Competition is GOOD!

Competition

I just saw an American Express ad on TV urging its members to do business with small, local businesses and not just the mega corporations.  Awww....it's that nice of them, looking after the little guy like that?  How sweet.  What's that....ulterior motive?  Why yes, yes they do.

This reminded me of a conversation I had with a high-up-the-ladder marketing guy with Lowe's a few years ago.  He told me that consumers had the impression that, because of their volume, Lowe's (and Home Depot) received better pricing from appliance manufacturers than the smaller local retailers.  He said that was not true, and that they in fact paid a bit more.  I asked why that was?

He told me that the two large box stores combined already accounted for something like 50% of all appliance sales.  The appliance manufacturers understood that if they allowed the small retailers to disappear, and Lowe's and HD had it all to themselves, the two big boxes would effectively OWN the appliance makers.  They would bark "jump", and the manufacturers would have to reply, "how high, sir?"  Therefore they gave the small retailers a slightly better price to keep them competitive and in business. 

Until recently American Express was the only credit card the giant members-only store Costco accepted.  Ten percent of all Am Ex cards were issued thru Costco, and 20% of Am Ex total loan portfolio was with Costco.  Feeling like they had the power to pull American Express's strings, Costco demanded that Am Ex cut their processing fee and raise their rewards program, both benefitting Costco and hurting Am Ex.  

American Express realized the folly of having too many of their eggs in one basket and bid Costco adieu.  Now they're trying to boost their business with thousands of small retailers so as to never be held hostage like that again.  And that's, as Paul Harvey would say, "The rest of the story."

So with this in mind, please tell me why we let the Big Six banks (JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley) control roughly half of all American banking, with the other half divided up among roughly 6,000 "others"?  Tell me again why we shouldn't break up the Big Six?

Who do YOU bank with?

S

I'm tired of being the bug. I wanna be the windshield!

A modern day "Tale of Two Cities"....the number of "health insurance co-ops" set up to enroll people in the ACA program, aka Obamacare, is declining by two more due to financial underperformance, leaving only 15 of the original 23 still in business.  Meanwhile four of the giant health insurers are merging to become even more "giant-er".  

As the photo headline above says, Aetna is buying Humana, and Anthem (Blue Cross) is buying Cigna.  The combined Aetna-Humana will insure 33 million people, and Anthem-Cigna will insure 53 million people.  The current top insurer, UnitedHealthcare, insures 49 million people. (FYI, those three insurers will have a combined revenue of $448 BILLION per year.)

From what I have read (and if anyone inside the medical/insurance field has other information I'd like to hear it), far-and-away the BIG winners in the Obamacare health care reform movement are the health insurers.  Early on the Democrats who pushed for Obamacare enlisted the health insurers support, promising them millions of predominantly young, mostly healthy, new clients....in other words, lots of new income, with little additional expense.  CHA-CHING!

Here's what it comes down to:  the health insurers are making money hand-over-fist, with numbers few of us can even imagine.  They have to invest their profits somewhere (they don't pay it all out in dividends), and they have found that there is no place more profitable to put their cash than in....themselves!

“When big [companies] like this join forces rather than compete, it’s always a worry in terms of choice,” said Betsy Imholz, special projects director for Consumer Reports. “History has generally taught us when there’s greater concentration of health insurers, premiums are higher. Companies say there are greater efficiencies, but I’ve never seen that passed along to consumers.”

“We really do need the regulators to be watching out for consumers in this because there’s not too much consumers can do” about it, she said. 

What?  Regulators watching out for consumers?  ROFLMAO!  Maybe in the old days, but now regulators are controlled by the politicians who appoint them, and the politicians are controlled by the companies (via their campaign contributions/PAC's) being regulated.  The fox is in charge of the hen house!

I thought capitalism was all about free markets, and competition?  No?  This all sounds rigged to me.

So, let's all go to the polls next year and vote to re-elect the same bunch of politicians that we have right now.  I mean, they're doing such a great job looking out for our interests, why shouldn't we?

S

Me and Big Al....I didn't see THAT coming!

I've never been a big Al Franken fan.  I love Saturday Night Live, but I never much enjoyed the skits he was in when he was a SNL regular/writer.  

Then he went on to become part of the ill-fated Air America liberal radio network, which cemented him in my mind as a far-out left winger.  And anyone who knows me knows I don't like far-out ANY wingers.

Since 2009 he's been SENATOR Al Franken of Minnesnowta.

Imagine my shock when I learned that he and I agree on something.  On the Senate Judiciary Committee he's become their main anti-trust advocate.  Right now he's all hot and bothered by the proposed $45B buyout of Time Warner Cable by Comcast.  Sic 'em Big Al!

The business interests in our country have for years been obsessed with mergers.  Through their eyes it's a way to eliminate competition, become more efficient (fewer marketing departments, fewer accounting departments, etc), and MAKE MORE MONEY.  Never mind those who will lose their jobs, or the consumers who will have less choices and have to pay more.

Combined, the new Comcast would be a cable TV and internet access behemoth.  (They already own NBC and all their subsidiaries, and Universal Studios.)  For consumers in many areas a merger would leave them no choice but to sign up with Comcast.

See where this is going?  Look at the banks:  Today just six mega-banks control the majority of the US banking industry.  Outraged by all their fees, all the ways they get into your pocket, all while producing those cute little "We're looking out for you" commercials?  *gag!*

And look at the airline industry:  Delta and Northwest are now one, United and Continental are now one, Southwest and Air Tran are now one, America West and US Air are now one, and now they've merged with American to become the biggest airline in the world.  Fees for bags?  Pay extra for a Coke?  Are in-flight pay toilets next?  Good for their bottom line for sure, but not for yours!

How come when the conservatives are making a push for de-regulation (which I more often than not agree with) they tout the increased competition it will bring to the marketplace (yea!), but when their corporate campaign contributor masters want to eliminate competition via mergers, they just obediently fall into line and vote "AYE"?   

And we just let it happen, time after time.  Do we consumers get some perverse satisfaction in getting screwed?

I believe the people should control industry.  We should dictate what products and services we want, and industry should compete to give it to us.  But these days more and more industries are dictating to us what we can have, and our job is to just stand there and open our wallets.

It seems we've long forgotten the legacy of "The Great Trust Buster", Teddy Roosevelt. *sigh*

S

Not sure what to think of this one....

Sacre bleu!

I read in ze news that the French Senate has unanimously passed a bill that says online booksellers (read: Amazon) can offer consumers either a 5% discount or free shipping, but not both.

My first reaction was, "Why would the French government not want their constituents to get the best deal they could?"  Why, that's just downright un-American!  Umm....wait....

But then I realized they're just trying to keep the smaller booksellers from going out of business.  They're just trying to save jobs.  Hmmm...

But....but....free enterprise....the market....   

It's a real conundrum for sure.  Of course entrepreneurs should be encouraged to bring their new ideas to market.  What if the old school had tried to stifle Thomas Edison or Henry Ford or Steve Jobs?  But at some point you have to wonder how far this should go.  

It's one thing to keep the competition on their toes, but if pricing becomes so predatory (prices so low, sometimes at or even below cost....at least until they get a near-monopoly) they force the smaller competitors out of business entirely, is this really in the consumers best interest?

I think we're now seeing that airline consolidation in America is going to work against the consumer.  (Check fares on the "low cost" carriers.  They're not so low any more.)  It will be great for the airlines and their stockholders, but consumers will pay more.

And now that just 5 big banks control the majority of the banking biz, do you see yourself getting better service or lower fees?  When is the last time you got a free toaster from a hungry bank wanting to gain market share?  Their attitudes sure changed, didn't they?

Major appliance manufacturers are worried, too. That's why, contrary to popular opinion, the big box retailers (Home Depot, Lowe's) do NOT get better wholesale pricing than the mid-sized retailers.  They know that if the big boxes get better pricing and put the smaller guys out of business, then the 2 boxes will in effect "own" the manufacturers.  The manufacturers don't want to lose control.

So more competition is good.  The government should just butt out and let the market do it's thing.  And less competition is bad.  The government should step in and make sure the big don't get too big.  (Don't kid yourself.  Our anti-monopoly regulators are not at all pro-active.)

DOH!  See, conundrum.  We don't live in a black or white world anymore.  Think about it.

S

Will we never learn?

We seem to have it in our mind that "bigger is better".  We Americans like things BIG.  We Texans like thing REALLY BIG.  Trouble is, as we're always prone to do, we take things too far.  


Once this country's largest air carrier American Airlines is today in bankruptcy.  Now comes word that Delta Airlines and US Airways both might make a play to buy American.  We're supposed to have anti-trust laws to guarantee competition, but IMO meaningful anti-trust regulation / oversight  fell by the wayside long ago.  In just the last few years, Delta absorbed Northwest, United absorbed Continental, America West merged with US Air, Southwest snatched up AirTran, and pretty obviously American will be swallowed up by somebody, TBD.  


The same with banking.  I remember hearing experts say 20 years ago that some day there would be only a handful of mega-banks left.  As there was a local community bank on every corner at the time I thought this a ridiculous prediction, but look were we are today.  We're well on our way.  Homebuilding:  Today a handful of national homebuilders control over half the market, and their share is growing.  Retailers:  Think Wal Mart.  'Nuff said.


A hundred years ago we broke up "big railroad" and "big oil", rightly proclaiming it would be good for competition, and therefore for the people.  I understand the principle of "economy of scale".  I also understand the reality of "too big to fail" and "moral hazard".


Once again we're getting run over, and we just sit here and meekly take it.  The people we've elected to look out for our interests are failing us.  I guess we're getting what we deserve.


(Sorry for the boring post.  I guess I read / think too much.) 


S