Could $1 store + $1 store = monopoly?
Family Dollar has rejected Dollar General's offer over antitrust concerns.
Citing antitrust concerns, Family Dollar stores has rebuffed an offer of $9 billion from its competitor Dollar General.
But let’s review the issue at hand here: monopolies. Monopolies are bad (unless you're the owner) because they mean no competition, and the potential for just one company to control prices. But Rob Campagnino, head of consumer research for SSR, says the proposed merger doesn't represent any substantial antitrust concerns.
“They’re dollar stores – inherently they aren’t looking to raise prices," he says. "As a matter of fact, the pricing tends to be a race to the bottom."
Campagnino says the antitrust concerns that get raised generally revolve around large businesses that increase prices. "That's just not how these companies do business," he says.
But for some consumers, the fear of a monopoly can depend on where they live.
"In very dense environments, where there’s a store every couple of blocks, you don’t worry as much because there are so many competitive choices,” says Scott Hemphill, a professor of antitrust law and intellectual property at Columbia Law School. But things can change as geography does.
"If you are a customer in a part of the country that’s close to Dollar General and close to Family Dollar, but not close to a Wal-Mart, then there’s a real concern that the firms that they merged would be able to raise their prices," he says.
George Hay, a professor of law and economics at Cornell who held the position of chief of economic policy for the antitrust division of the Justice Department, says he thinks it’s highly unlikely there will be an antitrust issue with a dollar store. But, he says, that doesn’t mean companies shouldn’t be careful. You only have to take the case of the merger of United and Continental airlines.
“The government passed on the merger and a group of lawyers brought a case on behalf of consumers who would be adversely affected," he says. "At the end of the day that challenge did not succeed, but it did cause problems.” Problems in the form of delays and legal expenses.
But Hay says Family Dollar Stores' antitrust concerns are probably just an excuse to let it go with a different offer. SSR's Rob Campagnino agrees. It's likely, he says, that the president of Family Dollar has planned to stay on in some capacity, but he wouldn't be guaranteed a spot based on Dollar General's offer.
"People," he says, "tend to like to keep their jobs."