Christine blogs about the Whirlpool-Maytag merger and its antitrust problems. Law Blog has the story, as well. Both mention the American Antitrust Institute which opposes (vehemently) the merger.
In fact, the AAI has never met a merger it didn’t find anticompetitive, so its opposition should be taken with a grain of salt. Then again, I’ve never met a merger I thought was anticompetitive, so perhaps the same disclaimer applies to me . . . .
Nevertheless, here’s a couple of thoughts:
The FTC and the DOJ in my experience are pretty resistant to the “emerging foreign competition” argument, which is being claimed here (China is the source) (although there are exceptions). The problem, of course, is that it can be difficult to convince skeptical regulators that a not-quite-apparent (to them, anyway) threat is real, or that the mere potential for foreign entry into contestable markets is enough to restrain anticompetitive behavior. Often these just aren’t winning arguments against the “show us the numbers now” gambit, although they should be.
Meanwhile, here, as always, it comes down to market definition. The AAI says the combined company would have too much power in the top-loading washer “market” (scare quotes mine). “Of particular concern, the white paper explains, is the “market” for top-loading washers—a unique “Americanâ€? product for which there is no foreign competition.” (Notice the sly “and foreign competitors just won’t compete in this “unique” American market” argument). Now, the AAI is worried on other accounts, as well. And I haven’t seen the cross-elasticity study. But this doesn’t even pass the smell test. Does anyone seriously believe that Americans just wouldn’t go in for those fancy-pants front-loading washers if the price of their beloved top-loaders shot up? I mean, who wants to bend down to do laundry . . . you know, except for loading and unloading those uniquely-American front-loading dryers. Because, um, they’re different. Dryers and washers are apples and oranges, dontcha know. Um . . . I gotta go.
But perhaps because the companies maintain separate top- and front-loading divisions (I don’t know whether they do or not), or because some front-loader manufacturers just don’t make top-loaders (and vice versa), or because, currently, front-loaders seem to cost a bit more, the two are in separate “markets.” It’s a screwy way to determine an economically-relevant market: a more-or-less ad hoc assessment of competitor and customer comments, combined with a flawed dissection of internal memos, some casual empiricism (agency staff have been known to take field trips to local retailers to suss out “the market”), and a little econometrics on the side. (For more on the problems of market definition, see my article, Hot Docs vs. Cold Economics).
At any rate, here’s my casual empiricism. If you go to epinions.com you’ll find that there are currently 30 manufacturers listing top-loading washing machines. I realize some (like Kenmore) may be selling products manufactured by Whirlpool or Maytag, and others may not be available in the US, etc. Nevertheless, every single one of these manufacturers, along with the even greater number who make front-loaders, to say nothing of new entrants, could begin and/or step up top-loader sales in response to a price increase. Where’s the problem?
