Tuesday, August 14, 2007

What happened after the FTC blocked the Heinz/Beech-Nut merger?

In 2000, the FTC challenged a merger between and Beech-Nut and Heinz, the second- and third-largest sellers of baby food in the US, but still much smaller than market leader Gerber. At issue in the case were the synergy claims of the merging parties (Heinz had a new factory; Beech-Nut had good brands) against the potential loss in competition. While Heinz and Beech-Nut rarely appeared together on the shelf of any given supermarket, supermarkets typically carried Gerber and one other brand, and there was competition between the two to be the other brand on the shelf.

It is harder to follow up on mergers that were challenged by the FTC because figuring out what would have happened had they been allowed to merge is much more difficult. This creates a kind of asymetry in that we can potentially catch anticompetitive mergers that were not challenged; but not pro-competitive mergers that were challenged. In the table below, we see that after their proposed merger was blocked, Heinz and Beech-Nut lost share to market leader Gerber. Since we do not know what would have happened had they been allowed to merge, it is difficult to evaluate the FTC's decision.

US Baby Food Market Shares
Heinz (Del Monte after 2002)1174

In 2002, Heinz exited the industry by selling its baby food brands to Del Monte. In 2006, Beech-Nut was sold to Hero AG, a Swiss firm.

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