dead weight loss. Sometimes this price is worth it (such as for food production), sometimes it's not (for example luxury goods).
Even if one were to assume all monopolies are bad, that would not necessarily mean all are equally bad, or that the optimal strategy for reducing their harm would be the same.
Finally, unions are not monopolies on labor. Some unions are sufficiently large that they can be modelled as monopolies, but in general only a small fraction of the labor force is unionized and most unions are limited in scope. You could just as easily say employers have a monopoly on employment at their companies, which would be a true but not particularly useful way of looking at them.
A natural monopoly is just a monopoly where the barrier to entry that makes a monopoly possible isn't manufactured via abuse or government (i.e. Mostly capital costs are too high to support investment by more than one or a small number of players). If the entity lucky enough to have that monopoly is profit maximizing it will definitely result in higher prices and dead weight loss. You are right though, that in this relatively small corner case the correct solution is regulation to force competitive pricing (of which there are many options I won't get into here), not breakup.
Of course all monopolies are bad. They are current or future points of deadweight loss and should be monitored and dealt with through regulation ( a very small subset of monopolies/oligopolies) or elimination. A monopoly is the forbidden fruit that everyone wants but noone should get for any length of time. That desire is a big driver of the innovation that is the secret sauce of a free market that makes it superior to every other economic organization method we have tried but once someone gets it it eliminates most of the need for any innovation and leaves that industry stagnating. How bad monopolies are (technically market power) is grossly understate in modern society in my opinion.
We are talking about government here. How bad something is isn't an argument for not doing something, it is an argument for priority. If your position is labor unions aren't as bad as X so we should sort X and then break up labor unions that's fine, but that's not what I'm hearing in this thread.
Of course they are monopolies on labor. most countries labor labor laws make them an explicit monopoly on labor for any workplace unlucky enough to be unionized. It's not relevant that they are non union companies employing non union labor. If your company is unionized it faces a monopoly on labor and can only hire union for the areas that are unionized unless the union allows non union. It is the textbook definition of a monopoly. (also, how do I sign up for this alternative non union government in my province/country? I would really enjoy the much lower taxes that would have from both lower labor prices but also much faster removal of incompetence via firing.. oh wait I can't sign up for that because there is no option because the public labour unions have a textbook monopoly). You can have natural monopolies at the employee level, however that is pretty rare because it means that employee is almost impossible to replace (this is why key man insurance exists basically). It's quite a lot different than saying all of X must be hired from the union where X is a whole class of worker that is fairly interchangeable with a reasonable labor supply but as a class is impossible or near impossible to do your business.
Of course all monopolies are bad. They are current or future points of deadweight loss and should be monitored and dealt with through regulation ( a very small subset of monopolies/oligopolies) or elimination. A monopoly is the forbidden fruit that everyone wants but noone should get for any length of time. That desire is a big driver of the innovation that is the secret sauce of a free market that makes it superior to every other economic organization method we have tried but once someone gets it it eliminates most of the need for any innovation and leaves that industry stagnating. How bad monopolies are (technically market power) is grossly understate in modern society in my opinion.
We are talking about government here. How bad something is isn't an argument for not doing something, it is an argument for priority. If your position is labor unions aren't as bad as X so we should sort X and then break up labor unions that's fine, but that's not what I'm hearing in this thread.
Of course they are monopolies on labor. most countries labor labor laws make them an explicit monopoly on labor for any workplace unlucky enough to be unionized. It's not relevant that they are non union companies employing non union labor. If your company is unionized it faces a monopoly on labor and can only hire union for the areas that are unionized unless the union allows non union. It is the textbook definition of a monopoly. (also, how do I sign up for this alternative non union government in my province/country? I would really enjoy the much lower taxes that would have from both lower labor prices but also much faster removal of incompetence via firing.. oh wait I can't sign up for that because there is no option because the public labour unions have a textbook monopoly). You can have natural monopolies at the employee level, however that is pretty rare because it means that employee is almost impossible to replace (this is why key man insurance exists basically). It's quite a lot different than saying all of X must be hired from the union where X is a whole class of worker that is fairly interchangeable with a reasonable labor supply but as a class is impossible or near impossible to do your business.
> A natural monopoly is just a monopoly where the barrier to entry that makes a monopoly possible isn't manufactured via abuse or government (i.e. Mostly capital costs are too high to support investment by more than one or a small number of players).
That's not what a natural monopoly is. Again, go look it up. It is also not a small edge case.
> Of course all monopolies are bad.
Again, this is just incorrect. Monopolies can be the most economically efficient option, and even when they are not there are things to consider besides economic efficiency. Monopoly is not the death of innovation - in an actual free market a monopoly can never rest on its laurels or it will have new market entrants coming to eat its lunch (and we see this in the real world, eg Myspace or Kodak). Certain anti-competitive measures that can be used to create monopolies are very dangerous to competition, but that is a different matter.
> We are talking about government here. How bad something is isn't an argument for not doing something, it is an argument for priority. If your position is labor unions aren't as bad as X so we should sort X and then break up labor unions that's fine, but that's not what I'm hearing in this thread.
Both murder and shoplifting are crimes. Crimes are bad, both murder and shoplifting cause problems for society. Everyone will agree that murder is worse than shoplifting, but that doesn't mean murder is simply a higher priority than shoplifting, and that when the resources necessary to go after murderers are freed up that they should be applied in the same manner towards shoplifters. Shoplifting and murder, while both subcategories of the same thing, are fundamentally different and the optimal responses to both fundamentally ought to be different.
You have not established that treating corporate monopolies and labor unions the same at any point in time is a good idea, nonetheless that it is the optimal course of action.
> If your company is unionized it faces a monopoly on labor and can only hire union for the areas that are unionized unless the union allows non union.
That's not how unions work.
> how do I sign up for this alternative non union government in my province/country?
Move to a country with laws more to your liking.
> You can have natural monopolies at the employee level, however that is pretty rare because it means that employee is almost impossible to replace
Again, not what a natural monopoly is.
> the union where X is a whole class of worker that is fairly interchangeable with a reasonable labor supply but as a class is impossible or near impossible to do your business.
Again, not how unions work.
That's not what a natural monopoly is. Again, go look it up. It is also not a small edge case.
> Of course all monopolies are bad.
Again, this is just incorrect. Monopolies can be the most economically efficient option, and even when they are not there are things to consider besides economic efficiency. Monopoly is not the death of innovation - in an actual free market a monopoly can never rest on its laurels or it will have new market entrants coming to eat its lunch (and we see this in the real world, eg Myspace or Kodak). Certain anti-competitive measures that can be used to create monopolies are very dangerous to competition, but that is a different matter.
> We are talking about government here. How bad something is isn't an argument for not doing something, it is an argument for priority. If your position is labor unions aren't as bad as X so we should sort X and then break up labor unions that's fine, but that's not what I'm hearing in this thread.
Both murder and shoplifting are crimes. Crimes are bad, both murder and shoplifting cause problems for society. Everyone will agree that murder is worse than shoplifting, but that doesn't mean murder is simply a higher priority than shoplifting, and that when the resources necessary to go after murderers are freed up that they should be applied in the same manner towards shoplifters. Shoplifting and murder, while both subcategories of the same thing, are fundamentally different and the optimal responses to both fundamentally ought to be different.
You have not established that treating corporate monopolies and labor unions the same at any point in time is a good idea, nonetheless that it is the optimal course of action.
> If your company is unionized it faces a monopoly on labor and can only hire union for the areas that are unionized unless the union allows non union.
That's not how unions work.
> how do I sign up for this alternative non union government in my province/country?
Move to a country with laws more to your liking.
> You can have natural monopolies at the employee level, however that is pretty rare because it means that employee is almost impossible to replace
Again, not what a natural monopoly is.
> the union where X is a whole class of worker that is fairly interchangeable with a reasonable labor supply but as a class is impossible or near impossible to do your business.
Again, not how unions work.
> to help keep small businesses alive.
That’s what a lot of this concern is really about. Legal bailouts for mediocre boomers who run inefficient, unambitious businesses with high prices.
Small businesses try to guilt you for your business as they rarely offer something worth buying on the merits unless they occupy a niche.
> Walmart and scattered Dollar Generals fill the void left by shuttered independent grocers. Frerick worries about the mid-level grocers “collaps[ing] like the rest of America.”
“Independent” in this case meaning high priced grocers people didn’t want to shop at. They got wiped out for being unable to control their costs.
That’s what a lot of this concern is really about. Legal bailouts for mediocre boomers who run inefficient, unambitious businesses with high prices.
Small businesses try to guilt you for your business as they rarely offer something worth buying on the merits unless they occupy a niche.
> Walmart and scattered Dollar Generals fill the void left by shuttered independent grocers. Frerick worries about the mid-level grocers “collaps[ing] like the rest of America.”
“Independent” in this case meaning high priced grocers people didn’t want to shop at. They got wiped out for being unable to control their costs.
Indeed, do we shop for groceries in order to provide businesses with revenue, or does a business exist to serve customers? If the latter, and some business don't serve our needs as well (e.g. higher prices, poor selection or bad service), then should we not be able to patronize businesses that do?
Nature presents the efficiency vs security dilemma almost everywhere you look. One is always traded off for the other, especially between the short term and long term.
Efficiency lowers costs (especially in the short term), but increases risks in the long term (less resiliency/options when things go wrong). Things going wrong can also mean a business with pricing power deciding to increase profit margins (and/or reduce quality/quantity of services).
Efficiency lowers costs (especially in the short term), but increases risks in the long term (less resiliency/options when things go wrong). Things going wrong can also mean a business with pricing power deciding to increase profit margins (and/or reduce quality/quantity of services).
Walmart and drug store retail “control their costs” by using their market power to shift them up-chain. Their suppliers are required to stock and rotate inventory (as opposed to the retail employees). Unsold and expired product is required to be bought back by suppliers. If a retail buyer finds out a supplier has extra funds they will call and require that the supplier buy advertising on their homegrown retail media network (a shakedown). It’s a racket
Walmart is notorious for coming into an area and running at a loss until it has eliminated all the competition then jacking up prices.
Is this true? It definitely sounds truthy and would confirm my biases. But I could just as well see:
1. Walmart opens location
2. Prices things to get a small margin
3. Competition is driven out because consumers don't want to go to multiple stores to get everything they need
4. Suppliers raise costs, inflation happens, market conditions change, etc. (it would even make sense for the supplier to raise prices if they have less independent customers, to account for the risk of only having 1 big customer)
5. Someone writes an article about how X is more expensive now at Walmart than it was at random shop, years ago.
1. Walmart opens location
2. Prices things to get a small margin
3. Competition is driven out because consumers don't want to go to multiple stores to get everything they need
4. Suppliers raise costs, inflation happens, market conditions change, etc. (it would even make sense for the supplier to raise prices if they have less independent customers, to account for the risk of only having 1 big customer)
5. Someone writes an article about how X is more expensive now at Walmart than it was at random shop, years ago.
Is that true? Or does it just seem that way because it takes time for places to go out of business competing with Walmart and during that time we have inflation. Is it proven that Walmart operates at a loss for some of their stores for a while?
>That’s what a lot of this concern is really about. Legal bailouts for mediocre boomers who run inefficient, unambitious businesses with high prices.
The free market only works when both consumers and producers are atomised and unable to exert market influence. Both billionaires, unions, conglomerates, vertical integration and every other trick labor or capital uses to increase their bargaining power are market failures.
In short: if you like capitalism you need trust busting along with union busting.
The free market only works when both consumers and producers are atomised and unable to exert market influence. Both billionaires, unions, conglomerates, vertical integration and every other trick labor or capital uses to increase their bargaining power are market failures.
In short: if you like capitalism you need trust busting along with union busting.
Certainly a take.
That's the definition of a free market in every economics textbook.
It's actually the opposite of what free market means in economics textbooks. The textbook definition of a free market is an economic system in which prices are determined by unrestricted competition between privately owned businesses. Monopoly busting and union busting are both government interventions that are explicitly not supposed to happen in a free market.
> “Independent” in this case meaning high priced grocers people didn’t want to shop at.
Not necessarily high-priced. Expense to the consumer (me) is also measured in time.
Maybe the little stores didn't have a large selection, so a shopper who went there would have to go to the big store anyway. Why waste time? Just go to the big one. I'm guilty of that behavior.
Flip that story a bit and I've also bought more expensive individual items at a small store close to me when it was "an emergency." Higher prices were outweighed by my time saved.
> occupy a niche
The indies that seem to exist in most of the country seem to be ethnic specialty markets or local produce/meat/etc. Near me in my little Iowa town are Korean, Mexican, and Egyptian grocers, fruit/veggie produce, and butcher shops. There's also the pretentious Co-op. I should add that the farmer's market is always bustling and also isn't being put out of business by the Walmart.
And this is flyover country. It's not like when I was in Manhattan and within a block of me had 2 bodegas, 2 bakeries, a seafood store, a cheese shop, and a butcher.
I'm sure I've left things off both of those lists.
> Legal bailouts for mediocre boomers who run inefficient, unambitious businesses with high prices
No, they're for things deemed to be for the public good despite the ravages of the "free market," by which today we mean acceptable monopolies.
Not necessarily high-priced. Expense to the consumer (me) is also measured in time.
Maybe the little stores didn't have a large selection, so a shopper who went there would have to go to the big store anyway. Why waste time? Just go to the big one. I'm guilty of that behavior.
Flip that story a bit and I've also bought more expensive individual items at a small store close to me when it was "an emergency." Higher prices were outweighed by my time saved.
> occupy a niche
The indies that seem to exist in most of the country seem to be ethnic specialty markets or local produce/meat/etc. Near me in my little Iowa town are Korean, Mexican, and Egyptian grocers, fruit/veggie produce, and butcher shops. There's also the pretentious Co-op. I should add that the farmer's market is always bustling and also isn't being put out of business by the Walmart.
And this is flyover country. It's not like when I was in Manhattan and within a block of me had 2 bodegas, 2 bakeries, a seafood store, a cheese shop, and a butcher.
I'm sure I've left things off both of those lists.
> Legal bailouts for mediocre boomers who run inefficient, unambitious businesses with high prices
No, they're for things deemed to be for the public good despite the ravages of the "free market," by which today we mean acceptable monopolies.
It's unfortunate that the word monopoly is losing it's meaning. Formerly, it meant a business that had an overwhelming or total share of the entire market, plus high barriers to entry. Now it just means a big business, or the only option in my neighborhood.
Supermarkets aren't especially profitable these days, and downward pressure on suppliers ultimately serves consumers anyway. The grocery business is very competitive, with incredible price transparency and low margins.
Supermarkets aren't especially profitable these days, and downward pressure on suppliers ultimately serves consumers anyway. The grocery business is very competitive, with incredible price transparency and low margins.
you really cannot see the connection?
This comes at the expense of quality and variety though. A market economy will not flourish if there are only a few big players. We need small businesses to be able to innovate.
The buyers in the market almost always choose the lowest prices. Hence the success of Walmart/Kroger/Albertsons/Costco/Target/Aldi/Dollar General/etc.
There might be room for one sort of upscale grocer on the richer side of town, but I doubt there is space for more.
There might be room for one sort of upscale grocer on the richer side of town, but I doubt there is space for more.
That's not an iron law, though. Some consumers will always choose based on price, but for others, it is a function of experience. I, for one, am happy to pay a bit more for a higher-quality product, but my experience tells me that a slightly higher price is indicative of marketing rather than product quality.
So why doesn't anyone fill that niche? Perhaps in part because the market is so consolidated. There's little incentive for the small handful of major players to cannibalize their own products.
So we end up largely with two options: the cheapest version of the thing that is possible to manufacture, and an extremely high-quality artisan product costing multiple times as much.
So why doesn't anyone fill that niche? Perhaps in part because the market is so consolidated. There's little incentive for the small handful of major players to cannibalize their own products.
So we end up largely with two options: the cheapest version of the thing that is possible to manufacture, and an extremely high-quality artisan product costing multiple times as much.
Grocery stores sell multiple quality products (generic/branded), and you have various quality of inventory based on the market the retailer is targeting. For example, Whole Foods/local higher end store, down to Costco/Trader Joes/Kroger, down to Aldi/Winco/etc, down to Dollar General.
Then you also have lower priced stores operated by immigrants that attract more price sensitive immigrant diasporas.
But broadly speaking, it would reflect the disposable wealth gap between buyers. With a widening income/wealth gap, I would expect there to only be a few viable markets to cater to, maybe even only 2. The source of the “problem”, however, would be the wealth gap, not the stores. The stores are a reflection.
Another issue is also technology and instant communication making it more convenient and cheaper to use fewer vendors. Shopping and checking prices is work.
If someone can drive to one big box store and get almost everything that need, they will choose to do that.
Then you also have lower priced stores operated by immigrants that attract more price sensitive immigrant diasporas.
But broadly speaking, it would reflect the disposable wealth gap between buyers. With a widening income/wealth gap, I would expect there to only be a few viable markets to cater to, maybe even only 2. The source of the “problem”, however, would be the wealth gap, not the stores. The stores are a reflection.
Another issue is also technology and instant communication making it more convenient and cheaper to use fewer vendors. Shopping and checking prices is work.
If someone can drive to one big box store and get almost everything that need, they will choose to do that.
And the more we have big businesses in charge of the economy, the more they will suppress wages, and the more people will have to buy primarily based on price.
You can buy speciality meat or cheese or produce at niche speciality shops.
Local butchers haven’t been displayed by Walmart unless they thought their business was pork chops over Wagyu and goat.
But in general, customers don’t want variety and quality over price.
Local butchers haven’t been displayed by Walmart unless they thought their business was pork chops over Wagyu and goat.
But in general, customers don’t want variety and quality over price.
During covid, while every corporation whined how tough times were (and often they really were), retail sellers in Europe like Tesco had record profits. Elevated prices, excuses about supply chain, less workers on the fields etc. Their profits went through the roof, year after year.
Rewind to 2024, prices are even higher, their profits are still stellar. I have hard time feeling any sympathy towards them.
Its almost as if they somehow, big boys behind closed doors, made together some shady deals about overall prices (with which smaller guys can't still compete ie due to economies of scale or massive negotiating power). No, that can't happen in 2024, almost pretty sure about that.
Rewind to 2024, prices are even higher, their profits are still stellar. I have hard time feeling any sympathy towards them.
Its almost as if they somehow, big boys behind closed doors, made together some shady deals about overall prices (with which smaller guys can't still compete ie due to economies of scale or massive negotiating power). No, that can't happen in 2024, almost pretty sure about that.
Nominal profits have no place in this discussion. Only profit margin, and grocery businesses have profit margins of 2% or maybe 4%. Tesco has a less than 4% profit margin (they only list operating margin, I didn’t bother to calculate profit margin, but it must be lower), and the margins have not been increasing. Which means Tesco’s costs are increasing, necessitating Tesco’s price increases. Otherwise Tesco loses money.
https://www.tescoplc.com/investors/reports-results-and-prese...
If you think you can run a better business on sub 4% profit margin, you are welcome to throw your hat in the ring. But it really is an achievement of modern technology, logistics, and management to enable to get the amount of food, from all over the world, in consumer’s hands, all year round, at such low profit margin.
https://www.tescoplc.com/investors/reports-results-and-prese...
If you think you can run a better business on sub 4% profit margin, you are welcome to throw your hat in the ring. But it really is an achievement of modern technology, logistics, and management to enable to get the amount of food, from all over the world, in consumer’s hands, all year round, at such low profit margin.
> It's unfortunate that the word monopoly is losing it's meaning. Formerly, it meant a business that had an overwhelming or total share of the entire market,
You're just describing the most extreme and dysfunctional aspect of a phenomenon that comes in shades of gray.
> plus high barriers to entry.
That's not exactly a requirement. A sufficiently powerful monopoly can generate its own barriers to entry (e.g. it can use its war chest to lower prices to an uneconomical level to drive a potential competitor out of business, and the threat of that can keep a competitors from even trying).
> Now it just means a big business,
It means big business that abuses its market share to make even more money due to a lack of real competition.
> or the only option in my neighborhood.
And those an be a legitimate monopoly, even by your above definition. It's all about how you describe the market.
IIRC, in the Grapes of Wrath, there's a company store that's a monopoly, and the proprietor says as much: his prices are unfair, but the transportation cost to shop at another store forces his customers to shop with him.
You're just describing the most extreme and dysfunctional aspect of a phenomenon that comes in shades of gray.
> plus high barriers to entry.
That's not exactly a requirement. A sufficiently powerful monopoly can generate its own barriers to entry (e.g. it can use its war chest to lower prices to an uneconomical level to drive a potential competitor out of business, and the threat of that can keep a competitors from even trying).
> Now it just means a big business,
It means big business that abuses its market share to make even more money due to a lack of real competition.
> or the only option in my neighborhood.
And those an be a legitimate monopoly, even by your above definition. It's all about how you describe the market.
IIRC, in the Grapes of Wrath, there's a company store that's a monopoly, and the proprietor says as much: his prices are unfair, but the transportation cost to shop at another store forces his customers to shop with him.
While monopoly originally referred to a single company having an overwhelming share of the market, its colloquial use refers to any company that has enough market share to abuse its position to harm customers. This is just because it's easier to convey the point by saying monopoly than deal with all the dumb questions that get brought up by using oligopoly.
This seems pretty monopolistic to me: https://en.wikipedia.org/wiki/Bread_price-fixing_in_Canada
After I left the store, I did check their ad, and found a 12 pack of a lower tier soda for $3.50
Someone is making 60 points of margin on the $10 12 pack. That seems extreme for what is effectively corn syrup and water in an aluminum can.