We are seeing creeping concentration in key American industries.

In the airline industry, four airlines control fully 70 percent of the market — American with 20 percent, Southwest has 18 percent, Delta has 17 percent and United has 15 percent.

In the beer industry, the proposed Anheuser Busch merger with Miller Beer would create the King of Beers that would control 70 percent of the American market.

And the proposed Staples merger with Office Depot would create an office supply superstore monopoly.

“We are seeing very high levels of concentration in key industries like food, healthcare and airlines,” American Antitrust Institute President Diana Moss told Corporate Crime Reporter in an interview last week.

“We are seeing higher prices. Quality is becoming an issue.”

“We worry not only about higher prices, but lower quality and less innovation as a result of high levels of concentration. We are reaching a point where even the most disinterested American consumer is taking notice of the fact that there are fewer choices in providers. We are seeing higher food prices. Food prices have gone up at a rate higher than inflation. We have seen documented evidence of fare increases following airline mergers.”

“Even the most blase American consumer is now thinking about antitrust and the importance of having enforcement to preserve a vital market system. We have a remarkable economic system in the United States. It’s a market based economy that produces benefits for consumers and incentives for innovation. You don’t get that system, you don’t protect it and promote it and nurture it without having some referees. It’s a game. And the referees are the antitrust enforcers — the Federal Trade Commission and the states — those are the referees. And they enforce the rules of the game. We are reaching a point now where consumers see higher prices, they see potentially lower quality in some industries. And we are thinking more carefully now about more rigorous enforcement.”

“After ten years of rapid fire consolidation there are much higher levels of concentration on certain routes in the airline industry,” Moss said. “I call them the big four — United, Delta, American — which just merged with US Air — and Southwest. Southwest is no longer a low cost carrier. That’s long gone. They all follow each other. The Department of Justice is poking around right now into potential collusion. We have documented higher fares as a result of mergers and higher levels of concentration.”

What are the percentages that the airlines control?

“On some routes, there are only two carriers. Overall, it’s American with 20 percent, Southwest has 18 percent, Delta has 17 percent and United has 15 percent. The big four control about 70 percent of the national market.”

“It’s a tight oligopoly. In beer, you have a dominant firm and a smaller fringe of firms. A dominant firm can unilaterally control prices. A tight oligopoly raises concerns that the firms will not compete hard against one another — they will just follow each other on fare increases.”

Moss and the American Antitrust Institute have come out against the Staples/Office Depot merger.

“Staples/Office Depot is similar to Sysco/US Foods,” Moss said. (The Sysco/US Foods merger was rejected by the FTC earlier this year.) The big two national competitors in office supplies proposing to merger. It would be a merger to monopoly in the office superstore segment.”

“The outcome will depend on how the FTC defines the market. Is the market just office superstores? Or does it include online sellers like Amazon and and others like Walmart? We made the case that for contract enterprise customers, which are the big business customers, the only viable options for them were Staples and Office Depot.”

Why can’t they buy from Amazon and Walmart?

“Staples and Office Depot offer sophisticated and significant rebates and discounts on bulk purchases. They have the buyer power to negotiate with their suppliers. And they in turn negotiate rebates and discounts with their corporate customers. Walmart can’t do that. Amazon can’t do that.”

“Neither of those competitors has the infrastructure to deal with big contract enterprise customers. The procurement systems. The service support. We are talking about significant differences.”

“And that’s the story we heard in Sysco and US Foods. Sysco and US Foods were the only distributors that had a national footprint that large chain restaurants and institutional customers like hospitals and military bases would go to to serve their needs. They had the purchasing economies, scale, the scope, the rebates, the support systems that other competitors did not offer.”

Why hasn’t antitrust become a political issue in the United States?

“We want to spearhead the drive,” Moss said. “We are right now actively promoting an agenda to study the connection between antitrust enforcement and income inequality. A number of academics have put out some early papers on this — John Baker, Steve Salop, Einer Elhauge at Harvard — they have all written on aspects on this. We will be pulling this together and looking at the effects of concentration and economic power on the income gap.”

[For the complete q/a format Interview with Diana Moss, see page 29  Corporate Crime Reporter 41(12), October 26, 2015, print edition only.]