September 7, 2005

Mr. Scott Notes that Tesco is Larger Than...

H. Lee Scott's comments about Tesco's share of the market being too large a target for UK politicians are easily interpreted as a call for an investigation. In the comments of the last link, Alan (from Alan and Paul) gets to the heart of the matter right away:

It appears that back in 2003, Wal-Mart’s subsidiary Asda controlled 16.9 percent of the British grocery market (slightly more than it has now), when it became the highest bidder to purchase British Safeway, a struggling chain with 12.4 percent of the grocery market.

If Wal-Mart had been allowed to purchase British Safeway, it would have controlled 29.3 percent of the grocery market. This level of market share, it turns out, was completely unpalatable to British Trade and Industry officials, who stepped in and proclaimed that it would be illegal for Wal-Mart to have that large a share of the grocery business. Fair enough, I suppose.

But now Euro retailer Tesco has achieved a 30.5 percent market share. Why is it that Wal-Mart having 29.3 percent of the market constitutes an illegal monopoly—but Tesco having an even larger share is just fine? And that, of course, was the obvious question on Lee Scott’s mind when he directed those comments at British antitrust regulators over the weekend.

Itoo think Scott's remarks are taken entirely out of context by many, but there's no doubt that Mr Scott i's correct about the desire of politicians to intervene in the economy if it will score them points. What did Scott actually say?

"As you get over 30% and higher, I am sure there is a point where government is compelled to intervene, particularly in the U.K., where you have the planning laws that make it difficult to compete," Scott told the Times of London, adding that "at some point, the government has to look at it."

Why is it that nobody is calling for intervention into Tesco? Could it be that Tesco has captured the regulators?

Most anti-trust/planning/regulatory laws allegedly designed to enhance competition do exactly the opposite; they do NOT protect the public from nefarious behavior, and as may or may not be exemplified here, they are frequently used by companies as hammers to drive nails through each other and the public.

The skinny: One should greatly doubt the abilities of regulators to determine exactly which market configurations are in the public interest.

Posted by Kevin on September, 7 2005 at 10:24 AM