Expert says anti-trust action may apply to Shaw's

Ronald Cotterill, Director of the Food Marketing Policy Center at the University of Connecticut, said Wednesday that the acquisition and closure of Butson's Supermarket by Shaw's Supermarkets "raises potential antitrust issues."

Cotterill, who frequently testifies as an expert witness in state and federal legislative, regulatory and judicial proceedings about competition and pricing in wholesale and retail food markets, said that the transaction significantly reduced Shaw's competition and boosted its power in the Laconia market.

Cotterill explained that the federal government measures the level of competition in the market by the Hirschman-Herfindahl Index or HHI. The HHI is computed by squaring the market share of each firm in a particular market, then adding these values. For example, a concentrated market with two firms, one with a share of 60 percent and the other with 40 percent, would have an HHI of 5,200 (60 x 60 = 3600; 40 x 40 = 1600; 3600 + 1600 = 5200). On the other hand, a competitive market with 7 firms, where two firms enjoy market shares of 25 percent and the rest 10 percent each, would have an HHI of 1,750.

With the closure of Butson's, Laconia resembles the first example much more closely than the second, with only Shaw's and Hannaford Brothers sharing the bulk of the market. Cotterill figured that "the HHI would be well above the 1800 when the Justice Department starts getting worried." Moreover, referring to the downtown market formerly served by Butson's, he said that "imposing higher prices on an immobile, elderly population can trigger or strengthen an antitrust action."

Cotterill's research in different markets, including many communities similar in size and demographics to Laconia, indicates that as markets become concentrated, firms use their market power to increase prices. In a recent study of the impact of a merger of supermarket chains in 18 counties in New York, New Jersey, Delaware and Pennsylvania, Cotterill projected prices would increase 3.5 percent in the most concentrated markets and by more than one percent in 10 of the 18 counties.

Antitrust actions can be pursued by both state and federal authorities. Senator liftn Below (D—Lebanon) has written to Attorney General Peter Heed asking him to consider bringing an anti-trust action against Shaw's. New Hampshire's anti-trust law — The Combinations and Monopolies Act (RSA 356) — dates from the turn of the previous century. However, state attorney generals can bring anti-trust actions under the federal anti-trust law. Unlike the United States Department of Justice, state attorney geenrals cannot file criminal charges in anti-trust actions, but the full range of civil remedies, including divestiture, is open to them. Cotterill said that Vermont has "has been very aggressive and successful in using antitrust laws to preserve competition in its small towns."

Cotterill said it was "a little unusual for a large firm to acquire a lease and hold the property vacant, but quite common to acquire locations and add covenants to leases excluding competitors." He recalled a case in Jamestown, New York where the dominant firm in the market, with a 75 percent market share, acquired a site and applied a covenant to prevent a competitor from entering the market. Ultimately, after much litigation, the city condemned the property and sold it to a competing supermarket chain. Cotterill said that municipalities should explore using their power of eminent domain to foster competition.