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I would imagine the argument for concern (not saying I agree with it) goes like this: If Amazon Whole Foods is freed from the need to be profitable (like the r

I would imagine the argument for concern (not saying I agree with it) goes like this: If Amazon Whole Foods is freed from the need to be profitable (like the rest of Amazon), and has the access to all of Amazon's other infrastructure, it will have a powerful competitive advantage against all other major grocery chains. Even if Amazon Whole Foods continues to focus on the upper end of the grocery market (which they may not), that will still make it even harder for other chains to compete in those markets, which I assume are more profitable than markets full of poor people. If a given chain is only able to compete in the markets with the least purchasing power, that could have the effect of causing those chains to go out of business, which would in turn mean store closures in the poorest places. If I'm in charge of Ralph's as they're getting outcompeted in wealthier urban areas with high rents, I have to make up that profit by closing the least profitable stores, right? Also, why assume that Amazon will keep Whole Foods' pricing or even brand alignment? Maybe they are simply buying a massive infrastructure for Amazon Fresh or whatever, and they intend to compete further down the line? I don't think there is any reason to assume that Amazon Whole Foods will have the same price range as Whole Foods. By definition, there is no great business to be had selling groceries in poor areas. That's why there are food deserts now. If Amazon drives down margins and helps consolidate the grocery market, there may be even less likelihood that stores in poor areas will open or stay open. Edit: read the actual letter, which makes very direct points about the potential pitfalls and merely asks for them to be studied (not for the merger to necessarily be blocked): http://www.ufcw.org/wp-content/blogs.dir/61/files/2017/07/Lttr-to-DOJ-FTC-Re-Amazon-Whole-Foods-072017.pdf http://www.ufcw.org/wp-content/blogs.dir/61/files/2017/07/Lt...

stale2002 9y ago
Driving down costs isn't an argument against a merger. It is the opposite. It is the argument that Amazon would make IN FAVOR of the merger.
- ForrestN 9y ago
  I'm not talking about driving down consumer costs, I'm talking about driving down profit. In addition to the usual benefits of any consolidation, Amazon is generally not expected to be profitable in the way that grocers are. How can a company trying to maintain profitability compete with a giant who doesn't have to?
  - stale2002 9y ago
    But it DOES drive down consumer costs. Less profit for for-profit businesses means more money for consumers because prices are lower. I don't care about if a bunch of for profit businesses lose money. What I care about is consumers and low prices. It doesn't matter if it is fair. What matters is what is best for consumers. What you are effectively arguing is "Amazon is too awesome, and too good for consumers. Their prices are so low, that other companies, that offer a WORSE product for a WORSE price, are unable to compete". And that to me makes no sense.
    - pdeuchler 9y ago
      Oh i'm sure consumers will love getting their expensive whole foods groceries at bargain prices for 5 years, until amazon has pushed everyone else out of the business, solidified a monopoly, and jacks up prices.
      - stale2002 9y ago
        People keep saying that the inevitable Amazon price raise will happen. Amazon has been around for 20 years "monopolizing" every market that it enters. And those doomsday price raises have yet to materialize.
    - komali2 9y ago
      Wait, but here's the argument: - Whole Foods no longer needs to be profitable because it's a subsidy of Amazon - Whole Foods will thus drive down prices Hold on, why? Because driving down prices will drive out competition. There's ample historical evidence for the inevitable result of this, which is - Whole Foods leverages its new monopoly after murdering all competition by raising prices. https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing
      - enoch_r 9y ago
        Can you provide a few examples of the ample historical evidence for that "inevitable result"? I'm looking for one or two cases where a private monopolist entered a competitive market, managed to shut down competitors with predatory pricing, and then raised prices afterwards to higher levels than when they entered the market. This is one of those claims that sounds plausible, but I've yet to encounter a historical case of it actually occurring.
- bsder 9y ago
  > Driving down costs isn't an argument against a merger. True, but the restriction of choice is. And Amazon is NOT going to stay upmarket long. They're going to wipe out smaller players. This merger drives down some consumers costs (generally the wealthier who already have plenty of choice) while increasing the costs of others (wiping out marginal stores in areas that are less affluent). WalMart is a good analogy. When WalMart comes into an area costs go down--until all the alternatives are driven out of business. And, quite often, WalMart isn't even the cheapest. In addition, by wiping out those businesses WalMart wipes out jobs and those people don't care that groceries are 10% cheaper because they now have no income at all. So, it basically boils down to the people who already have plenty, get things cheaper, while the people already hurting, hurt worse.
prostoalex 9y ago
> If a given chain is only able to compete in the markets with the least purchasing power, that could have the effect of causing those chains to go out of business This is the status quo today, it's not like we have incredible diversity of grocery chains serving each and every market out there. Whole Foods, Wegmans and Bristol Farms dominate the top tier, Costco inserted itself to serve upper middle class suburban communities, Safeway and equivalents vie for middle and lower-middle markets, while Walmart Supercenters, 7-11s, corner bodegas and Chinese/Korean grocers operate in lower-income markets.

stale2002 9y ago

Driving down costs isn't an argument against a merger. It is the opposite. It is the argument that Amazon would make IN FAVOR of the merger.

ForrestN 9y ago
I'm not talking about driving down consumer costs, I'm talking about driving down profit. In addition to the usual benefits of any consolidation, Amazon is generally not expected to be profitable in the way that grocers are. How can a company trying to maintain profitability compete with a giant who doesn't have to?
- stale2002 9y ago
  But it DOES drive down consumer costs. Less profit for for-profit businesses means more money for consumers because prices are lower. I don't care about if a bunch of for profit businesses lose money. What I care about is consumers and low prices. It doesn't matter if it is fair. What matters is what is best for consumers. What you are effectively arguing is "Amazon is too awesome, and too good for consumers. Their prices are so low, that other companies, that offer a WORSE product for a WORSE price, are unable to compete". And that to me makes no sense.
  - pdeuchler 9y ago
    Oh i'm sure consumers will love getting their expensive whole foods groceries at bargain prices for 5 years, until amazon has pushed everyone else out of the business, solidified a monopoly, and jacks up prices.
    - stale2002 9y ago
      People keep saying that the inevitable Amazon price raise will happen. Amazon has been around for 20 years "monopolizing" every market that it enters. And those doomsday price raises have yet to materialize.
  - komali2 9y ago
    Wait, but here's the argument: - Whole Foods no longer needs to be profitable because it's a subsidy of Amazon - Whole Foods will thus drive down prices Hold on, why? Because driving down prices will drive out competition. There's ample historical evidence for the inevitable result of this, which is - Whole Foods leverages its new monopoly after murdering all competition by raising prices. https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing
    - enoch_r 9y ago
      Can you provide a few examples of the ample historical evidence for that "inevitable result"? I'm looking for one or two cases where a private monopolist entered a competitive market, managed to shut down competitors with predatory pricing, and then raised prices afterwards to higher levels than when they entered the market. This is one of those claims that sounds plausible, but I've yet to encounter a historical case of it actually occurring.
bsder 9y ago
> Driving down costs isn't an argument against a merger. True, but the restriction of choice is. And Amazon is NOT going to stay upmarket long. They're going to wipe out smaller players. This merger drives down some consumers costs (generally the wealthier who already have plenty of choice) while increasing the costs of others (wiping out marginal stores in areas that are less affluent). WalMart is a good analogy. When WalMart comes into an area costs go down--until all the alternatives are driven out of business. And, quite often, WalMart isn't even the cheapest. In addition, by wiping out those businesses WalMart wipes out jobs and those people don't care that groceries are 10% cheaper because they now have no income at all. So, it basically boils down to the people who already have plenty, get things cheaper, while the people already hurting, hurt worse.

prostoalex 9y ago

> If a given chain is only able to compete in the markets with the least purchasing power, that could have the effect of causing those chains to go out of business This is the status quo today, it's not like we have incredible diversity of grocery chains serving each and every market out there. Whole Foods, Wegmans and Bristol Farms dominate the top tier, Costco inserted itself to serve upper middle class suburban communities, Safeway and equivalents vie for middle and lower-middle markets, while Walmart Supercenters, 7-11s, corner bodegas and Chinese/Korean grocers operate in lower-income markets.