Heinz case


Heinz case

The purpose of this short comment, however, is not to "reply" to these articles but rather to "explain" my vote in the Heinz case case.

Commissioners Anthony and Swindle dissented. The vote lineup apparently surprised some people, and I therefore specially welcome this opportunity to discuss my reasons for voting the way I did. The reader should understand, however, that there is a distinction between this explanation of why I had "reason to believe" that the proposed transaction violated the law, based on the information available at the time, and the final conclusions I may have formed on the facts of the Heinz case, had it been tried in the agency.

The comment also Heinz case not be construed as a full critique of the contrasting judicial decisions in the case. The Market Definition Issue The analysis of this case, like every merger case, began with an effort to define the market and the players in it.

Before turning to efficiencies, it is necessary to digress briefly and discuss this issue because it had a significant impact on the way I viewed the efficiency claims. At first glance, the matter seemed simple and straight forward. For at least forty years, there have been three significant players in the baby food business: The case thus looks like a Heinz case with a very low potential for entry, and there is a broad consensus in the economics community that and combinations are likely to be particularly troublesome.

In addition, there was no claim that any of the competitors was failing and, though the baby food business appeared to be stagnant, there was no claim that the industry faced dramatic changes comparable, for example, to recent claims in defense-industry mergers.

In the language of the Court of Appeals: The parties challenged the simple analysis on two grounds. First, they argued that Heinz and Beech-Nut did not really compete with one another because each was strong in different areas of the country, with minimal horizontal overlaps.

Second, they argued that Heinz and Beech-Nut did not really compete at the consumer level, which they claimed is the only one that counted.

Heinz case

I did not believe that either objection was well founded. As to the first objection, it is true that neither Heinz nor Beech-Nut had the full national coverage of Gerber. It is not accurate to characterize Heinz and Beech-Nut as regional players, however.

They can and do ship across the country from their single plants, located in Pennsylvania and New York, respectively.

Moreover, they do have significant geographical overlaps. The Circuit Court noted, "there are at least ten metropolitan areas in which Heinz and Beech-Nut both have more than a 10 per cent market share and their combined share exceeds 35 per cent.

It appeared likely that the regional patterns evolved through decades of essentially passive competition tacitly acknowledged by the partiesunder which Heinz and Beech-Nut failed to challenge one another aggressively. It would be perverse to permit parties to merge just because they have not chosen to compete hard in the past.

Consumers do not view the brands as substitutes and generally only one of them is available in a given store. Heinz and Beech-Nut rivalry is thus limited to competition for the number two slot on grocery shelves, primarily through the offer of so-called "slotting allowances.

Note that this argument is problematic for one of the same reasons as the regional separation argument, discussed above. The fact that parties have historically chosen to compete in a way that is not particularly effective does not mean that they should be allowed to merge and cease competing altogether.

But, there is an even more fundamental reason for rejecting this objection to a analysis. Competition at the wholesale level is important in its own right, wholly apart from the effect it may have on ultimate consumers.

As the Court of Appeals noted, "no court has ever held that a reduction in competition for wholesale purchasers is not relevant unless the plaintiff can prove impact at the consumer level. The "Efficiencies" Issue The parties argued vigorously that the merger would create a stronger competitor which would be better able to launch a vigorous attack on the entrenched position of the industry leader, Gerber.

The argument was supported by a substantial number of retail customers and by internal documents and studies. I do not know whether these arguments would have proven persuasive after a full administrative trial, but I would like to highlight some issues that were particularly important in shaping my preliminary views.

First, there appeared to be a fundamental disconnect between the way the parties thought about some efficiency arguments and the way I thought about them.

Their arguments was focused, in part, on the claim that the combination would improve the efficiency of the Beech-Nut operation. For me, the issue was the impact of the combination on the efficiency of the surviving entity, Heinz, which is a different question. I suspect there is a deeper way to look at these questions but I have not seen it articulated.

Moreover, whatever these efficiency improvements might be, there was an initial question of whether they were merger related.

I believe there is likely to be a merger-specificity issue whenever, as here, rationalization of productive capacity is asserted as an efficiencies defense.

If such rationalization is not a viable option, I would like to know why.Heinz Günther Guderian was born on August 23rd of and in , started his officer career.

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Your guide to a tariff-free Canadian grocery list: Balzac's coffee over Folgers and French's ketchup over Heinz Whether you're participating in the movement or simply looking to save a few dollars. Finally, it is important to remember that the Heinz case was a merger, without any showing of easy entry, failing firms, or a distressed industry.

The ultimate lesson of the case was expressed by the Court of Appeals, as follows.

The Kraft Heinz Company