The FTC’s current review of narrow food-related mergers is similarly silly. As Bloomberg’s Bobby Ghosh noted a couple weeks ago, for example, the agency has spent seven-plus months deciding whether to allow Campbell Soup, which makes Prego pasta sauce, to acquire Sovos Brands, which makes the tonier Rao’s. Not only is the merger small (only $2.7 billion in a U.S. economy that annually spends more than $1 trillion on groceries), but it would give the combined pasta sauce “monopoly” just 36.5 percent of the U.S. market, beating out the 22.9 percent share held by current top-dog Mizkan (which makes Ragu and Bertolli). Rao’s and Prego, moreover, don’t even compete against each other—the former is priced around three times as much as the latter—and, even in an absurd hypothetical future dominated by Big Sauce, alternatives exist and American consumers can always make their own. It’s really easy.
The same goes for the FTC’s investigation of Big Sandwich, i.e., the $10 billion acquisition of Subway by (ironically named) Roark Capital, which already owns Jimmy John’s, Arby’s, McAlister’s Deli, and Schlotzsky’s. As Jonah ably discussed late last year (encroaching on my turf in the process, grumble), the government’s case against this supposed “sandwich shop monopoly” falls apart once you consider the combined entity’s small share of your typical local (not national) sandwich market, how easy it is to enter that market (or to make lunch at home), or how sandwiches compete directly with plenty of other fast foods not owned by Roark Capital. Leaving aside the obvious entertainment value of having the federal government officially weigh in on the age-old internet debate over whether burgers, tacos, gyros and other bread/meat combinations are “sandwiches,” this—like the case against Big Sauce—is simply not something that requires the full force and attention of the federal government.
Yet here we are.
The Broader Faults
Beyond the issue-specific problems, all this picking of economic nits suffers from the same general ones, too—even leaving aside whether any of this stuff is remotely within the United States’ government’s enumerated constitutional powers.
For starters, the caterwauling isn’t just costless, inflation-related politicking (though it certainly is politicking). Bourne notes, for example, that populist attacks on routine pricing moves are “fueling legislative attempts to control firms’ prices or pricing structures” in ways that would generate real economic harms for companies, consumers, and the U.S. economy more broadly. Indeed, the press release accompanying Sen. Casey’s recent interrogation of Wendy’s cited that episode and “shrinkflation” as justifying disastrous federal price control legislation that he, Warren, and two other populist senators just introduced in Congress.
Groundless or insignificant regulatory actions, meanwhile, cost the companies involved millions of dollars in both legal fees and lost time. They also discourage these and other companies from exploring business innovations or transactions (e.g., mergers) that might generate substantial efficiencies or other economic benefits. And, as Adam J. White writes about the FTC, even if an agency ultimately loses in court, a broad and aggressive regulatory approach—and the chilling uncertainty it creates—teaches other powerful regulators “to rule beyond mere rules.” Given the open-ended state of U.S. law, that’s no small thing: