Incompetent FTC

The FTC in the United States has been completely incompetent for several decades now and just like any Ponzi or plunder scheme, it takes a crises to expose it. I have been railing for years how outdated the FTC is.  How their use of economic theory that is at least a century old / outdated should have been trashed a very long time ago.  Their decisions over the years to allow the US economy to become pretty much an oligarchy have been the most instrumental in American history and at this point.

I have been hearing for weeks about the lack of basic supplies, really basic supplies, to the health care industry.  I have heard NOTHING about why these supplies are in short supply.  I have read about how some of the shortages have been made up on a small scale but NOBODY is asking, "Hey, why or how did every major industry end up having so few suppliers?"

There is no way I am going to cover this topic in depth here. It is dissertation material.  However any idiot (who does not work for the FTC obviously) that has been alive at least 50 years has seen this process unfold even if they can't "see" the supply chains and producers disappear as obviously, they have seen it in their interaction with the world every day on at least the retail front.

While the FTC has been applying way out dated "rules" to every merger let's just look at a basic example, DIY or Home Improvement sector.  Mind you, what I say here goes for every industry the consumer touches and every supply chain, wholesale channel, manufacturing etc.  When top end, ie; retail, mergers happen a great deal of repercussions happen down stream.  These repercussions have been completely overlooked and utterly missed even though the same dynamics happen over and over again.  The mergers create immediate oversight of suppliers.  The desire for "economies of scale" mean the merged retailer looks at it's supply chain and tries to reduce costs, first by pitting suppliers against each other then eventually by offering monopoly positioning of the winner's products on their shelves.

What happens in this scenario?  If you make locks and have served say a tri-state area or some regional area for decades it is likely your existence is due to the consolidation of even smaller producers in the generations before you, before your product was mass produced in your factory.  Now you have a "market" that has served the retailers in your market, hardware stores, home improvement stores and the like. After a retail merger your company gets a call asking you to compete for continued access to the stores you previously served (along with other suppliers / competitors who operated in your market as well). The demands for cost reductions are pretty steep.  In order to be able to meet these demands you are going to need to increase output; get your cost of production down.  To do this quickly you call your competitors, who are getting the same demands from the retailer.  A merger is created and new investment to increase production / reduce costs between the suppliers.  This also creates another down stream effect on the providers of inputs to these manufacturers and down whatever chain exists in the making of your product.  For a while you win continued shelf space.

Meanwhile, the newly merged retailer is trading on the message of more variety, lower prices etc. to their customers and touting this great benefit to the idiot regulators who look at the market from a national perspective and sign off due to their outdated useless academic "models".  What happens over time?  Simple answer, desire for increased profits creates additional pressure on suppliers.  Retailer decides to shrink the number of suppliers over time going through additional rounds of requests for lower cost product.  Suppliers are forced to merge again, consolidate production more.  This further drives out the down-line supply chain.

Next, additional retail mergers and buyouts.  Those DIY retailers that serve regional markets start to merge. Private Equity firms step in and demand mergers or selling out to new "national" players in an ever drive to increase profits and squeeze out competitors.  FTC sits back and watches this slow train wreck.  Consumers see fewer choices on the store shelves.  Slowly the lower priced competitive products begin to disappear, being replaced by the mega suppliers who by now have merged, bought out competitors and managed to restructure to supply the entire nation from a much smaller supply chain.

Most manufacturing has been off shored by the surviving companies as the retailers go to them and say "hey, some factory in China can get me this product for $.05 cheaper".  Now this small margin would not mean so much in the past but now we are talking about thousands of locations where a nickle means millions of dollars when selling an item on a national scale.  Of course the final step is straight out monopoly shelf space where the retailer goes to bed with the suppliers to guarantee a designated profit on every item sold.

Monopoly shelf space, guaranteed profits, where to go next?  Increase prices, lower quality to squeeze more profit out of each unit of sale and most importantly, now you have monopoly suppliers with a "predictable" demand selling to oligopoly retailers all production is coming from one or two factories somewhere on the planet, ordered months or years in advance, sold into a radically shrunk supply chain, while engineers spend all of their research dollars figuring out how to cut costs and effectively dumb down products to increase margins.

I could go on, like explaining how these dynamics also mean sales forces look to the developing world to decimate any and all local production by flooding markets with their cheap mass produced products made in sweatshops by workers under some authoritarian regime as the markets in the developed world stagnates along with the population. But I will stop here.

Now apply the above dynamic to everything the consumer touches... Remember 2009 when the infrastructure spending bill resulted in shortages of seemingly simple products like the paint to put lines on roads?  Well now we are seeing how fragile this new dynamic is.  We (the FTC allowed) the total decimation of  manufacturing, driven by the consolidation of retail, producers, suppliers etc. and we now have the resulting repercussions. With now a full 70% of the US economy driven by consumer expenditure it does not take a genius to see how the incompetence of the FTC in allowing the rapid consolidation of every sector of the economy has created a recipe for disaster not only for the future of our nation's well being as a producer of goods, but now as a consumer of goods as these dramatically reduced supply chains have exposed the food supply in the same way.

Where are the MSM "reporters" or "anchors" that are asking "why are there only 2 companies in the country producing XYX?"  "Why are there 3 or 5 companies supplying 80% or more of our food on any given level, from retail, to production to distribution?"  Where are we as a nation when everything has been relegated to oligarchy?   I don't see the questions being asked.  Why, the oligarchy pays the MSM.  They would not challenge them. Nor would the incompetent government agents we have "elected" or those heading up the government agencies that have overseen this progress for half a century as they round trip from government to industry in just about every category of "regulation" the government has.

So now the "government" has to step in and procure basic supplies and force other companies to produce products because there are mass shortages of necessary supplies of, well, just about everything needed to meet the needs of the medical community.  Why don't we just ask the FTC?

The Day The Economy Died...

I was reading today an article on the proposed merger of Sysco and US Foods (currently owned by private equity groups KKR & Co. LP and Clayton Dubilier & Rice LLC.) about the FTC's opposition to the merger.  Hurray for the FTC!  Well really is there any question in anybody's mind in the US who is a restaurant owner that this should not happen?  Really?

The plain fact is, the chains that have built a considerable business serving Americans low grade industrial food via corporate restaurant "brands" have been the biggest cheerleaders of having national distributors to serve their hundreds or thousands of restaurants nationally.  The lazy MBA's they hire and the corporate managers who hire them have only the lowest cost corporate structure and highest profit in mind when making decisions like buying food for their restaurants.  They like nothing more then to deal with one source for all their food needs.  The national restaurant chains buy large volumes from Sysco, have standardized menus (often items on the menu are actually "created" by Sysco to meet certain cost/price thresholds and certain theme/ethnic branding needs based on available ingredients and cost factors out there) and are able to wield some influence over pricing. Given their size, they can negotiate with the national food wholesalers and even hedge against food costs if necessary.  Essentially the dominance of national food chains and the habit of fat America not to cook any longer but to eat out has over time created these mega distributors and essentially put everyone else out of business.

However, there are still thousands of "non-corporate" restaurant chains who have absolutely NO barganing power against these distribution behomeths and are faced with a scereno like this: It's Tuesday. Sysco arrives at about 10:00 am Tuesday and Friday, portable order tablet in hand quoting the latest "prices" for your food needs.  "Oh, Tomatoes are up 12% from last Friday?" you ask why, Salesperson answers, "Yea, we had price hikes in X, Y, Z of over 10% and A, B, C of 15% due to the 'blizzard, storm, flood, drought, port delay, latest bug infestation yada yada' so these are the prices today, what will you buy?"  Total BS and you know what, unless that restaurant owner happens to have a true independent restaurant supply wholesale ware house or another batch of independent suppliers he can check prices with on a regular basis, then he just has to eat the Sysco price and deal with it.

Oh, so what happened to all the other thousands of local supply companies that used to exist?  They went the same way as the "markets" that used to exist.  All food chain supply in the US is controlled by national grocery chains, national distributors and national franchise wholesalers. Even regional supply chains have disappeared.  The oligopoly economy is rapidly moving to a monopoly economy (which though not controlling 100% of the market everywhere, the Sysco / US Food merger would still enjoy monopoly privilege over price setting and other variables if allowed to happen along with controlling 75%+ of the market over much of the US) which basically means, well, who cares any more?  I mean What's the difference?

America you have the "Office Supply Store", the "Construction Supply Store", the "Food Store", the "Buy all your other imported plastic junk here Store" and soon "get your home plumbing, HVAC etc. here" service...

It is so funny to hear Conservative politicians in the US spout about the more liberal party members and the current president being "socialist" when in fact the conservative side, in their support of ever larger corporate entities, national oligopolies and the like are the ones actually "creating" socialism.  There is nothing more socialist then 3 or fewer companies controlling the sale and distribution of nearly everything America buys (Thank God for Independent Brewery's!).  Just get on the phone and try to contact a real person in some of these behemoths, it's like calling the Kremlin!  Oh, well, actually we are becoming the Kremlin, a nation of oligarchs running the show while everyone else lives like, as Putin himself put it, "serfs". And the US government?  A big fat drain on what "wealth" may have been left in the hands of it's citizens to the Defense Department and for Profit Health Industry.

So kudos to the FTC for overseeing the VERY END DAYS of a dynamic economy in America.  The last wave of mergers will be the last wave cause there is almost no consolidation left to happen... All that's left is Monopoly.  Unfortunately, corporate America is not only consolidating like mad, but doing everything they can to avoid paying their fair share of taxes, essentially gutting the government (hence the influence of the public under constitutional law), while raking in ever larger "profits", often left overseas, which under an oligopoly and monopoly economy may be redefined as "tax" since it increasingly sucks the welfare out of the consumer in favor of the corporation operating in a high price environment without fair competition leaving the citizen with no choice but to pay.

NOTE: The comical thing about the habits of corporate America are when doing business in other parts of the world, even though the corporate entities do everything to avoid paying fair taxes, as soon as they are hit by some cartel or other "unfair" practice in other lands, they try to use the "taxpayer funded" and "constitutionally backed" US legal system to seek justice.  But as Motorola recently found out, TOUGH LUCK cause you can't come home and cry to Mama Liberty when you get screwed by the big boys who operate in kleptocracies with no legitimate legal system or constitutional protections they can turn to when they get screwed!!