Mr. Magoo Visits Wal-Mart: Finding the Right Lens for Antitrust

WalMart and Local Economic Development

“…Similarly, the “aggregate effect” hypothesized by Basker (2005b) may perversely lead other retailers—in particular smaller ones—to raise prices. Foer (2007) illustrates this potential indirect price-increasing effect of large retailers on their competitors by using Dobson’s (2005) “waterbed effect.” As large retailers gain bargaining power over their suppliers by buying goods at the marginal production cost, the same suppliers may be forced to charge higher prices to smaller retailers, who have little to no bargaining power, to cover fixed costs. As a result, although consumers may be worse off in the short run because of the higher prices, in a long-run scenario they will likely switch to the low-priced retailers (such as WalMart), and as a consequence, small retailers, mostly managed and operated locally, are more likely to be hurt.…”

“…The company’s bargaining power over its suppliers, the so-called “WalMart squeeze,” is supported by several anecdotal cases (see Bianco, 2007), but despite its importance, there is little to no formal analysis of this phenomenon. Nonetheless, the possibility of, and the rationale for, antitrust intervention against the company has been discussed repeatedly (Foer, 2007; Lynn, 2006; Shils & Taylor, 1997).…”

Mercadona (Spain): a retail model in expansion

“…Cost reduction is supported by a strict control of suppliers and a strict salary policy. Its relationship with manufacturers is characterised by the attainment of big margins in the inequality framework (Raju and Zhang, 2005;Foer, 2006;Geylani et al, 2007), especially in relation to less important suppliers (Amato and Amato, 2009). An example of this power is related to one of Wal-Mart's most important innovations, the Radio Frequency Identification (RFID), a device which suppliers must place in products acquired by the company with the aim of tracking the supplies.…”

“…As we have seen, Wal-Mart hardly had any barriers to its expansion in its domestic market. The misgivings from Supermarkets by provinces (1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009) A retail model in expansion some sectors due to its power did not have practical regulations in either federal legislation (Foer, 2006;Scheelings and Wright, 2006) or in local or state administration regulatory practice (Hemphill, 2005;Lecfoe, 2005). However, the regulation in Spain, like other European countries as the Netherlands (Evers, 2002), has become stricter since 1996, when legislation on domestic commerce introduced new requirements for opening establishments over 2,500m 2 through authorisation given by the local administration (a second licence, granted by regional governments).…”