"Here's a billion, don't raise your prices" is an interesting strategy.
From Axios:
The Biden administration will offer $1 billion to help independent meat and poultry producers in its latest measure to fight inflation, the White House announced Monday.
Driving the news: The Biden administration has argued that large corporations and corporate monopolies are responsible for rapidly rising prices. It specifically blames four monopolists in the meat-processing industry for increasing meat prices.
- None of the four industry giants cited by the White House — Tyson, JBS, Marfrig and Seaboard — has made a major acquisition in the past few years, but each has a long history of inorganic growth.
What they're saying: "Over the last few decades, we’ve seen too many industries become dominated by a handful of large companies that control most of the business and most of the opportunities — raising prices and decreasing options for American families, while also squeezing out small businesses and entrepreneurs," the White House said.
- "Four large meat-packing companies control 85% of the beef market. In poultry, the top four processing firms control 54% of the market. And in pork, the top four processing firms control about 70% of the market."
- "When dominant middlemen control so much of the supply chain, they can increase their own profits at the expense of both farmers — who make less — and consumers, who pay more."
The big picture: Current antitrust law, which hasn't changed much in any of our lifetimes, is mostly predicated on pricing concerns, Axios' Dan Primack writes. As such, regulators have typically cared more about horizontal mergers (where a company subsumes a competitor) than vertical mergers (where it buys a company in a different market).
- Politicians of both parties have been pushing for antitrust laws to be rewritten and enforcement to be creatively expanded. Particularly when it comes to big tech, where competition issues are often divorced from what consumers pay (at least directly).
- Biden's beef battle doesn't negate the adoption of broader antitrust policies, but does suggest that pricing will remain the cornerstone concern.
The other side: The Biden administration has been criticized by the North American Meat Institute, which says the government does not understand agricultural economics, Axios' Felix Salmon reports....
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A fascinating look at the thinking in the West Wing. Either they, and Senator Warren (and others) truly believe that corporations are at the root of the inflation the country (and to a lesser extent, the world) is experiencing or they don't believe it but have decided to go with the story anyway. Last week's talk about "big grocery" from Senator Warren would point in the latter direction. From her letter to Kroger, Publix, and Albertson's:
"While many Americans faced the loss of jobs, homes, and loved ones during the COVID-19 pandemic,grocery companies like yours saw immense gains through record sales and profits,"Many, many years ago I was counseled not to ever waste a minute analyzing low-margin businesses, and the grocery stores with their ~2% profit margins were the example used.
So the questions become: Is this blame-shifting? An attempt to jawbone businesses into eating any cost increases from their suppliers, government mandates and employee wage and benefit increases? Is it a soft version of Diocletian's Maximum Price Edict? So many questions.....
