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Dubroff: Obama administration’s anti-trust efforts failing in Tri-Counties

By   /   Friday, October 30th, 2015  /   Comments Off on Dubroff: Obama administration’s anti-trust efforts failing in Tri-Counties

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Editor Henry Dubroff

Editor Henry Dubroff

Monopoly is a fun game — as long as you’re the winner.

And so it is in the actual game of business, where monopoly has become the all-too-frequent outcome of mergers and acquisitions. It happened just a few months ago in the grocery business. Office supplies and pharmacies could be next.

The grocery saga is one of anti-trust meddling going off the rails. Through the botched sale of 146 grocery stores to food and pharmacy chain Haggen, regulators triggered what one expert described as the fastest bankruptcy in modern supermarket history.

That sale was meant to create a viable competitor to the newly combined Safeway-Vons-Albertsons chain. Instead, it creased a financial weakling that missed the market for pricing and inventory and was not able to make headway in competing against Ralphs, a unit of Kroger, and tough incumbents like Trader Joe’s.

It took a vibrant three-way competition and turned it into a duopoly — with serious questions about how the Albertsons-Vons-Safeway combo will hold up in its fight with demonstrably stronger Kroger.

Office supplies could be even worse.

In the final stages of approval is the merger of Staples with the combined Office Depot/Office Max chain. One option, discussed by Bank of America analysts recently, would be for Essendant, formerly United Stationers, to buy the commercial supply business of Staples to ease concerns about business overlaps.

Whether the deal goes through or not, some 400 Office Depot/Office Max stores will be closed this year as the merged company slashes costs. You have to wonder if anybody has thought about what would happen if Staples/Office Max/Office Depot got into financial trouble. I don’t know but the mom and pops that are left will probably say “I told you so.”

Finally, we turn to the pharmacy business. On Oct. 27, the Boots Alliance-Walgreen drug store chain proposed merging with Rite-Aid in a $17.2 billion deal. It would combine the current No. 2 and No. 3 chains, creating a new No. 1 chain with 13,000 stores compared to CVS, which currently has 7,800 units.

That deal, too, is likely to face scrutiny from regulators who may or may not order some divestitures. But that, too, looks like a suckers game as this set of weak-kneed trust busters has so far shown little knack for creating viable secondary competitors when mega-mergers take place.

In the case of Haggen, cities such as Carpinteria, which for decades had two viable supermarket competitors, will be left with a single mainline supermarket. Likewise, communities that had viable rivals for office supplies will have just one — especially now that the Staples of the world have driven out the vast majority of mom and pop firms.

And now what will happen to drug stores is likely to be much the same, though perhaps on more of a neighborhood-by-neighborhood basis.

It would be a shame if the legacy of the Obama administration is a business landscape littered with dominant firms that bullied their way to the top only to collapse and leave communities high and dry.

But that’s apparently what we are going to get.

• Reach Editor Henry Dubroff at [email protected]

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