Seven Out of One?

When the Great Atlantic & Pacific Tea Co. paid out $175,000 in fines early this year for violation of the antitrust laws, the company thought that its fight with the Government was ended. A. & P. had been found guilty of using its mass buying power to get not only preferential prices but also the pick of the product from food producers. The Government had also made much of the fact that A. & P. used the profits from its non-retail operations (manufacturing & processing) to cut the prices in its retail stores, thus making it harder for other grocers to compete. But it pooh-poohed the more important point that lower retail prices are a boon to consumers.

Butcher Order. Last week the Department of Justice went after A. & P. again, this time in a civil suit to break up the country's biggest retail food company. As co-defendants it named nine subsidiary organizations, A. & P. President John A. Hartford, 76, and his brother, Board Chairman George L. Hartford, 86. The Hartford Bros, control about 99% of A. & P. stock, had paid fines of $10,000 apiece in the criminal case. DOJ wanted a court order to 1) divorce A. & P.'s manufacturing and processing operations from its buying and selling organizations, and 2) carve up A. & P.'s retail business (6,000 stores) into seven separately owned retail food chains.

The purpose, explained Attorney General J. Howard McGrath in filing his first antitrust suit, was "to eliminate the abuse by A. & P. of its mass buying and mass selling power. Such abuses in part have been responsible for an increase in gross sales by A. & P. from $330 million in 1925 to $1.9 billion in 1947, or 6.4% of the national total made by approximately 600,000 food stores." With such statistics (wh!ch failed to mention that total U.S. grocery sales had also grown a great deal, while A. & P.'s share of the business had dropped from 11.6% to 6.4% since 1933), and with a repetition of the criminal charges, McGrath was ready to make his case.

"A Quaint Way." A. & P. hit right back. It challenged DOJ's "theory that the people have no right to patronize a company if their patronage will make that company grow." By such "an attack on the entire system of efficient low-cost, low-profit mass distribution," complained A. & P., the trustbusters were working "just opposite to the purpose of the antitrust laws, which were meant to increase competition and keep prices down."

Actually, the suit was a complete reversal of the traditional bases for antitrust action, i.e., that a company had a monopoly or restrained trade in order to keep prices high. Snapped A. & P.: "The whole basis of this attack is the fact that we sold good food too cheap." The New York Herald Tribune also found cause for alarm: "To start a major suit of this kind with no clear idea of the policy it serves or the economic results it is expected to achieve seems a quaint way of running a government."

One economic result of the DOJ's attack might well be higher food prices for consumers. Nevertheless, DOJ was confident of winning its case, since the charges against A. & P. had been proved once before. If DOJ won again, it hinted it would follow up with similar suits against other large food chains.

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