FTC’s Bureau of Competition today highlights on its website a quotation from the Supreme Court’s opinion in Topco v. United States (1972):
The sentiment is common, but it’s application in the context of Topco was risible.
A group of 25 small/medium regional supermarket chains, with an average market share of 6% in their areas, set up a cooperative purchasing agent to enable them to achieve efficiencies comparable to those of the three big national chains. A part of the structure was creation of private label products, and in connection with this the coop members got territorial exclusivity for the label. That is, one member could extend into another’s territory, and they often did so, but the invader could not use the Topco private label in the extension.
The district court held for Topco on the ground that the private label program was an essential and reasonable way for the small chains to compete with the large ones, but the Supreme Court would have none of it. This was a horizontal restraint, so even though it was in fact pro-competitive the Court would hold it illegal because the Court had long ago decided that horizontal restraints are always anti-competitive, and it does not want to get into the jungles of economic analysis. (Despite the fact that the Court’s original conclusion that horizontal restraints are always anticompetitive was itself an a-empirical product of abstract reasoning, not the fruit of experience.)
Topco was good in a way, in that it marked the end of the Silly Sixties in antitrust. Thereafter, the tide turned and some degree of rationality returned to the field. Unfortunately, the FTC may not yet have gotten the word (its walls are thick and hard to penetrate) and it persists in defending the large discounters against struggling toy and CD retailers, in denying that office supplies sold by mail compete with superstores, and in insisting that the organic sections of major food chains are not in the same market universe as Whole Foods.
So perhaps they are right to cite Topco. And Disco will return.