Low-Priced Monopoly

The Great Atlantic & Pacific Tea Co. of America, largest U.S. retail food chain, is a monopoly. So a Federal judge in Danville, Ill. decided last week: after 89 days in court listening to 200 witnesses, 30,000 pages of testimony, and inspecting 5.000 documentary exhibits. In his 117-page decision, Judge Walter C. Lindley said: A. & P. was guilty of conspiring "to monopolize a substantial part" of the country's food business. Also guilty: twelve A. & P. subsidiaries and 16 officers, including President John A. Hartford and his brother, Board Chairman George Hartford.

A. & P.'s monopoly, said the Government, consisted of a vertical combination of purchasing, manufacturing, distributing, and retail companies, all controlled by the Hartfords. Particularly useful was A. & P.'s purchasing agency, the Atlantic Commission Co., which used its mass buying power to force producers to give A. & P. preferential prices, the pick of the lot in products. If producers or manufacturers balked, A.C. Co. threatened to buy elsewhere or to set up a competing A. & P. subsidiary. Result: a two-price structure in which the lower price is paid by A. & P., the higher price by A. & P.'s retail competitors. A.C. Co.'s practices, said the court, "leave a bad odor."

To squeeze competing retailers out of business, said the court, A. & P. often operated its own stores at a loss in one area, covered the loss with profits from other stores.

The Government also made much of the fact that A. & P. used the profits from non-retail operations to cut down its retail prices. This, said the Government, made it virtually impossible for less integrated retailers to compete. But A. & P. argued that it was only making use of the usual chain-store economies to offer consumers lower prices. If that was a crime (and the court ruled that it was) then every other chain store and large industrial company which reduced prices by integrating its operations was equally guilty. (Indictments, almost identical with the one returned against A. & P., have already been filed against the Kroger Co. and Safeway Stores, Inc., next two largest U.S. retail food chains.)

Moreover, said A. & P., there was no proof that it had actually driven any competitors out of business. On the contrary, competition in the food business was increasing. In 1933, A. & P. controlled 11.3% of the food business in the U.S.; by 1943 its share had fallen to 7.1%. Nor had A. & P. used its size to keep prices up or to make unreasonably large profits. In effect, said A. & P., the Government's case was based on the fact that A. & P. had sold too cheaply.

Said A. & P. President Hartford: "Our company grew to its present size because we believed it was better to sell 200 Ibs. of butter at 1-c- a pound profit than 100 Ibs. at 2-c- a pound profit." What President Hartford propounded was the basic idea on which U.S. mass production and mass retailing is based. But if the higher courts do not overrule last week's decision, those ideas may cost each defendant as much as a $10,000 fine and two years in prison. And eventually U.S. consumers may find themselves paying more for their food.

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