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To: Don Green who wrote (85816)	3/12/2003 4:17:21 PM
From: Don Green	Respond to of 93625

FTC Screams for Antitrust HOLMAN W. JENKINS, JR WSJ 12 Mar 2003 While your government is bogged down with French and Russian obstructionism in its efforts to protect you from terrorists wielding Iraqi weapons of mass destruction, at least the war on ice cream monopolists is proceeding apace. Yes, it's time for our annual roundup of antitrust silliness. If we're still here in the morning and haven't found a dirty bomb in the hamper, we'll want to have an economy, one that actually works. It pays therefore to keep an eye on the propensity of trustbusters to bring cases merely for the heck of it. Under a deal announced last summer, Nestle would merge its U.S. ice cream business with Dreyer's Grand Ice Cream. Nestle would end up owning a majority stake in Dreyer's. The problem? The Federal Trade Commission, an agency with perennially too much time on its hands, smells an attempt to cartelize the market for "superpremium" ice cream. Never mind that "superpremium" represents less than 12% of the packaged ice cream market -- or less than 8% if you include what the industry labels "ice cream novelties" like fudgesicles and ice cream sandwiches. Never mind that store brands hold a bigger share of the total market than either of the branded national manufacturers. Never mind that these private label operators either have their own "superpremium" lines or are fully capable of introducing them. Never mind that "superpremium" itself is nothing more than a made-up marketing word for ice cream that's "really good" and "really expensive" (and really fattening). What the FTC has done, with a minimum of art and a maximum of chutzpah, is define the prospective sales volume of the two biggest manufacturers as the "market." Nestle makes Haagen-Dazs and would own Dreyer's. Its all-time global rival Unilever, makes Breyers and Ben & Jerry's. These brands account for just 41% of total ice cream sales, but the FTC pretends to find it more significant that Nestle and Unilever would account for "98% of superpremium ice cream sales." What fun! Now the agency has manufactured an enemy monopolist that it can be seen vanquishing in a fabulous war of regulatory coercion. As of yesterday, Nestle had been proposing various concessions in hopes of getting the deal approved, such as agreeing to dump certain lines of ice cream and various distribution assets, without clear sign whether the FTC will accept an offer of tribute to get out of the way. It's obvious why the FTC engages in such intellectual sleight of hand. It wouldn't have anything to do otherwise. Were they obliged to wait until presented with a case raising genuine antitrust concerns, its lawyers might spend the whole of their government service twiddling their thumbs. Hence the urge to launch adventures in intellectual dishonesty like the ice cream case. Don't take our word for the dubiousness of this exercise. A federal court in the 1980s looked at whether superpremium was a separate market from other ice creams, and summarily ruled that any such distinction was "economically meaningless" for antitrust purposes. Belaboring the obvious, the court pointed out that "all grades of ice cream compete for both retail shelf space and for consumers' attention. The various adjectives used to describe brands of ice creams do not alone establish separate markets." Nothing makes this clearer than the reason Dreyer's became an object of Nestle's lust in the first place. No offense to Dreyer's excellent ice cream, but the lure is the company's unique distribution network. Dreyer's put money and effort into creating an intelligent system to make sure ice cream arrives fresh and every retailer has the product mix the customer is looking for. Ice cream shoppers are picky and leave in a huff if they don't find the Chubby Hubby they're craving. To this end, Dreyer's has become a pioneer of scan-based trading, in which the retailer doesn't even pay for his ice cream supply until it's rung up at a register. The punch line is that Dreyer's uses this system to deliver not just its own brands but those of its rivals, including archrival Ben & Jerry's. The company is only too happy to funnel other people's ice cream through its network because it defrays the overhead and makes retailers happy by giving them an optimum mix of goodies to put in front of shoppers who waddle in. Why doesn't this system blow up over conflicting interests? Because the market doesn't operate like a zero-sum game in which "superpremium" brands are primarily stealing sales from each other. Category expansion is the fat opportunity -- taking sales away from ordinary ice creams, not to mention taking sales away from any other consumer "indulgence" (the industry's favorite word) that a shopper might snag on his way to the register. Antitrust was invented in the 1890s to protect inefficient competitors from efficient ones, a goal that we long ago disavowed without actually disavowing the laws that embody it. Trustbusters have been searching for a mission ever since. Unfortunately, the problem with the FTC can be stated even more simply: It exists. Eager young attorneys file in and want to "make cases" so they can put them on their resumes and then waft out through the revolving door. Even in Republican administrations, appointees reason that the agency is here so let's use it for something. We may be hopeless patsies, but it would be nice if another consideration were allowed to weigh on the opposite side of the scale -- the legitimate property rights of the poor companies that are the targets of the FTC's often whimsical interventions. While we're at it, let's wish for world peace and the brotherhood of man too.

To: Don Green who wrote (85816)	3/12/2003 4:18:00 PM
From: Don Green	Respond to of 93625

Intel still chewing over Elpida investment Fangs for the memory By Paul Hales: Wednesday 12 March 2003, 13:34 INTEL IS STILL MULLING OVER whether to take a stake in the (relatively) newly-created Japanese memory company Elpida Memory Inc. The burly chipmaker was said to be sniffing about when Elpida was created last year after NEC and Hitachi consolidated their memory interests but denied everything. Persistent reports that Intel would take a share of the company were raised again at a press conference in Tokyo at which Paul "Steely" Ottelini was non-committal. Intel's Chief Operating Officer said, "what I said last time I was asked this question here in Japan is that we would evaluate this kind of decision, and if we make a decision we'll announce it when other people do." But he did concede that his company may be considering an investment, "not necessarily to make money, but to ensure there is adequate supply and technology available in terms of memory to be able to meet our needs for platforms going forward." Japanese reports have suggested Intel would invest up to $300 million in the venture but Intel has refused to confirm these reports theinquirer.net