Mergers and Acquisitions
A new acquisition is announced today, continuing a troubling streak that is going to put our economy in even more risk.
News in the business world today that Dollar Tree is buying Family Dollar for $8.5 billion. Family Dollar has been facing some serious financial problems from an excessive growth spurt they went through. But this is also a troubling sign of the times that puts our economy in peril.
These two companies are already the biggest discount retailers in the nation, now becoming one, behemoth of a discounter. In turn that also means that competition in the free market has just become a little more scarce, and that should alarm everyone.
In the past few years we have seen an alarming growth rate in mergers and acquisitions. Some are awaiting government approval, like Comcast and Time Warner, but if history is any lesson, then chances are high that the government will allow them. Many of us can remember the problems having huge monopolies can cause. That’s what forced the government to breakup Bell System back in the 80’s, the result of decades of antitrust lawsuits filed by the government. Sadly our government doesn’t seem as concerned about this type stuff today, and many in both parties (more so in the right) look at this as the government interfering with the free market. But that couldn’t be further from the truth….
Free Market has always been one of those things that get to me. The idea of capitalism is great, but we can’t have a truly “free” market. Instead we need referees to keep the playing field level, so that the strongest companies can survive. Some might argue that the consumer is the best referee, however with corporations growing to the “too big to fail’ scale, the consumer doesn’t have the power to referee. Instead the only true referee is the government. This referee has a job of vital importance. They need to keep companies to the point that other companies can fairly compete. Now that’s not an easy job, and can’t always be done. For example, a mom and pop store can’t compete against WalMart. WalMart is so huge and buys from suppliers in such quantity, that they can offer prices to the consumer that are lower than a single store can purchase them for.
Since we can’t do much about the WalMart example above, then the referees need to really make sure that these companies aren’t buying up the smaller stores that do manage to survive.
But there’s a bigger failure here, one of the people. We need to realize that stopping mergers, preventing “too big to fail” and ending monopolies isn’t interfering with the free market, but rather protecting it. With the rate of these mergers today, we are quickly approaching a future of only a few corporations. In my mind I think back to the Sylvester Stallone movie, Demolition Man. In it Stallone finds out that the only resteraunt remaining is Taco Bell, from what was called “the franchise war”. You can view a clip of it here. While that is a fictional movie, written over two decades ago, it does appear to have the foresight of the problems we face today.
Trying to level the field and getting our free market back to one that anyone can compete in should be a non-partisan issue. Sadly that isn’t the case. The right seems to be against fixing this fatal problem, and even some on the left are the same. So it’s time for the people to start demanding that our legislators set boundaries and rules for who can acquire and merge with who. We saw what “too big to fail” did to the financial sector in 2008. Could we really survive the same happening to other sectors, like retail, medical and the service industry? I really don’t think so.