Department Stores on Sale: An Antitrust Quandary

Transcription

Georgia State University Law Review
Volume 26
Issue 2 Winter 2009
Article 1
2009
Department Stores on Sale: An Antitrust Quandary
Mark D. Bauer
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Bauer: Department Stores on Sale: An Antitrust Quandary
DEPARTMENT STORES ON SALE:
DEPARTMENT
AN
AN ANTITRUST
ANTITRUST QUANDARY
QUANDARY
•
Mark D.
Bauer*
D. Bauer
INTRODUCTION
INTRODUCTION
American society. With
Department stores occupy a unique role in American
memories
of
trips
to
see
Santa
Claus,
Christmas
window
window displays,
memories
holiday parades
fireworks, department storesstoresparades or Fourth of July fIreworks,
particularly the old downtown stores-are often more likely to
particularly
courthouse.' I
building or
engender
engender civic pride than aa city
city hall
hall building
or aa courthouse.
Department store companies
companies have traditionally
traditionally been among the
strongest
strongest contributors
contributors to local civic charities, such as museums or
or
symphonies.
symphonies. In many towns, the department
department store is the primary
downtown
renewal
downtown activity generator and an important focus of urban renewal
plans. The closing of a department
store
is
generally
considered
department
generally considered a
devastating
suburban shopping
devastating blow to a downtown, or even to a suburban
mall.
Many people feel connected to and vested in their hometown
largest department
department store. 223 In 2005, Macy's,3
department
Macy's,3 already the largest
department
and Associate
Law, Stetson
Stetson University
College of
Law. A.B.,
A.B., The
The
•* Associate
Associate Dean
Dean and
Associate Professor
Professor of
of Law,
University College
of Law.
University
of
Chicago;
J.D.,
Emory
University.
The
author
was
formerly
an
attorney
with
the
Federal
University
Commission and the U.S. Department of Justice. This article
Trade Commission
article was presented
presented as a work in progress
at the Southeastern
Southeastern Association
Schools' annual conference, Indiana
Indiana University
University School of Law Association of Law Schools'
Indianapolis,
Wesleyan School
School of Law, and the Annual
Indianapolis, Mercer
Mercer University
University School of Law, Texas Wesleyan
Meeting
& Economics
Meeting of the Canadian Law
Law &
Economics Association of the University
University of Toronto Law Faculty. The
author also gratefully
gratefully acknowledges
acknowledges student research
research assistants
assistants Ryan McGee,
McGee, Dana Dean, Marisa
Gonzalez, Mike Kincart, and Marc Levine, who all did background
background research. This article
article has benefited
from helpful
helpful critiques and suggestions
suggestions from Jon Baker, Richard
Richard Benedikt,
Benedikt, Darren Bush, and Janice
Janice
McClendon. Finally, this article was supported by Pamela Burdett, Wanita Scroggs, Julieanne Hartman
Stevens,
Stevens, and Sally Waters, Stetson's
Stetson's reference
reference librarians; a generous
generous research grant from Stetson
University
unfailing support of Dean Darby
Darby Dickerson
Dickerson and Associate Dean
University College
College of Law; and the unfailing
Ellen
Ellen Podgor.
1. See,
See, e.g., Barbara
Barbara Cloud, Department
Stores Evoke Warm Memories,
I.
Department Stores
Memories, PrrrSBURGH
PmSBURGH POSTPOSTGAZETTE,
also Alan Lupo, When a Store Closes Its Doors,
Doors, a Bit of the Past
Past
GAZETTE, Dec. 4, 2006, at C3. See also
Disappears,
1998, at 3.
Disappears, BOSTON GLOBE, Dec. 20,
20,1998,
Game: Federated
FederatedKeeps Tight Grip
Grip on Dearly
2. Sandra Jones, Hoarding
Hoarding Names No Game:
Dearly Departed
Departed
Department
Stores to Protect
Its Star
StarBrand,
TRIB., July 23, 2006,
Department Stores
Protect Its
Brand, CHI. TRffi.,
2006, § 5, at 1.
I.
3. In
February 27,
In 2005,
2005, Macy's was an operating arm of Federated
Federated Department
Department Stores
Stores (FDS).
(FDS). On February
2007,
it would
would seek shareholder
2007, FDS
FOS announced
announced that
that it
shareholder approval to change
change its corporate
corporate name to Macy's
Macy's
255
Published by Reading Room, 2009
1
HeinOnline -- 26 Ga. St. U. L. Rev. 255 2009-2010
Georgia State University Law Review, Vol. 26 [2009], Iss. 2, Art. 1
256
UNIVERSITY LAW
LAW REVIEW
GEORGIA STATE UNIVERSITY
[Vol.
[Vol. 26:2
store group in the United States,
States, acquired
acquired May Department Stores, its
$17 billion.44 The merger was closely
largest competitor, for $17
examined by federal antitrust
examined
antitrust authorities, but the regulators took no
action. 55 Although this industry was no stranger
stranger to mergers, name
reorganizations, nothing came close to Macy's
changes, or reorganizations,
Macy's dramatic
decision in 2005 to rename-and indeed, drastically alter-hundreds
department stores to Macy'
Macy's.
of former May department
s. 6 Although each Marshall
Field's, Filene's, Hecht's,
Hecht's, Strawbridge's,
Strawbridge's, and Foley's store, among
others, had long since become part of a distant holding company,
shoppers in each separate city were able to participate in an unbroken
unbroken
chain of tradition and memories
memories that hearkened
stores'
hearkened back to each stores'
local founder.
According
According to the doctrine of law and economics,
economics, however, none of
of
7
this really matters. To a devotee of law and economics,
economics, antitrust is a
study of elasticity
elasticity of demand, market power, and a concept called
"consumer
do with
with lay definitions of the
"consumer welfare"
welfare" that
that has
has little
little to
to do
90% of its sales come from Macy's (the other 10% coming from its other
Inc., recognizing
recognizing that 90%
other
department store chain, Bloomingdale's). Press
Federated
Press Release,
Release, Federated
Federated Department Stores, Inc., Federated
Plans
Corporate
Name
Change,
Feb.
27,
2007,
http://phx.corporatePlans
Corporate
Change,
http://phx.corporateir.net/phoenix.zhtml?c=84477&p=irol-newsArticle&ID=967632&highlight. That name change
change was
ir.netiphoenix.zhtml?c=84477&p=irol-newsArticle&ID=967632&highlight.
1, 2007. Sandra
Macy's: State
State St.
St. Store
Sandra Jones,
Jones, Macy's:
approved by stockholders and became effective
effective June I,
'Doing Badly':
Badly': Official Says Greater
GreaterEffort Needed to Get Traffic into Flagship,
Flagship, CHI. TRm,
TRIB, May 19,
'Doing
19,
CI.
nomenclature of the various entities
I. The mixed lineage and nomenclature
entities discussed in this article can be
be
2007, at C
confusing because FDS and Macy's
Macy's both had
had long independent
independent histories before finally merging in 1993.
1993.
occurred while Macy's was part of FDS,
FDS, this article will only
only
Although many
many of the events discussed occurred
refer to FDS
1994 when
FDS when necessary
necessary for historical clarity, particularly relating to the period before
before 1994
when
FDS bought
IDS
bought Macy's.
Macy's.
4. Brenon Daly, Federated,
Federated,May to Tie Knot, DAILY DEAL,
1, 2005; David Moin, Evan Clark,
DEAL, Mar. 1,2005;
Merger: With aa Deal
Imminent, Market Weighs
Federated-May Merger:
Deal Imminent,
Vicki M. Young & Amy S. Choi, Federated-May
Fallout:Federated
FederatedDepartment
DepartmentStores
Stores and May Department
Stores to Merge,
Merge, WOMEN'S WEAR DAILY,
Fallout:
Department Stores
DAILY,
Feb. 28,
28, 2005,
2005, at 1.
5. See,
See, e.g., Stephanie
Stephanie Strom, FTC Ends Inquiry
1994, at 37;
Inquiry into Macy Deal,
Deal, N.Y. TIMES,
TIMES, Aug. 20,
20,1994,
Statement
Concerning Federated
Commission Conceming
Department Stores,
Stores, Inc./The May Department
Department
Statement of the Commission
Stores Company, FTC File No. 051-0111
generally Federal Trade Commission,
051-0111 at II (FTC 2005); see generally
Pre-Merger/Hart-ScottRodino Act, available
at http://www.ftc.gov/bc/hsr/
17, 2008);
Pre-MergerlHart-Scott
available at
http://www.fic.gov/bc/hsr/ (last
(last visited Aug. 17,2008);
Federal
Thresholds for
Section 7A of the Clayton
Clayton Act,
Jurisdictional Thresholds
for Section
Federal Trade Commission, Revised Jurisdictional
http://www.ftc.gov/os/2007/01/P85991
ORevisedSection7AClaytonAct2007.pdf.
http://www.fic.gov/osl2007/011P85991 ORevisedSection7
AClaytonAct2007 .pdf.
6. Jones, supra
1.
supra note 2, at I.
7. Law and economics-ofien
economics-often referred to as "the Chicago School"-boiled
School"-boiled down
down to its most
simplistic
simplistic description, would
would argue that "fa]ntitrust
"[a]ntitrust concerns
concerns should
should kick in only when a firm had a
dominant market
barriers, and entry itself could
market share in a market protected
protected by entry barriers,
could be relied
relied upon to
solve most competitive problems, except
except when government
government action protected incumbents."
incumbents." Jonathan
Jonathan
Preface to Post-Chicago
Post-Chicago Antitrust,
Antitrust, in POST-CHICAGO DEVELOPMENTS
ANTITRUST
Baker, A Preface
DEVELOPMENTS IN
IN ANTITRUST
ANALYSIS
ANALYSIS 60, 66 (2002).
http://readingroom.law.gsu.edu/gsulr/vol26/iss2/1
2
2010)
20101
ANTITRUST QUANDARY
AN ANTITRUST
QUANDARY
AN
257
"consumer" or "welfare.
"welfare. 8 To these scholars, department stores
words "consumer"
are analogous to a basket of goods, or simply a retail channel
distributing products
products made by others and offering
offering nothing substantive
substantive
9
of value to purchasers. Were a department
department store to raise prices, law
and economics informs us that shoppers would make rational
expensive sellers of similar
economic decisions by flocking to less expensive
wares.
At odds with the predictions of the law and economics
economics crew,
of
however, was the reaction of consumers to Macy's acquisition of
May, particularly
particularly in Chicago. Upon hearing of Macy's
plan
to
change
Macy' s
change
the name of Marshall Field's, Chicago's iconic downtown anchor,
Chicagoans took to the streets in protest.
protest.'IO0 These
hundreds of Chicagoans
purchase similar
shoppers
shoppers were not content to purchase
similar or even identical
identical goods
elsewhere. Even now, several years after the merger, fans of Marshall
annual shareholders
at Macy's
protest at
Macy's annual
shareholders meeting.il
meeting. I I
Field's continue to protest
"consumer welfare"
of
8. The term "consumer
welfare" is confusing
confusing to some
some because it does not mean that the welfare
welfare of
LAW 3-4 (The
the majority
majority of consumers is maximized. STEPHEN F. Ross, PRINCIPLES OF ANTITRUST
ANTITRUST LAW
of
Foundation Press, Inc. 1993). Consumer welfare means maximization
maximization of societal
societal wealth, not that of
individuals, which can
already
can simply mean there
there is more wealth, but it is concentrated
concentrated among the already
wealthy. /d.
Id.Similarly, "allocative
"allocative efficiency"
"competition." Id.
efficiency" does not mean "competition."
Id. at 4. The Chicago
School usually
usually focuses on short-term
short-term rather than long-term efficiencies.
efficiencies. Id.
Id.
characteristic separate and apart from the
9. The concept of a collection of goods taking on a characteristic
individual
individual goods themselves
themselves has not received considerable attention from antitrust scholars. See
generally
Jonathan B. Baker, Product
Product Differentiation
Through Space
Space and Time: Some Antitrust
Antitrust Policy
generally Jonathan
Differentiation Through
Policy
Issues, 42 ANTITRUST
(1997); Jonathan
Theories in
in
Issues,42
ANTITRUST BULL. 177 (1997);
Jonathan B.
B. Baker, Unilateral
Unilateral Competitive Effects Theories
MergerAnalysis, 11 ANTITRUST 21-26 (Spring
& Timothy F. Bresnahan, The
Merger
(Spring 1997); Jonathan B. Baker
Baker &
Gainsfrom Merger
Collusion In
In Product-Differentiated
Product-DifferentiatedIndustries,
Industries, 33 J. INDUS. ECON. 427 (1985);
(1985);
Gains
Merger or Collusion
Craig
Price Concentration
Concentration Studies:
Studies: There
M. Newmark,
Price
You
Go Again
12,
http://www.usdoj.gov/atr/public/workshops/docs/202603.htm (suggesting
(suggesting that consumers
http://www.usdoj.gov/atr/public/workshops/docS/202603.htrn
consumers compare
prices on individual
individual products
products but are actually
actually interested
interested in buying a package
package of bundled services); 1992
Horizontal
10, 1992). The Supreme
Supreme Court
Horizontal Merger
Merger Guidelines, 57 Fed. Reg. 41552, §§ 2.2-2.21 (Sept. 10,
did, however, at least hint at this in one of the earliest
earliest merger
merger cases. See United States v. Philadelphia
Philadelphia
(1963).
Nat'l Bank, 374 U.S. 321,
321, 356-57
356-57 (1963).
Wants, WALL ST. J.,
17, 2006, at AI0;
10. Gail Heriot, Give the Lady What She Wants,
J., June 17,2006,
AI0; Rummana
Green, See Red: 200 Demonstrate
Field's Becomes Macy's, CHI.
Hussain, Protestors
Protestors Wear Green,
Demonstrate on State As
As Field's
SUN-TIMES,
10, 2006, at A9. Slogans on the protestors signs included
included "Boycott
"Boycott Macy's, Field's is
SUN-TIMES, Sept. 10,2006,
is
Chicago," "Hell No, Not My Dough,"
Chicago,"
Dough," and, thinking along similar lines as this author
author with regard to the
title of this article, "Give
"Give the Lady What She Wants
Wants and She Wants Marshall
Marshall Field's."
Field's." Hussain,
Hussain, at A9.
The Chicago Tribune in an editorial
editorial compared
compared it to renaming
renaming Wrigley Field as Yankee
Yankee Stadium.
Field's,CHI. TRiB.,
TRIB., Sept. 21,2005,
21, 2005, at C26.
Editorial, Farewell
Farewell to Field's,
Field's Backers Take Beef to Macy's Annual Meeting, CHI.
CHI. TRiB.,
TRIB., May 24,
11. Sandra
Sandra M. Jones, Field's
Cl.
2008, at CI.
3
258
UNIVERSITY LAW REVIEW
REVIEW
[Vol. 26:2
(Vol.
There is something
something important about department stores and antitrust
that is not captured in a conventional law and economics analysis.
science does not lie, but law and economics
Economic science
economics may be
focusing on the wrong data. There may be a reason even within
conventional antitrust analysis to explain the cries of outraged
conventional
outraged
12
consumers. 12
Part I of this article will review the history of department
department stores
particularly to the
and examine their importance
importance to American
American culture, particularly
development of the urban fabric. The literature
scholarship
development
literature and scholarship
importance of department
focusing on this period amply chronicle the importance
department
stores to the development of cities, civic identity, and popular culture.
Indeed, antitrust arose in the same populist
populist era as department
department stores,
common origins and ideals of consumerism
consumerism and
and both share
share
3
1
democracy. 13
necessary
Part II of this article will provide the background and necessary
context for the antitrust laws. Part III of this article will review the
United States Federal Trade Commission's (FTC) decision to permit
Macy's to acquire May. The conclusion of this article offers a
suggestion for remedial
remedial action.
AND GROWTH
GROWTH OF DEPARTMENT
DEPARTMENT STORES
I. HISTORY
HISTORY AND
A. The Relevance ofDepartment
DepartmentStore
Store History
History
Law and economics
economics generally ignores retail. 1I44 "The most extreme
extreme
form of neglect
neglect is to act as though retailers do not even exist-as
Decisionmaking and
and the Limits of Disclosure:
Disclosure: The Problem
of
12. See generally
generally Lauren E. Willis, Decisionmaking
Problem of
PredatoryLending: Price,
BehavioralModel of
Predatory
Price, 65 MD. L. REv. 709, 754-57 (2006);
(2006); Herbert Simon, AA Behavioral
of
Rational Choice,
Choice, in Models of Man,
Man, Social and Rational:
Rational: Mathematical
Rational
Mathematical Essays on Rational
Rational Human
Human
Behavior in a Social Setting, 69 THE
THE Q. 1.
J. OF
ECON. 99 (1955);
(1955); Daniel Kahneman, Maps
Maps of Bounded
Behavior
OF EcON.
Rationality:Psychology
BehavioralEconomics, 93 AM.
ECON. REv.
REV. 1449 (Dec. 2003).
for Behavioral
AM. ECON.
Rationality:
Psychology for
13.
Origins of the FTC.
Concentration, Cooperation,
Cooperation, Control,
Control, and
13. See Marc Winerman,
Winennan, The Origins
FTC: Concentration,
Competition, 71 ANTITRUST
ANTITRUST L.J. I,
1, 75-76, 90 (2003); 51 CONG.
REC. 11228,
11228, 11105,
11105, 11109,
11109, 14936.
Competition,
CONGo REc.
(1914)
(statements of Sens.
Stevens)); Neil W. Averitt, The
Sens. Robinson, Cummings, Newlands, and Rep. Stevens»;
(1914) (sJatements
Meaning
"UnfairActs of Practices'"
in Section
Section 5 of the Federal
FederalTrade
Trade Commission
Meaning of "Unfair
Practices " in
Commission Act, 70 GEO. L.J.
225,230-31
225,230-31 (1981).
(1981).
14.
Restraints, 30 ANTITRUST
14. See Robert L. Steiner, The Nature
Nature of Vertical
Vertical Restraints,
ANTITRUST BULL.
BULL. 143 (1985)
(1985)
[hereinafter Steiner, Vertical
Vertical Restraints];
Enforcement Perspective
Restraints]; Pamela
Pamela Jones Harbour, An Enforcement
Perspective on the
Robert L. Steiner:
Vertical Relationships
Relationships Matter,
ANTITRUST BULL.
Steiner: Why Retailing
Retailing and Vertical
Matter, 49 ANTITRUST
BULL. 985,
Work of Robert
985-86, 992 (Winter
Economists Are Wrong to Neglect Retailing
Retailing and
(Winter 2004); Michael
Michael P. Lynch, Why
Why Economists
4
20101
2010)
AN ANTITRUST
AN
ANTITRUST QUANDARY
QUANDARY
259
manufacturers sell directly
though manufacturers
directly to consumers."'
consumers.,,155 But this segment
of the economy is just too big to ignore. In recent years, more than 20
million people
people worked in the distributive
distributive trades: 1.5 workers for
16
Wal-Mart is not only a retailer
retailer
every worker
worker in manufacturing.
manufacturing. 16
Americans-Wal-Mart is also one
employing more than one million Americans-Wal-Mart
of the two largest corporations
corporations in the world.'
world. 177
Law and economics generally
generally predicts that in the event of a
manufacturer-imposed price increase,
manufacturer-imposed
increase, retailers will pass through
18 This presumes
100% of the increase to consumers. IS
100%
presumes that retail can
can be
"modeled
as
a
perfectly
competitive
industry
with
constant
marginal
constant
"modeled as a perfectly competitive industry
costs."' 19 Because
costS.,,19
Because retailers face imperfect
imperfect competition from their
"often are able to exercise a degree of market
counterparts, they "often
20
power.,,20 Furthermore, retail giants like Macy's are no longer just
power."
retailers; Macy's
Macy's is a vertically
vertically integrated
integrated giant that produces
nineteen percent of its2 1 sales from store brands that it designs,
sells. 21
manufactures, and
and sells.
department stores, however, is more than just
The importance
importance of department
numbers reflecting
reflecting industrial might. To fully appreciate the
Macy's/May merger, it is necessary
necessary to consider
consider
ramifications of the Macy's/May
development
department stores in context, including
including their historical development
national fabric.
and their role in the national
How Steiner's
Steiner's Theory Provides
Important Regularities,
49 ANTITRUST
ANTITRUST BULL.
Provides an Explanation
Explanation of Important
Regularities, 49
BULL. 911
911
Productivity in Consumer
Consumer Good
GoodIndustries(Winter 2004).
2004). See generally
generally Robert L. Steiner, Marketing
Marketing Productivity
IndustriesAA Vertical
Vertical Perspective,
Dual-Stage View of the
Perspective, 42 J. MKT. 60, 61-63 (1978);
(197S); Robert L. Steiner, AA Dual-Stage
Consumer Economy, 35
(2001).
Consumer
35 J. ECON.
ECON. ISSUES 27 (2001).
15. Lynch, supra
911.
IS.
supra note
note 14, at 911.
16. Id.
Id. at
at 912.
912.
17.
Global 500, FORTUNE,
available at http'//money.cnn.com/magazines/
17. Fortune
Fortune Global
FORTUNE, 2006,
2006, available
http://money.cnn.comlmagazinesl
fortune/global500/2006 (last visited Aug 17,
2008); Fortune Global 500,
2005, available
available at
fortunelglobalS00I2006
17, 200S);
SOO, FORTUNE,
FORTUNE, 200S,
http://money.cnn.com/magazines/fortune/global500/2005 (last
Belsie,
Laurent Belsie,
http://money.cnn.comlmagazineslfortunelglobaISOOI200S
(last visited Aug 17,
17, 2008);
200S); Laurent
Wal-Mart:
World's Largest
SCi. MONITOR,
19,2002, at 1.
Wal-Mart: World's
Largest Company,
Company, CHRISTIAN SCI.
MONITOR, Feb.
Feb. 19,2002,
1.
18. Lynch, supra
supra note
915, 920-21.
IS.
note 14, at 911, 91S,
920-21.
19. Id.
19.
/d. at921.
at 921.
supranote
157-58.
20. Harbour, supra
note 14, atat 987;
9S7; Steiner, Vertical Restraints,
Restraints, supra
supra note 14, at 157-SS.
http://www.macysinc.com/Investors/Financiallnformation/SalesByCategory.aspx
21. See
http://www.macysinc.coml1nvestors/FinanciaIInformationlSalesByCategory.aspx (last
visited Feb.
Sept. 27,
1997, at
at
visited
Feb. 15,
IS, 2010);
2010); Jennifer
Jennifer Steinhauer,
Steinhauer, Strutting
Strutting Their Own Stuff,
Stuff, N.Y. TIMES,
TIMES, Sept.
27, 1997,
Dl.
01.
5
260
(Vol.
[Vol. 26:2
B. The Beginnings
B.
Beginnings
From small
mall
small peddler
peddler outposts
outposts to
to ubiquitous
ubiquitous suburban
suburban mall
landmarks,
department
stores
have
grown
with
America
and
at
landmarks, department stores have grown with America and at the
the
same time
time changed
America. Indeed,
success
same
changed America.
Indeed, the
the pervasiveness
pervasiveness and
and success
of
stores today
belies aa remarkable
remarkable history.
history. Department
Department
of department
department stores
today belies
stores radically
radically changed
the rules
rules that
governed shopping
shopping for
stores
changed the
that governed
for
22
hundreds
of
years.
Peddlers
means, often
hundreds of years.22 Peddlers of
of modest
modest means,
often Jewish
Jewish
immigrants,23 became
shopkeepers, and
and many
immigrants,23
became shopkeepers,
many built
built enormous
enormous
institutions over
over aa few
The institutions
institutions they
they built
institutions
few decades.
decades. The
built were
were so
so
well
that, within
within aa generation,
generation, these
these former
well received
received that,
former peddlers
peddlers and
and
members
of
ethnic
and
religious
minorities were
accepted
members of ethnic and religious minorities
were frequently
frequently accepted
society. 24
of society.
upper crust
into the
into
the upper
crust of
24
Department stores
stores made
made urban
urban cores
cores aa focal
city life,
life,
Department
focal point
point for
for city
25
25
rather than
dreary and
and austere
austere collection
collection of
And
rather
than aa dreary
of offices.
offices.
And
department store
store buildings
became symbols
symbols of
urbanity and
and aa central
central
department
buildings became
of urbanity
26
identity. 26
fixture of
fixture
of community
community identity.
1960).
22. JOHN WILLIAM
WILLIAM FERRY, A
A HISTORY OF THE DEPARTMENT
DEPARTMENT STORE
STORE 3 (The Macmillan
Macmillan Co. 1960).
23. The founders of America's
America's largest department
department stores were invariably
invariably of British ancestry, Jewish
Jewish
dmigr~s escaping
emigres
escaping oppression
oppression in Germany
Germany and Eastern Europe, or descendants of Quaker
Quaker families that
settled in New England
also JAN WHITAKER,
England in the 1600s. Id.
Id. at 23-24; see also
WHITAKER, SERVICE AND STYLE:
STYLE: HOW
HoW
THE AMERICAN
AMERICAN DEPARTMENT STORE FASHIONED
FASHIONED THE MIDDLE CLASS 184 (St. Martin's Press 2006).
2006).
24. See generally
generally Bill Hendrick, Getting Past
PastPrejudice;
Lieberman Choice
Choice May Herald
HeraldDecline
Decline in
in
Prejudice; Lieberman
J.-CONST., Aug. 9, 2000,
ID; ISADORE BARMASH,
30
Anti-Semitism, ATLANTA
ATLANTA J.-CONST.,
2000, at 10;
BARMASH, MACY'S FOR SALE 30
(Weidenfeld &
& Nicholson
WILLIAM LEACH, LAND
(Weidenfeld
Nicholson 1989);
1989); WILLIAM
LAND OF DESIRE: MERCHANTS,
MERCHANTS, POWER,
POWER, AND THE
THE
RISE OF A NEW AMERICAN CULTURE
Maas Bros
Bros Store
CULTURE 117 (Pantheon
(pantheon Books 1993); Dave Simanoff, Moos
Store
Once Was Tampa,
11, 2006, Moneysense, at 1.
1.
Tampa, TAMPA TRIB.,
TRIB., Apr. 11,2006,
IN NINETEENTHNINETEENTH25. GUNTHER
GUNTHER BARTH,
BARTH, CITY PEOPLE: THE RISE OF MODERN CITY CULTURE IN
CENTURY AMERICA Ill,
111, 147 (Oxford
(Oxford Univ. Press 1980).
146 (HarperPerennial
(HarperPerennial 1992).
26. THOMAS
THOMAS J. SCHLERETH,
SCHLERETH, VICTORIAN AMERICA
AMERICA 146
1992). Although there is
some dispute
transitioned from
dispute as to which department store was founded first (and some
some gradually transitioned
small
small dry goods stores), many credit Bon March6
Marche in Paris founded in 1852 by Aristide Boucicaut.
Boucicaut.
FERRY,
supra note 22, at 2; ROBERT HENDRICKSON,
HENDRICKSON, THE GRAND EMPORIUMS: THE ILLUSTRATED
FERRY, supra
ILLUSTRATED
HISTORY
DEPARTMENT STORES 25-27 (Stein
(Stein and Day 1979). Boucicaut's
Boucicaut's
HISTORY OF AMERICA'S
AMERICA'S GREAT DEPARTMENT
department
department store
store was a revolutionary change
change in retail: customers
customers were encouraged to browse without
any obligation to make a purchase;
purchase; a money-back
money-back guarantee allowed
allowed shoppers to feel more secure in
their
merchandise was sold with a small
their purchases;
purchases; the
the merchandise
small mark-up, requiring rapid turnover to yield profit;
and
fixed prices and clerks were forbidden to haggle over the price.
and goods
goods were clearly marked
marked with fIXed
HENDRICKSON,
HENDRICKSON, at 25-27. Other
Other retailers
retailers made
made similar innovations
innovations around the same time and it is
difficult to determine who invented
Id. at 28. For example, Adam Gimbel introduced
introduced fixed
invented what first. Id.
fIXed
prices
prices to his Vincennes, Indiana trading post in 1840;
1840; Potter Palmer (the original
original partner
partner of Marshall
Field), R.H. Macy, and the founders of Strawbridge &
Philadelphia introduced cash
& Clothier in Philadelphia
cash
discounts long before their stores became department
department stores. Id.
6
20101
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AN ANTITRUST
AN
ANTITRUST QUANDARY
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261
Most American
American department stores were founded between
between 1860 and
revolution. 27 Americans
1910, and were a product
product of the industrial
industrial revolution?7
shifted from rural areas to urban centers and millions of immigrants
28 The increased density of population in
United States. 28
came to the United
department
cities as well as advances
advances in industrial production allowed department
textile
stores
gave
created and flourish.2299 Department
stores to be created
Department
dependable outlet for their wares, and their 30heavy
manufacturers
manufacturers a dependable
heavy
prosper.
and
grow
to
newspapers
daily
advertising allowed city
newspapers to grow and prosper. 30
advertising
Department stores in the United States democratized
democratized luxury.31
luxury. 3 ' All
Department
"ladies" to department store staff and the principal
women were "ladies"
principal of
of
first-come-first-served allowed a servant to be waited upon before
frrst-come-first-served
before an
an
32
32
heiress. Women aspiring to middle class comfort could find it
temporarily
creating an illusion
illusion
temporarily in this new downtown center of life, creating
33 Obsequious acts, such as
of shared luxury between
between shoppers. 33
greeting shoppers, accepting
accepting returns, and treating all equally,
position in society, were elevated
elevated to the level34of public
regardless of position
society. 34
democratic society.
a
in
regarded
highly
something
service, something
regarded in a democratic
stores' success is that their founders
The principal cause of the stores'
understood that they were creating
creating democratic and almost public
consumer
industrialized society by satisfying
satisfying consumer
institutions for a newly industrialized
hunger in the cheapest possible way, while at the same time
providing a taste for elegance
elegance and comfort unknown to previous
previous
35
35
democratic phenomenon
phenomenon
generations. Thorstein Veblen called this democratic
"pecuniary
cannons
of
taste,"
meaning
that
all
people
"pecuniary cannons of taste," meaning that 36all people were equal if
goods. 36
to acquire
they had the money to
acquire certain
certain goods.
supra note 24,
LEACH, supra
WHITAKER, supra
27. HENDRICKSON,
HENDRICKSON, supra
supra note 26,
26, at 30-31; WHITAKER,
supra note 23, at 1;
I; LEACH,
at 16.
1; HENDRICKSON,
28. WHITAKER,
WHITAKER, supra
supra note 23, at I;
HENDRICKSON, supra
supra note 26,
26, at 30-31.
31.
supra note 26,
supra note 25, at 113; HENDRICKSON,
29. BARTH,
BARTH, supra
HENDRICKSON, supra
26, at 3J.
23, at 137.
137.
30.
30. WHITAKER,
WHITAKER, supra
supra note 23,
31.
supra note 25, at 115.
3J. BARTH,
BARTH, supra
32. Id.
Id. at 123.
130; see also
also JONATHAN
33.
Id. at 130;
33. Id.
JONATHAN RABAN,
RABAN, HUNTING
HUNTING MISTER HEARTBREAK:
HEARTBREAK: A
A DISCOVERY OF
supranote 24,
(Harpercollins Publishers
AMERICA
AMERICA 51 (Harpercollins
Publishers 1991); LEACH,
LEACH, supra
24, at 20.
34.
34. BARTH,
BARTH, surpa
surpa note 25,
25, at 133.
supra note 26,
35.
35. SCHLERETH, supra
26, at 149.
149.
36. Id.; BARTH,
BARTH, supra
supra note 25,
25, at 133.
7
262
GEORGIA STATE
STATE UNIVERSITY
UNIVERSITY LAW
GEORGIA
LAW REVIEW
[Vol.
[Vol. 26:2
26:2
became "meccas
"meccas of consumerism and
Department stores became
and
materialism," pioneering the
the art
art of commercial displays and
and taking
stronger, and clearer
clearer
advantage of new technology for larger, stronger,
shop without even entering a
windows, allowing pedestrians to shop
37
37
another popular phenomenon of this era,
era,
store. Like World's Fairs, another
stores used exciting interior designs, fashion shows,
department stores
38
merchandise. 38
sell merchandise.
to sell
carnivals to
and carnivals
fairs, and
parades, fairs,
holiday events, parades,
39
Christmas 39
commercialize Christmas
to commercialize
learned to
even learned
stores even
Urban department stores
and persuaded the federal government to move Thanksgiving one
week earlier in order to increase the time available for Christmas
shopping.440°
By the late 1800s, a new world of retailing was created as
department stores created a new market position as universal
41
goods. 41
providers of substantially all goodS.
The most prominent
department
stores
emerged
from
department
small peddler shops and became
some of America's largest businesses. Department stores required
required
new building materials
materials because
because of their enormous size, glass
technology for giant display windows, and innovations in heating and
cooling systems for the comfort
other
comfort of customers,
customers, among other
architectural
advancements.
The
store
layouts
made
shopping
easier
architectural advancements.
layouts
shopping easier
social and economic
economic
for consumers
consumers and allowed persons
persons of different social
backgrounds to mix. The department
backgrounds
department store also offered new customer
customer
services
never
before
seen
services never before seen such as restaurants,
restaurants, restrooms,
restrooms, reading
rooms, home delivery, wrapping
services,
late
and
dependable
wrapping services,
dependable store
hours, new
merchandise displays, and other
other improvements.
improvements.
new types
types of merchandise
42
of dry
pioneers
early
the
to
debt
creative
a
While owing creative debt to the early pioneers of
dry goods
goods42
stores, John
John Wanamaker
Wanamaker in Philadelphia,
Philadelphia, Marshall
Marshall Field
Field in
in Chicago,
Chicago,
37.
148.
37. SCHLERETH,
SCHLERETH. supra
supra note
note 26, at
at 148.
38. Id.
Id.
39.
39. See id,
id. at
at 144.
144. To
To promote
promote shopping,
shopping, department
department stores
stores resurrected
resurrected dormant
dormant holidays
holidays and
and
invented
Id. at
at 161.
161.
invented new
new ones.
ones. Id.
40.
40. Tim
Tim Feran,
Feran, Lazarus
Lazarus Worthy of
of Loving Farewell,
Farewell, COLUMBUS
COLUMBUS DISPATCH,
DISPATCH, Aug.
Aug. 9,
9, 2004,
2004, at
at IC;
Greg
Greg Saitz,
Saitz, Back
Back to
to Black:
Black: The Legend of
ofthe
the Day
Day After
After Thanksgiving,
Thanksgiving, and
and How
How It Became
Became the Main
Main
Event
for Retailers
Eventfor
Retailers andHoliday
and Holiday Shoppers, NEWARK
NEWARK STAR-LEDGER,
STAR-LEDGER, Nov.
Nov. 27,2003,
27,2003, at
at 63.
63.
41.
41. See
See LEACH,
LEACH, supra
supra note
note 24,
24, at
at 23-24.
23-24.
42.
The term
term "dry
"dry goods"
goods" has
has long
long been
been associated
associated with
with the
the items
items carried
carried by
by department
department stores.
stores. See
See
42. The
HENDRICKSON,
HENDRICKSON, supra
supra note
note 26,
26, at
at 30.
30. Dry
Dry goods
goods stores
stores take
take their
their name
name from
from the
the practice
practice of
ofearly
early New
New
England
England merchants
merchants to
to sell
sell "wet
"wet goods"
goods" or
or nun
rum on
on one
one side
side of
of the
the store,
store, and
and "dry
"dry goods"
goods" or
or bolts
bolts of
of
8
2010)
20101
AN ANTITRUST
AN
ANTITRUST QUANDARY
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263
Rowland Hussey Macy
Macy in New York were
were the originators of the
and Rowland
American
American department
department store, creating enduring legacies
legacies that continue
continue
43
day.43
to this day.
C.
Early Department
Department Stores
Stores
C. Growth of the Early
44
1861. 44
in 1861.
first store
his first
Wanamaker opened his
John Wanamaker
store in
in Philadelphia
Philadelphia in
What started as a small thirty-by-eighty foot shop became
became the largest
largest
45
45
men's store in the city within seven
seven years. As Wanamaker's
Wanamaker's
expanded over the years, its founder instituted some of the policies
satisfaction
for which he would be famous, including a complete
complete satisfaction
46
46
Wanamaker's was not the first store to
guarantee on all items sold. Wanamaker's
institute a no-haggle
no-haggle pricing
pricing 47system, but it was the first to adopt the
large
a
system on such
such a large scale.
scale. 47
1876, Wanamaker
In 1876,
Wanamaker opened his flagship store, portions of which
Macy's. 48 On opening
opening day, more than
still stand today, albeit as a Macy's.48
contained more
seventy thousand people entered the store, which contained
stools "for the
counters,
1,400
than three acres of retail space, 129
129
convenience of shoppers,"
shoppers," stained
stained glass skylights, and great gas
convenience
49
49
chandeliers. This early store contained a version of the racetrack, or
chandeliers.
circular
50
circular pathway, design still used by most department stores today.5°
term wet
calico on the other side of store. Id.
Id. The tenn
wet goods appears
appears to have slipped from usage, but some
department stores
stores and department store literature
litemture still refers to the items carried therein as dry goods.
See id.
Seeid.
supra note 26,
Id. at 38, 61;
43. Id.
61; SCHLERETH,
SCHLERETH, supra
26, at 147; Jane M. Von Bergen, Retail Revolution ofHis
Shoppers Is
Own: John
John Wanamaker's
Wanamaker's Stores Are Long Gone.
Gone. But His Influence on American Shoppers
Palace" opened in
Incalculable, PHILADELPHIA
PHILADELPHIA INQUIRER, Nov. 21,
Incalculable,
21, 1999. A.T. Stewart's
Stewart's "Cast-Iron
"Cast-Iron Palace"
practices found at Paris'
New York City in 1862 and introduced
introduced to American shoppers the pmctices
Paris' Bon March6,
Marche,
customers, a fixed price policy
including
policy with no haggling, departmentalized
departmentalized
including special attention to female customers,
centralized management, an impressive physical structure, shopping amenities such as organ
stock, centralized
organ
bought the Cast-Iron Palace
music, and basement sales. John Wanamaker
Wanamaker bOUght
Palace from Stewart's
Stewart's beneficiary,
beneficiary,
supranote 22;
Judge Henry Hilton, in 1896. See generally
generally FERRY,
FERRY, supra
22; BARTH, supra
supra note 25.
25.
supra note 26,
44. HENDRICKSON,
HENDRICKSON, supra
26, at 76.
Id.
45. Id.
Id. at 77.
46. Id.
16 (Univ. of North
47. HOWARD E. COVINGTON,
COVINGTON, JR., BELK: A CENTURY
CENTURY OF RETAIL LEADERSHIP 16
Carolina
Carolina Press 1988).
1911, portions of the
48. HENDRICKSON,
HENDRICKSON, supra
78. Though the store was rebuilt in 1911,
Id. at 79.
original
original store
store remain, and the rebuilt store occupies the same location as the 1876 store. Id.
79.
Id. at 78.
49. Id.
Store: Headed
Headedfor the Dustbin
50. See id.
id. at 78; see also
also generally
generally Sway, RoxAnna, The Department
Department Store:
Dustbin
1, 2003, at 1.
Re-Energize?, DISPLAY &
or Ready to Re-Energize?,
& DESIGN IDEAS, June 1,2003,
I.
9
264
[Vol. 26:2
[Vol.
openings like this became celebrated national events; when
Grand openings
Wanamaker
1911, President
Wanamaker rebuilt the store in 1911,
President William
William Howard
Howard Taft
51
store.
the store. 5I
dedicated the
Wanamaker's innovations extended
extended to employees as well. He
Wanamaker's
completion of their work;
made cash payments
payments to employees
employees upon completion
hired women; gave half of Saturday
Saturday off; instituted bonuses,
insurance, pensions, health and recreational facilities; and paid
52
competitive
wages. 52
competitive wages.
53
One of Wanamaker's
Wanamaker's peers was Marshall Field in Chicago.53
While Field created the world's first bargain-basement
department
bargain-basement department
store, the downtown
"grandest of the
downtown Chicago store was known as the "grandest
emporiums. ' 54 The store's south atrium, one of three in the
grand emporiums.,,54
store, was designed and built by Louis Comfort Tiffany and includes
55
feet. 55
6,000 square
covering 6,000
a glass mosaic covering
square feet.
Business was good for Marshall
Marshall Field; when he died in 1906,
1906, he
left an estate worth more than
$120 million-more than $2.6 billion
than $120
56
in today's dollars. 56 He endowed Chicago's natural history museum,
51.
52.
supra note 26, at 80. Wanamaker
52. HENDRICKSON,
HENDRICKSON, supra
Wanamaker was later appointed
appointed Postmaster
Postmaster General
General of the
Id.; LEACH, supra
United States. !d.;
supra note 24,
24, at 116. One of his most important
important acts, which
which benefited
benefited
millions
well as department
department stores,
stores, was to institute direct and free delivery of mail to
millions of Americans, as we1l
all
supranote 26,
a1l homes in the United States
States in 1896.
1896. HENDRICKSON, supra
26, at 80,
80, 210.
53.
small cramped
cramped shop
53. Unlike most of the merchant princes, Field did not start with a sma1l
shop of his own.
HENDRICKSON,
& HERMAN
HENDRICKSON, supra
supra note 26, at 82; LLOYD WENDT &
HERMAN KOGAN, GIVE THE LADY
LADY WHAT
WHAT SHE
WANTS!
"The A.T. Stewart
WANTS! 47-55, 62-64 (Rand McNally
McNa1ly &
& Co. 1952). Potter Palmer, known
known as ''The
Stewart of the
West," sold his store
store to Field and a junior partner
partner in 1868.
83. Field
Field
1881. Id.
Id.at 86.
86. The store grew
grew bigger and stronger, despite the
bought out his partner, Levi Leiter, in 1881.
setback of burning
1871. Id.
Id at 85. Field eamed
earned the loyalty
brief setback
burning to the ground
ground in Chicago's Great Fire
Fire of 1871.
of his employees by posting a sign in the ruins of his store telling
telling the staff where they could pick up
their pay. Id.
Id.
54.
82. See also LEACH, supra
supra note 24, at 27-28.
HENDRICKSON, supra
supra note 26, at 82. Some
consider it the most architecturally
architecturally significant
55. HENDRICKSON,
Some consider
& Joanna Ramey,
department store in the United States. David Moin,
Moin, Vicki M. Young, Meredith
Meredith Derby
Derby &
Macy's Coast-to-Coast:
Forges New Retail Giant,
Macy's
Coast-to-Coast: Federated-May Deal
Deal Forges
Giant, WOMEN'S
WOMEN'S WEAR
WEAR DAILY, Mar.
1,
2005, at I.
1. Field's also amassed an art collection,
Rockwell's ''The
"The Clock Mender."
Mender."
1,2005,
c01lection, including Norman
Norman Rockwe1l's
William Mullen, Times Heals
Chains Comes to an End
End with
Heals Rift Over aa Rockwell: Tiff Between 2 Retail Chains
Donationof
Painting The
'The Clock
Clock Mender' to the Chicago
Chicago History
History Museum, CHI. TRIB.,
TRIB., Sept. 27,
the Donation
of the Painting
2006, Metro,
3. When Macy's bought MarshalI
Marshall Field's it found that the famous painting
2006,
Metro, at 3.
painting was missing
and began
began aa public
public argument
argument with Target,
the former owner, to get the painting back. Id.
Id Target finally
and
Target, the
donated the painting to the Chicago
Chicago History Museum.
Museum. Id.
Id. See also LEACH,
LEACH, supra
Is aa Dollar
Worth,
56. U.S. Federal Reserve Bank for Minneapolis,
Minneapolis, What Is
Dollar Worth,
http://www.minneapolisfed.org/communityeducation/teacher/calc (last visited Aug. 17,
2008). See also
also
http://www.minneapolisfed.orglcommunity_educationlteacher/calc
17,2008).
WENDT &
supranote 53, at 257.
WENDT
& KOGAN,
KOGAN, supra
10
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20101
AN ANTITRUST
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265
also
which was renamed
renamed the Field Museum of Natural History, and also
of
donated the land that comprises the central core of the University of
57
Chicago campus. 57
Chicago
("R.H.") Macy was born on Nantucket
Rowland
Rowland Hussey ("R.H.")
Nantucket Island to a
58
1822.58 He left on a whaling ship at age fifteen and
Quaker
Quaker family in 1822.
returned with a red star tattooed on his hand-the red star that now
returned
59 After
Macy
Inc. 59
of Macy's, InC.
serves as the trademarked logo ofMacy's,
whaling, Macy
tried careers in retail, the stock market, and real estate before opening
opening
60
a store in Manhattan
Manhattan in 1858.
1858.60
twenty-foot
R.H. Macy's small store was sixty feet deep with a twenty-foot
Fourteenth Street. 6611 With no
front and located
located on Sixth Avenue
Avenue near Fourteenth
money, he financed the store with loans of $20,000 and instituted the
policies Macy became
became known for: selling at fixed, marked
marked
basic policies
prices; selling at lower prices than other stores; buying and selling for
62 The store was a success and
cash only; and advertising vigorously.
vigorously.62
and
63
63
storefronts.
eleven
soon grew to occupy eleven storefronts.
confidence in his son's business skills; instead, two
Macy had little confidence
years
years after opening
opening his store, Macy
Macy hired and came to depend on one
of the first women in American
American department
department stores, a distant relative
relative
64
named
Margaret Gretchell.64
1877,
named Margaret
Gretchell. When Macy died suddenly in 1877,
FIELD'S 130-33 (John
AXEL MADSEN, THE MARSHALL FlEW'S
57. Id.
Id. at 176; AxEL
(John Wiley
Wiley &
& Sons,
Sons, Inc. 2002); A
Builds a University,
University, U. OF CHI., http://www.lib.uchicago.edu/e/spcl/centcat/city/citychl_03.html
City Builds
http://www.lib.uchicago.eduie/spcVcentcatJcity/citychl_03.html
Field Document, U. OF
Marshall Field
(last visited
visited Aug.
Aug. 17,
17, 2008);
2008); Marshall
OF CHI.,
CHI., http://www.lib.
http://www.lib.
17, 2008).
uchicago.edu/e/spcVcentcat/city/cityimg08.html (last visited Aug. 17,2008).
uchicago.eduie/spcVcentcatJcity/city_img08.html
58.
58. FERRY, supra
supra note
note 22,
22, atat 55;
55; HENDRICKSON, supra
Department Store:
Store: The Evolution
Evolution of 75
59. Id.
/d. See generally
generally L.H. Robbins,
Robbins, The City Department
75 Years, N.Y.
Waters, THE
Federated Navigates
TIMES, Feb. 12, 1933;
TIMEs,
1933; Rob
Rob Lenihan,
Lenihan, Federated
Navigates Choppy Waters,
THE STREET.COM,
STREET. COM,
http://www.thestreet.com/newsanalysis/retail/10343526.html (last visited
http://www.thestreet.comlnewsanalysislretaiVI0343526.html(last
visited Aug. 17, 2008);
2008); Macy and
http://www.britannica.com/EBchecked/
Company,
Company, Inc., BRITANICA
BRITANICA CONCISE,
CONCISE, available
available at http://www.britannica.comlEBcheckedl
topic/355535/Macys (last visited
visited Aug.
Aug. 17, 2008).
2008). Over the
the course of
of its history, Macy's
Macy's has
has sometimes
used aa whale in its
its logo,
logo, or referred to promotion
promotion as aa "whale of aa sale," perhaps
perhaps hearkening back to its
its
founder's early
early career. During the Cold
Cold War,
War, Macy's was
was encouraged
encouraged to drop
drop the
the red star
star inin the
the face
face of
of
criticism that
that itit was aa communist
communist symbol; Macy's refused,
refused, suggesting
suggesting itit was aa guiding
guiding star or aa brilliant
brilliant
http://www.forgotten-ny.com/
supra note 26,
star of hope.
hope. HENDRICKSON, supra
26, at 62-63; http://www.forgotten-ny.coml
15, 2010).
SLICES/macy/macy.html
SLICES/macy/macy.html (last
(last visited
visited Feb. 15,2010).
supranote
60.
60. FERRY, supra
note 22,
22, at 56-57; HENDRICKSON, supra
supra note
note 26,
26, atat 62.
62.
HENDRICKSON, supra
supranote
61.
61. HENDRICKSON,
note 26, at 63.
63.
until 1939.
1939.
22, at
at 57.
Macy's operated
operated on
on aa cash-only
62. Id.
Id. at
at 63-64;
63-64; FERRY,
FERRY, supra
supra note
note 22,
57. Macy's
cash-only basis
basis until
HENDRICKSON,
HENDRICKSON, supra
64.
HENDRICKSON, supra
supra note
note 26,
26, at
at 64.
63.
63. HENDRICKSON,
supra note 22,
Id. at 65; BARMASH,
64. /d.
BARMASH, supra
supra note 24, at 23; FERRY,
FERRY, supra
22, at 57-58.
11
266
(Vol.
[Vol. 26:2
65
store.65
the store.
acquired the
nephews acquired
Gretchell's
Gretchell
's husband and one of Macy's nephews
Over the next few years, the store changed hands several times, each
66
relatives. 66
Macy's relatives.
of R.H. Macy's
one ofR.H.
another one
time being purchased by another
The last of these Macy's family owners, Charles Webster, became
the sole owner of Macy's within a short period of time, but Webster
Webster
67
experience and retailing knowledge.67
A few years before his
lacked experience
death, R.H. Macy leased the 2,500 square foot china department to
emigrated to the United States
Lazarus Straus, a Jewish peddler who emigrated
68
1852.68 It became Macy's most profitable
from Germany in 1852.
profitable
69
department, with sales reaching twenty percent of the store's tota1.
total.69
1887, and in 1896, Lazarus's
Webster offered
offered Straus a partnership
partnership in 1887,
Lazarus's
70
two sons, Isidore and Nathan, bought Webster out. 70 Although the
store still carries
carries Macy's name today, Macy's was owned by the
Straus
family
for decades-far
decades-far longer than it was owned
Macy
owned by the Macy
Straus 1
7
family.71
family.
The Straus family achieved national prominence in that era. At the
same time they were consolidating
consolidating their control over Macy's, Isidore
and Nathan
were
also
taking over Brooklyn's grand
Nathan
grand department
department store,
Wechsler
Wechsler & Abraham, later renamed
renamed Abraham
Abraham & Straus (or as
72
Brooklynites
Brooklynites knew it, A&S).
A&S).72
65.
66.
67.
68.
69.
FERRY,
FERRY, supra
Id.
Id. at 58.
BARMASH,
supranote
BARMASH. supra
note 24,
24, at 24. See generally
generally HENDRICKSON,
HENDRICKSON, supra
supra note
note 26,
26, at 66.
66.
BARMASH,
supranote
supranote 22,
BARMASH. supra
note 24,
24, at 24; FERRY,
FERRY, supra
22, at 59.
BARMASH,
supranote
BARMASH, supra
note 24,
24, at 25-26. See generally
HENDRICKSON, supra
66.
70. Id.; FERRY,
FERRY, supra
supra note 22, at 59. Lazarus
Lazarus Straus died
died in 1888. BARMASH.
BARMASH, supra
71.
family's
71. See generally
generally BARMASH,
BARMASH, supra
supra note 24. Some
Some have theorized that as long
long as the Straus family's
name
department store-Abraham
store-Abraham & Straus-the
Straus-the family
family did
did not feel it
name was
was immortalized
immortalized in
in one
one department
necessary
necessary to
to change
change the
the name
name of
of Macy's.
Macy's. Id.
Id. Abraham
Abraharn & Straus,
Straus, however,
however, was
was acquired
acquired by and renamed
renamed
Macy's
Macy's in
in 1995.
1995. http://www.macysinc.com/AboutUs/History/MacysAHistory.aspx
http://www.macysinc.comlAboutUslHistorylMacysAHistory.aspx (last
(last visited Feb. 15,
15,
2010).
72.
at 25-26.
72. LEACH,
LEACH, supra
supra note
note 24,
24, at
25-26. Abraham
Abraham Abraham
Abraham was
was born
born in New
New York City
City in 1843
1843 into a
Jewish
Jewish family,
family, and
and the
the son
son of
ofaa man
man who
who had emigrated
emigrated from
from Germany.
Germany. FERRY,
FERRY, supra
supra note 22, at 64. He
He
left
left school
school at
at age
age fifteen
fifteen to work
work in a Newark
Newark dry
dry goods store along with
with Benjamin
Benjamin Altman
Altman (who
(who
founded
Altman's department
department store)
store) and Lyman
Lyman Bloomingdale
Bloomingdale (co-founder
(co-founder of
of Bloomingdale's).
Bloomingdale's). Id.
Id.
founded B. Altman's
Wechsler
Wechsler sold
sold his
his interest
interest in
in Wechsler
Wechsler & Abraham
Abraham in 1893 to the
the three
three Macy's
Macy's partners,
partners, Isidore
Isidore and
and
Nathan
Webster, changing
Nathan Straus,
Straus, and
and Charles
Charles Webster,
changing the
the name
name of the
the store
store to Abraham
Abraham & Straus. Id.
Id. at 65.
65. The
The
Strauses,
Strauses, separately,
separately, took over
over the
the A&S
A&S china
china department, as they
they had done
done at
at Macy's.
Macy's. Id;
/d.; see
BARMASH,
at 26-27.
BARMASH. supra
supra note
note 24,
24, at
26-27. Other
Other department
department store
store founders
founders unofficially
unofficially apprenticed
apprenticed at these
these
great
at Wanamaker's
Wanamaker's in
in New York City
City while
while earning
earning his MBA
MBA at
at
great stores;
stores; William
William Dillard
Di\lard worked
worked at
Columbia--that
Columbia-that job,
job, as
as well
well as
as visits
visits to Macy's
Macy's and Gimbels,
Girnbels, provided
provided him
him with
with examples
examples of
of how
how
prosperous
LEON JOSEPH
JOSEPH ROSENBERG,
ROSENBERG, DILLARDS
DILLARDS 77 (Univ. of
of Arkansas
Arkansas Press
Press 1988).
1988).
prosperous stores
stores operated.
operated. LEON
12
2010)
20101
AN ANTITRUST
ANTITRUST QUANDARY
QUANDARY
AN
267
Isidore died in 1912 while sailing
sailing on the maiden
maiden voyage
voyage of
of
Isidore
73 and
Titanic,73
and Nathan
Nathan continued
continued to run the business.
business. Although
Although
Titanic,
Macy's went public in 1922,
1922, the Straus
Straus family continued
continued to be
be
Macy's
corporate officers,
officers, and
and directors until Macy's
Macy's
involved as investors, corporate
involved
74
74
private in 1985.
1985.
was taken private
Macy's flourished under Straus
Straus family control. In 1902, Macy's
Macy's
Macy's
moved uptown
uptown to Manhattan's
Manhattan's Herald
Herald Square into a new
new nine-story
nine-story
moved
75
75
The Herald
Herald
store featuring thirty-three
thirty-three elevators
elevators and four escalators.
escalators. The
store
Square store
store cost $4.5 million, which
which was aa huge sum at the time, but
Straus family was considered
considered such a good credit risk that neither
neither
the Straus
76
76
collateral for the loan. Additions
Macy's nor A&S had to be used as collateral
Macy's
occupied the entire
1930s it occupied
Macy's so that by the early
early 1930s
were made to Macy's
Broadway to Seventh
Seventh Avenue,
Avenue, and from Thirty-Fourth
block from Broadway
Street to Thirty-Third
Thirty-Third Street, making it the largest
largest store in the
77
77
world.
Macy's opened branches
branches in Brooklyn
Brooklyn and in the New York City
suburbs, and also acquired
acquired other
other department store
store chains
chains in Toledo,
Francisco
Ohio (1923);
(1929); San Francisco
(1924); New Jersey (1929);
(1923); Atlanta (1924);
(1945);
(1947).78
(1945); and Missouri (1947).78
ambassador to
Oscar Straus, Lazarus'
Lazarus' youngest son, graduated from law school and was appointed
appointed ambassador
Turkey by President
President Grover Cleveland-a
Cleveland-a controversial move because
because Oscar was Jewish. BARMASH,
BARMASH.
of
Secretary of
supra
President Theodore
Theodore Roosevelt
Roosevelt appointed
appointed Oscar
Oscar as Secretary
supra note 24, at 29-30. In 1906, President
appointed to a cabinet position. BARMASH, supra
Commerce and Labor; Oscar was the first Jew
Jew to be appointed
supra
note 24, at 30.
Id. Isidore refused to enter a lifeboat because there was
73. Jd
Id. Isidore died along
along with his wife Ida. Jd.
was
room for women
women and children;
children; Ida refused to go because
because she had been married
married to Isidore
Isidore for
not enough room
of Macy's flagship
Id. A plaque
forty years and saw no reason to end it at that moment. Jd
plaque on the 13th floor ofMacy's
Id.
store in Manhattan commemorates
commemorates their courage, and Straus Hall at Harvard memorializes
memorializes them. ld
Actors Lew Raven and Elsa Palter play Isidore and Ida in James Cameron's blockbuster film, TITANIC
http://www.imdb.com/title/
Intemet Movie Database, Titanic,
(Paramount Pictures 1997). The Internet
Titanic, http://www.imdb.comltitle/
17, 2008).
tt0120338/fullcredits#cast (last visited Aug 17,
ttOl20338/fullcredits#Cast
BARMASH, supra
74. See BARMASH.
supra note 24, at 19, 126, 132.
75. HENDRICKSON,
HENDRICKSON, supra
76. BARMASH,
BARMASH, supra
supra note 26, at 66-67. Macy's even won an antitrust lawsuit during this period.
77. HENDRICKSON,
HENDRICKSON, supra
publishers' advertised prices on books, Macy's
Charging twenty to twenty-five percent less than publishers'
Macy's was
publishers' association of devaluing the copyright on the books it sold. Straus and
accused by a book publishers'
accused
Supreme Court, but
(1913). Macy's prevailed in the Supreme
Straus
Publishers' Assoc., 231 U.S. 222, 229 (1913).
Straus v. Am. Publishers'
contributed to Macy's singular decision to develop private labels for merchandise
struggle may have contributed
the struggle
merchandise
at 32.
32.
supranote 24, at
generallyBARMASH, supra
independence. See generally
to give it greater pricing independence.
supranote 26, at 69.
Id.; HENDRICKSON,
HENDRICKSON, supra
78. !d.;
13
268
LAW REVIEW
UNIVERSITY LAW
[VoL
[Vol. 26:2
Wanamaker's,
remarkable for their
Wanamaker's, Field's, and Macy's were remarkable
success, growth, and longevity, but they were not alone. David May,
emigrated to the United
the founder of May Department Stores, emigrated
79 By 1914, May
States in 1863 with less than one dollar to his name. 79
owned department
department stores
in Denver; Cleveland; Pittsburgh;
Pittsburgh; Akron,
8o
Louis. 80
St. Louis.
Ohio; and St.
Adam Gimbel, who founded the store across the street from
Macy's, was a German immigrant peddler
peddler who first opened a trading
81
8
1
post in Vincennes, Indiana. His success
Milwaukee,
success led to stores in Milwaukee,
82 Gimbels was
City.82
Philadelphia, and finally, in 1910, New York City.
1982, which shuttered
sold to British American Tobacco in 1982,
shuttered the chain
chain
in 1986. Many of the former Gimbels stores that remain standing
standing are
now Macy's.
Morris Rich, a Jewish immigrant
immigrant from Hungary, opened his first
1867, just three years after General Sherman
Sherman had
store in Atlanta in 1867,
83
83
caveat emptor ruled,
burned the city to the ground. At a time when caveat
guaranteed customer
Rich's guaranteed
customer satisfaction
satisfaction and treated customers
customers with
84
southern hospitality.84
contributions, the Rich
hospitality. Among many other contributions,
85 Although
school.85
family endowed Emory University's business
business schoo1.
1924 on, the Rich
competitor from 1924
Rich's had faced Macy's as a competitor
which, in 2003,
combined the
2003, combined
family sold out to FDS in the 1970s,
86
86
Atlanta.
in
stores
Rich's and Macy's
Macy's stores in Atlanta.
Almost every city in America had a local department
department store that
development and character. And some institutions
contributed to its development
department stores outlived the department
begun by department
department stores
themselves. Dayton's department store of Minneapolis
Minneapolis turned its
79. HENDRICKSON,
note 26,
26, at
at 110.
79.
HENDRICKSON, supra
supra note
110.
LEACH, supra
supra note 24,
80. LEACH,
24, at 25.
25.
81.
note 26,
26, at
at 71.
71.
81. HENDRICKSON,
HENDRICKSON, supra
supra note
Id. at 72.
82. Id.
72.
83.
BAKER, RICH'S
OF ATLANTA:
THE STORY
STORY OF
A STORE,
STORE, SINCE
SINCE 1867,
11
83. HENRY
HENRY GIvENS
GIVENS BAKER,
RICH'S OF
ATLANTA: THE
OF A
1867, atat I,1, II
(Univ. of Georgia 1953).
84.
supranote
26, at
at 97.
97.
84. HENDRICKSON,
HENDRICKSON, supra
note 26,
85.
at 95-96.
Goizueta Business
History, Emory
University,
85. Id.
Id. at
95-96. See also Goizueta
Business School History,
Emory University,
http://www.goizueta.emory.edu/aboutgoizueta/goizueta
throughthedecades.html (last visited
visited Aug.
17,
http://www.goizueta.emory.edu/aboutgoizuetalgoizueta_through_the_decades.html(last
Aug. 17,
2008).
86.
(last visited
Feb. 15,
15, 2010);
86. http://www.macysinc.com/AboutUs/History/1979.aspx
http://www.macysinc.comlAboutUslHistory/1979.aspx (last
visited Feb.
2010);
http://www.macysinc.comAboutUs/History/present.aspx
(last visited
2010).
http://www.macysinc.comlAboutUslHistory/present.aspx(last
visited Feb.
Feb. 15,
15,2010).
14
AN ANTITRUST
ANTITRUST QUANDARY
QUANDARY
AN
2010)
20101
269
basement into the "Downstairs
"Downstairs Store,"
Store," which
which set
set out
out to
to be
be aa "quality
"quality
basement
87
discounter.,,87 The "Downstairs
"Downstairs Store"
Store" was
was eventually
eventually turned
turned into
into a
a
discounter."
88
"Target."
called
Dayton's
that
store
freestanding
and
separate
and
freestanding
store
that
Dayton's
called
"Target.,,88
separate
"Automatic Bargain
Similarly, Filene's
Similarly,
Filene's of
of Boston
Boston created
created the
the "Automatic
Bargain
Basement" where prices were
were automatically
automatically reduced
reduced the
the longer
longer items
items
Basement"
89
remained in stock. 89
remained
Membership stores,
stores, well-represented
well-represented today
today by
by Costco,
Costco, B.J.'s
B.J. 's
Membership
the
antitrust
Wholesale
Club,
have
their
in
the
antitrust
in
their
roots
have
Club,
Sam's
and
Club,
Wholesale
combat the
laws
laws enacted
enacted in
in part
part to
to combat
the rising
rising popularity
popularity of
of department
department
stores.
stores. In
In 1936,
1936, with
with a
a populist
populist intent
intent to
to punish
punish all
all large
large department
department
passed
their enormous
stores
because of
enormous power,
power, Congress
Congress passed the
the MillerMillerof their
stores because
9o
90
"fair trade"
enact "fair
Tydings
Miller-Tydings allowed
allowed states
states to
to enact
trade"
Act. Miller-Tydings
Tydings Act.
states to
legislation,
legislation, effectively
effectively allowing
allowing individual
individual states
to overrule
overrule the
the
Co. v.
Miles Medical
Supreme Court's
Court's decision
decision in
in Dr.
Dr. Miles
Medical Co.
v. John
John D.
D. Park
Park
Supreme
91
retail
with retail
& Sons.
Sons. Co.,
CO.,91 and allowing
allowing manufacturers
manufacturers to
prices with
to fix prices
&
92
outlets. 92
87.
87.
117
LAURA ROWLEY,
ROWLEY, ON
ON TARGET:
TARGET: How
TIlE WORLD'S
HOTTEST RETAILER HIT A
A BULL'S
BULL'S EYE
EYE 117
WORLD'S HOTTEST
HOW THE
LAURA
2003).
& Sons, Inc. 2003).
(John Wiley &
STORE...
TEICHOLZ, LIKE No
& TOM TEICHOLZ,
117-18. See also
MARVIN TRAUB &
No OTHER STORE
... : THE
also MARVIN
88. Id.
Id. at 117-18.
BLOOMINGDALE'S LEGEND
LEGEND AND THE REVOLUTION
REVOLUTION IN
AMERICAN MARKETING 266 (Times
IN AMERICAN
BLOOMINGDALE'S
continued in the department store
BooklRandom House 1993). Dayton's
Dayton's continued
store business for many
many years,
Book/Random
eventually decided it had better
acquiring
acquiring Hudson's of Detroit and Marshall
Marshall Field's, but the company
company eventually
better
"Target" and selling its
prospects with Target,
Target, changing the name of the corporation to "Target"
growth prospects
117. Dayton
department
ROWLEY, supra
Dayton Hudson was not the only
only store to
department stores to May. ROWLEY,
successful. Rich's created
create a discount
discount chain, although
although it may have been the most successful.
created Richway,
create
also
Id. See also
Goods acquired Caldor, FDS created
created Gold Circle,
Circle, and May created Venture. Id
Associated Dry Goods
Associated
266-67. Richway, Caldor, and Gold
TRAUB,
TRAUB, supra
supra note 88, at 266--67.
Gold Circle were liquidated
liquidated during
during the
Campeau debacle
debacle and Venture ceased operations in the late 1990s in the face of heavy competition
competition from
Campeau
Target
Target and Wal-Mart. Id.
Id
Although Filene's Department Store is now owned by
129-30. Although
Basement," was spun off as a separate entity during the
"Filene's Basement,"
Macy's, the basement store, now "Filene's
Filene's Basement,
Basement, Retail Ventures, Inc.,
RVI - Filene's
1980s and continues to operate independently. RVI
17,
visited
http://www.retailventuresinc.comlindex.jsp
(last
Aug.
17,
2008);
http://www.retailventuresinc.com/index.jsp
15,
http://www.retailventuresinc.comiPressReleasesl2009IRVI]B
http://www.retailventuresinc.com/PressReleases/2009/RVI FB_ DISPOSITION.pdf (last visited Feb. 15,
Filene's Basement).
2010) (announcing RVI's disposal of
ofFilene's
(1937).
Stat. 673, 693 (1937).
tit. 8, 50 Stat.
90. Miller-Tydings Act, ch. 690, tit.
1975, Congress passed
(1911). In 1975,
& Sons Co., 220 U.S. 373 (1911).
91. Dr. Miles Med. Co. v. John D. Park &
91.
1975, Pub. L. No. 94-145, 89 Stat. 801, repealing Miller-Tydings,
the Consumer Goods Pricing Act of 1975,
and restoring the precedent established
established in Dr. Miles. In 2007, the Supreme Court overruled Dr. Miles.
Whither Dr.
Dr.
Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877 (2007); Mark D. Bauer, Whither
REV. I1 (2007).
CONSUMER L. REv.
Miles?, 20 LOY.
Miles?,
loY. CONSUMER
Remnants of
of
andthe Remnants
Localist Ideology,
Ideology, and
Movement, £ocalist
The Anti-Chain
Anti-Chain Store Movement,
92. Richard C. Schragger, The
L. REv.
REV. 1011,1064-69
1011, 1064-69 (2005).
Constitution,90 IOWA L.
ProgressiveConstitution,
the Progressive
15
270
UNIVERSITY LAW
LAW REVIEW
[Vol. 26:2
(Vol.
Miller-Tydings
Miller-Tydings provided an exemption
exemption whereby
whereby stores that were
sell at a discount to the
open only to members could in fact sell·
93
manufacturer's
suggested
list
price.
E.J. Korvette's, the first of
of
manufacturer's suggested
many predecessors
predecessors to today's Costco, opened in New York City in
1948.94 Membership
Membership was not selective or even pricey: Korvette's
Korvette's
95
asked.
who
anyone
to
cards
membership
free
founder gave out
membership cards to anyone who asked. 95
Merger and
and Consolidation
D. Merger
Consolidation
While Wanamaker's
Wanamaker's and Gimbels operated in (respectively)
(respectively) two or
or
department
three cities, and Macy's and May acquired
acquired a few other department
store groups early on, most department stores remained
remained local
operations. But from the beginning, the entrepreneurial
entrepreneurial merchant
merchant
recognized certain economies
princes recognized
economies of scale could be achieved
achieved by
by
working cooperatively.
1916, A&S,
A&S, Filene's, Dayton's, Emporium, Bullock's, Lazarus,
In 1916,
Lazarus,
Hudson's, Strawbridge
Strawbridge & Clothier, and eighteen other family-owned,
non-competitive
non-competitive department stores in different
different cities formed the
Retail Research
Research Association, which was later renamed Associated
Associated
96
Merchandising
conducted joint
Merchandising Corporation. These organizations
organizations conducted
joint
97
market
research
and
pooled
buying.
Additionally,
A&S
Macy's
market research
A&S and Macy's
arrangements with
shared a buying office in Paris and made joint arrangements
98
factories. 98
93. Miller-Tydings Act 693.
693.
94. ROWLEY, supra
115.
supra note 87,
87, at 115.
95. Id.
[d. The chain stores, such as Sears and Montgomery Ward, also did well in this period, but
followed a business model
supra note 23,
model substantially different
different than the department stores. WHITAKER, supra
STEVENS, LIKE No
No OTHER STORE
IN THE WORLD: THE INSIDE STORY OF
at 2-3. See MARK
MARK STEVENS,
STORE IN
BLOOMINGDALE'S 164
also generally
supra
BLOOMINGDALE'S
164 (Thomas Y. Crowell, Publishers 1979); see also
HENDRICKSON, supra
note 26, at 205-50. Until World War I,, Sears and Wards
Wards were solely catalog businesses,
businesses, selling mostly
to customers
downtown
customers in rural areas. Id.
[d. Even after opening retail stores, the chains rarely chose downtown
locations, had
locations,
had inventory managed centrally
centrally without any discretion given
given to store
store managers
managers for local
local
tastes, and specialized
specialized in mass-produced
Id. It is unclear whether
J.C.
mass-produced goods rather
rather than fashion or style. !d.
whether J.C.
Penney is part
part of the chain store group, the discount store group, or even the department store group;
Penney's has changed its marketing
marketing strategies many times.
FERRY, supra
supra note 87,
96. FERRY,
supra note 22, at 66, 140; ROWLEY, supra
87, at 113; JOHN M. BURNHAM,
BURNHAM, A
VENTURE IN
INRETAILING, FEDERATED'S "FOLEY'S OF HOUSTON" BY MAX
LEVINE, RETIRED CHAIRMAN
MAX LEVINE,
CHAIRMAN
OF THE BOARD,
BOARD, FOLEY'S OF HOUSTON
HOUSTON 29-30
29-30 (The
(The University of Texas at Austin College of Business
Administration Foundation
Foundation Oral Business
Business History Project
Project 1969).
Id.
97. [d.
98. FERRY, supra
65.
16
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AN
QUANDARY
AN ANTITRUST
ANTITRUST QUANDARY
271
The department stores cherished
cherished local control and family
ownership, but also recognized
recognized that risks could be spread by
by
affiliating with other stores so the businesses were not entirely
99 Sharing ownership
city.99
dependent on the economy
economy of a single city.
responsibilities
responsibilities also reduced
reduced dependency
dependency on family succession where
generation might not have the talent or interest to run the
a future generation
company. 100
100
In 1929, FDS was formed by the merger of Lazarus
Lazarus of Ohio, A&S,
A&S,
0
later.'
months
few
a
join
to
asked
was
Bloomingdale's
and Filene's; Bloomingdale's was asked to join a few months later. 1011
FDS was originally
originally created
created as "a
"a loosely knit federation
federation of largely
largely
autonomous and quasi-independent
quasi-independent retail entities.,,102
entities." 10 2 The original
holding company
company controlled less than one hundred
hundred percent of the
entities, and its purpose was not to control, but
stock of its constituent entities,
0 3
centralized operations
operations and acquired all of
of
to unify. 103
Over time, FDS centralized
104
1 4
the stock of the member
department stores. 0 Headquarters
Headquarters was
member department
Cincinnati-where it remains today-and
moved from New York to Cincinnati-where
company began expansion
1940s. 10 55 FDS allowed critical
the company
expansion in the 1940s.10
decisions to be made locally, such as choosing fashions, but
centralized accounting and encouraged
encouraged competition between the
centralized
10 6
greatest revenue.
the greatest
produce
to
cities
divisions in different
different cities to produce the
revenue. 106
Joining together, each FDS department
department store could create buying
strength, but by operating independently,
independently, each retained its distinct7
chain.10107
not the
the store
loyalty was
character, so customer loyalty
was to
to the
store and
and not
the chain.
stockholder publication
An FDS stockholder
publication stated the following:
Because the company founders felt that Federated should not
become a chain of identical stores with a common name and
merchandise trying to appeal to a mythical
common merchandise
mythical common
common
99. BURNHAM,
BURNHAM, supra
100. Id.
Id. at 25.
25.
101.
TRAUB, supra
101. TRAUB,
supra note 88,
88, at 41,
41, 264.
264.
102.
STEVENS, supra
4, 66; TRAUB,
102. STEVENS,
supra note 95, at 163-65; FERRY,
FERRY, supra
supra note 22, at 4,66;
TRAUB, supra
supra note 88, at 41,
supranote 96, at 31-33.
264; BURNHAM,
BURNHAM, supra
31-33.
103. BURNHAM,
BURNHAM, supra
104. Id.
Id.
at 33.
33.
105.
Id.
at 33,
105. Id.
33, 45-46.
45-46.
106. Id.
Id.at 33-34,
33-34, 37-38,
37-38, 45-46.
45-46. See STEVENS,
supranote 95,
95, at 168-69.
STEVENS, supra
16~9.
107.
TRAUB, supra
107. TRAUB,
supra note 88,
88, at 41,264.
41, 264.
17
272
GEORGIA STATE
UNIVERSITY LAW
STATE UNIVERSITY
LAW REVIEW
[Vol. 26:2
[Vol.
customer, new merchandising
merchandising concepts have been developed and
and
tailored to the changing needs of the American
American consumer.
Operating control has remained
Operating
remained at the local level where
management
management can closely relate to the needs of customers
customers and
community. Federated believes
believes that a corporation, like an
individual, has a duty to be an involved citizen in the
community. This is even more important for department
department stores.
By the very nature of their presenting total services, department
department
°0
of
elements
major
the
of
most of the major elements of society.
society. lOS
stores are involved with most
The FDS business structure was highly successful and copied by
by
stores-each generally continuing
continuing some
other groups of department stores-each
local control,
control, extending
extending the founding family's involvement, and
making many merchandising
merchandising decisions separately.
Allied Stores included
department stores not invited to
included many of the department
join FDS; the most significant of which was Jordan Marsh in
Boston. °9 May continued to acquire department
allowed
Boston.109
department stores but allowed
their local character
character to continue. Carter Hawley Hale (CHH) grew out
of a combination
combination of stores in California; it later acquired Neiman
Marcus of Dallas, Wanamaker's,
Wanamaker's, and other stores. Similarly,
Mercantile Stores (later acquired by Dillard's), Associated
Mercantile
Associated Dry
Goods (later acquired
acquired by May), and on a smaller scale, Boscov's,
Bon-Ton, Belk, and Proffitt's, followed the FDS model combining
combining a
hodgepodge
of
family-owned
department
stores,
creating
hodgepodge
family-owned department
creating economies
of scale, but decentralizing
decentralizing important management decisions. With
each holding company except
department stores kept their
except Dillard's, department
local name and much of their local character.
From the end of World War II until the 1980s,
1980s, department stores
stores
continued
dealing with the rise of suburbs and malls
continued as they were, dealing
(and often the decline of downtowns),
invariably
downtowns), but almost invariably
profitable and locally
locally focused. By the end of the nineteenth century,
there were 1,000
1,000 department
department stores; by 1950, there were 4,000 stores;
108.
108.
109.
109.
STEVENS,
supra note 95,
STEVENS, supra
95, at 169.
169.
BuRNHAM, supra
supra note 96,
96, at 32-33.
BURNHAM,
18
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AN
ANTITRUST QUANDARY
QUANDARY
AN ANTITRUST
273
Conservative operations in
and in 2002, there were 9,355 stores. 110 Conservative
most department
department stores meant there was little debt, and the often
incredibly valuable downtown real estate was not leveraged. That led
led
American
directly to the most tragic event in the entire
entire history of American
department stores.
department
E.
Robert Campeau
Campeau
E. Robert
A perfect
Street
perfect storm of greed, lust for power, and a liberal Wall Street
department
American department
regulatory scheme
scheme almost led to the end of the American
store in the 1980s. Starting in 1985,
1985, one man, a Canadian
Canadian named
named
Robert Campeau,
Campeau, with less than $200 million in assets, was able to
borrow $11
$11 billion to purchase
department stores in
purchase the majority of department
the United States, plunging them into bankruptcy a short time
thereafter. In his wake,
wake, Campeau left these department
department stores-stores
with which he was unfamiliar until shortly before buying them-with
thousands of layoffs; a required bail-out and foreign ownership
ownership by
by
11
investment bank First Boston; 111' the collapse of the junk bond
market, which depressed profits for all department stores (forced
(forced to
compete with near fire sale prices on merchandise
merchandise sold by the
1 2
bankrupt Campeau department
stores
);
and
a big drop in print and
department
112);
broadcast advertising (hurting newspapers
newspapers and broadcast outlets). The
between FDS and
mess continued for years, resulting in the merger
merger between
Macy's, as well as the permanent
permanent shuttering of flagship downtown
113
including: Atlanta,
the country,
across the
cities
in
stores
department
department
across
country, including:
Atlanta,l13
Seismic Shifts; From
From the Wal-Mart Rollout to the Nationalization
of
110. Jean Palmieri,
Palmieri, Retailing's
Retailing's Seismic
Nationalization of
Macy 's, Retailing
Retailing Has
Has Undergone
UndergoneDramatic
Changes,NEWS
Macy's,
Dramatic Changes,
NEWS REC
REc (Los Angeles, CA), Apr. 24, 2006, at
98.
111. Sarah
That It Is Financially
TIMES, Feb. 24,
Sarah Bartlett, Reassurance
Reassurance by First
First Boston That
Financially Sound,
Sound, N.Y. TIMEs,
111.
Russian Novel, THE ECONOMIST,
1990, at
1990, at 35;
35; CS First
First Boston: As Many Names As
As a Russian
ECONOMIST, Nov. 3, 1990,
90; Steven Greenhouse, Reviving a Humbled
Humbled First
11, 1991,
DI. First
First Boston, N.Y. TIMES,
TiMEs, Mar. 11,
1991, at D1.
Boston was acquired by Credit Suisse and is now known as CS First Boston. Id.
Id.
112. Carol 1.
J. Loomis, The Biggest
Biggest Looniest Deal
DealEver, FORTUNE,
FORTUNE, June 18, 1990, at 48.
GOING FOR BROKE:
113. JOHN ROTHCHILD, GoING
BROKE: How ROBERT
ROBERT CAMPEAU BANKRUPTED
BANKRUPTED THE RETAIL
INDUSTRY,
THE BOOMING EIGHTIES
EIGHTIES TO A
A CRASHING
INDUSTRY, JOLTED THE
TIlE JUNK BOND MARKET, AND BROUGHT
BROUGHT TIlE
CRASHING
HALT 264-65 (Simon &
& Schuster 1991); Melissa Levy, Who Exactly Is Federated
FederatedDepartment
Stores,
Department Stores,
Inc.?, MINNEAPOLIS STAR
STAR TRIB.,
31, 2004, at 10.
ID.
TRIB., May 31,
19
274
UNIVERSITY LAW
LAW REVIEW
[Vol. 26:2
[Vol.
1 7 Los Angeles,118
l6 Newark,
5 Hartford,"
Columbus,115
Hartford,116
Newark,117
Los Angeles," 18
Columbus,"
2
Memphis,119
Memphis,119 Philadelphia, 1120
1 Pittsburgh,121
Pittsburgh, 2 San
San Francisco,122
Francisco, 122 St.
St.
123
1 24 and Washington, D.C.125
125
Petersburg,123
Tampa,124
Fortune
Magazine
Petersburg,
Tampa, and Washington, D.C. Fortune Magazine
Boston,114
Boston, 1 4
' 26
Deal Ever."'
called
called it
it "The
"The Biggest
Biggest Looniest
Looniest Deal
Ever.,,126
Shoppers Swarm Filene
114. Jenn
Jeon Abelson, Shoppers
Filene's's Clearance:
Clearance: But Even Amid
Amid This Retail Circus,
Circus, Many
Sadness over the End of an
an Era,
GLOBE, Mar. 7, 2006, available
available at
at
Voice Nostalgia
Nostalgia and Sadness
Era, BOSTON
BOSTON GWBE,
http://www.boston.com/business/globe/articles/2006/03/07/shoppers _swarm
swarm_filenes-clearance.
http://www.boston.comlbusiness/globe/articlesl2006/03/07/shoppers
_ filenes_clearance.
http://www.wosu.org/archive/lazarus/timeline.php (last visited
115. Lazarus
Lazarus Timeline, WOSU-TV,
WOSU-TV, http://www.wosu.org/archive/lazarusltimeline.php
17, 2008); Business
Columbus Lazarus-Macy's
Store to Close in 2004; New
Lazarus-Macy's Store
Aug. 17,2008);
Business Editors, Downtown Columbus
Location Will Not Be Pursued,
Pursued, Bus.
available at
at
Bus. WIRE, Oct. 17, 2003, available
Downtown Location
http://findarticles.com/p/articles/mimOEIN/is
2003 Oct_17/ai_I08988087
Oct 17/ai_108988087 (last
http://findarticles.comlp/articles/mi_mOEIN/is_2003_
(last visited Aug. 17, 2008).
Close, Ending
EndingRetail Era,
23.
Kirk Johnson, G.Fox to Close,
Era, N.Y. TIMES, Sept. 12, 1992, at 23.
116. Kirk
"Big 3"
3" Department
Stores: Their Life and
and Times, Old Newark
Department Stores:
Newark Memories,
117. Nat Bodian, The "Big
http://www.virtualnewarknj.com/memories/downtown/bodianbig3.htm
17, 2008).
http://www.virtualnewarknj.comlmemoriesldowntownlbodianbig3.htm (last visited Aug. 17,2008).
CAL., http://www.usc.eduldept/geography/la_
http://www.usc.edu/dept/geography/la-walkingtour/
DepartmentStore,
Robinson's Department
Store, S. CAL.,
walkin~tourl
118. Robinson's
newdowntown/robinsons
departmentstoreformer.html (last visited
new_downtownirobinsons_department_storeJormer.html
visited Aug. 17,
17, 2008); Max Pierce,
Before the Mall:
Stores Ruled Los Angeles, LA DOWNTOWN
DOWNTOWN NEWS
Mall: When Local Department
Department Stores
NEWS ONLINE,
http://www.ladowntownnews.com/articles/2005/11/07/news/news06.txt
17, 2008).
http://www.ladowntownnews.comlarticles/2005/11107/newslnews06.txt (last visited Aug. 17,
2008).
119. ROTHCHILD, supra
generally Andrea Knox &
& Jane M. Von Bergen,
Strawbridge: Why
For Smaller
120. See generally
Bergen, Strawbridge:
Why a Sale? For
Chains, It's
It's Harder
Harderto Compete with Big Chains
PHILADELPHIA INQUIRER, Mar. 31,
31, 1996; Von
Chains''Power,
Power, PHILADELPHIA
Chains,
Bergen,
Biddingfor Wanamaker's
Wanamaker's Stores,
supra note 43; Caroline E. Mayer, Woodies Wins Bidding
Stores, WASH.
Bergen, supra
POST,
POST, Nov. 5, 1986, at A16.
121. Randy
& Ken Alltucker, Downtown
Downtown Lazarus
Lazarus Lost
Last ofits Kind: Retailer
Planto
Retailer Announces Plan
121.
Randy Tucker &
Close 5 Unprofitable
UnprofitableStores,
17, 2004, at Al.
Close
Stores, CIN. ENQUIRER,
ENQUIRER, Jan. 17,2004,
AI.
122. Gavin Power, Retailer's
Retailer's Roots Trace Back to 1876, S.F. CHRONICLE,
Al. See
CHRONICLE, Nov. 19,
19, 1994, at AI.
122.
also Gavin Power
& Kenneth
Shoppers Mourn End of Emporium Era,
16,
Power &
Kenneth Howe, Shoppers
Era, S.F. CHRONICLE, Aug. 16,
Al.
1995, at AI.
123. Mark Albright, Maas
Bros. Pulls
St. Petersburg,
TIMES, Aug.
Maas Bros.
Pulls out of
ofDowntown St.
Petersburg, ST. PETERSBURG
PETERSBURG TIMES,
123.
4, 1991,
1991, at 18.
lB.
124.
Tampa Store
Store in 1989, ST. PETERSBURG
124. Bernice Stengle, Maas
Maas Brothers
Brothers to Close Downtown Tampa
PETERSBURG
TIMES, Jan. 31,1987,
31, 1987, at 14A.
125. See Rudolph A. Pyatt, Jr.,
Jr., Woodies Gets an
an Opportunity
Opportunity to Undo
Undo the Errors
125.
Errors of an Era,
Era, WASH.
POST, Jan. 20, 1994, at DI1
DII [hereinafter
[hereinafter Pyatt, Woodies]; Kara
Kara Swisher,
Swisher, Filene
Filene's's Basement to Open
Here,
13, 1993 at AI;
Al; Lena
Chicago Firm
WASH. POST,
Lena H. Sun, Chicago
Firm to Buy Raleighs,
Raleighs, WASH.
Here, WASH. POST, Jan. 13,
Dec. 1,1988,
1, 1988, at Al;
Garfinckel'sDeal,
Deal, WASH. POST,
AI; Caroline E. Mayer, Raleigh's
Raleigh's Completes Garfinckel's
POST, Aug. 20,
Washington's Retailing
12, 1988,
1988, at
1987, at BI; Rudolph A. Pyatt, Jr., Washington's
Retailing Upheaval,
Upheaval, WASH. POST, Sept. 12,
F5. "Woodies,"
"Woodies," as Woodward
affectionately known, was a profitable store acquired by
Woodward &
& Lothrop
Lothrop was affectionately
by
A. Alfred Taubman, a Detroit real
real estate
estate developer, in 1984.
1984. Pyatt,
Pyatt, Woodies, supra
supra note 125.
125. He
combined its operations with Wanamaker's
Wanamaker's in Philadelphia
Philadelphia and borrowed heavily based on the value
value of
of
Id. The store did not, however, entirely fade into history. Years later, Woodies's
Woodies's
the store's real estate. Id.
shopping bags, with
& L," were seen
seen on The Drew Carey
Carey Show, which was set in a
with a scripted "W &
Drew Carey Show
fictional department
department store with the same initials, Winfred-Louder,
Winfred-Louder, in Cleveland. The Drew
(Warner Bros. television broadcast
1995-2004). Art imitated
broadcast 1995-2004).
imitated life; during the nine seasons of the Drew
family-controlled Winfred-Louder
Carey Show,
Show, family-controlled
Winfred-Louder was acquired
acquired by a department
department store holding company
and the big downtown Cleveland store was eventually closed, although in the show's last season,
season,
winfredlouder.com, an internet retailer, was established.
generally The Drew Carey Show: Show
winfredlouder.com,
established. See generally
Description,
Cast
&
Crew,
http://tv.yahoo.confthe-drew-carey-show/show/64/castcrew;_
Crew,
http://tv.yahoo.comlthe-drew-carey-show/show/64/castcrew;_
Description,
Cast
ylt=AjP6bO4TEQA6uGNIOi5x2v2So9EF (last visited Aug. 17, 2008). Despite less than "stellar"
"stellar"
ylt=AjP6b04TEQA6uGNIOi5x2v2So9EF
profits, Macy's has elected
elected to keep its downtown Cincinnati department store, adjacent to its corporate
20
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ANTITRUST QUANDARY
AN ANTITRUST
QUANDARY
275
Three
Three unrelated events began this debacle. First, as interest rates
in
dropped in the early 1980s, insurance and pension
pension funds invested in
high-yield
junk
bonds,
making
it
easier
for
corporate
raiders
to
raise
high-yield junk:
corporate
127
The old staid department stores,
capital to conquer new companies. 127
with valuable real estate, steady profits, and intangibles like century
century
unprepared for
old household brand names, were very valuable, but unprepared
128
Second, an inside group of executives
executives and directors
the onslaught. 128
at Macy's took the store private. And third, Campeau,
successful
Campeau, a successful
real estate
estate developer, sought to expand his business holdings.
Although Campeau
purchasing a savings and loan or
Campeau first considered purchasing
an insurance
company,
he
decided
that "since
"since he was in the mall
insurance
building business, it made sense to own retail companies
companies whose
129
centers."'
his
in
space
in his centers.,,129
stores could rent
F. Macy's Goes Private
Private
F.
Ed Finkelstein
Finkelstein was a retail legend. After heading Macy's divisions
in New Jersey, California, and New York, he was named chairman
chairman
and chief executive
executive officer
officer of the entire company. Only twelve years
after Macy's ended a century long chain of Straus family leadership,
headquarters,
Contra Tucker
Tucker &
& Alltucker,
Alltucker, supra
121. This
This suggests
suggests that
that there
there is
is at
least some
headquarters, open.
open. Contra
supra note
note 121.
at least
some
value
value to local
local ownership of
of department
department stores.
126. Loomis,
112, at
126.
Loomis, supra
supra note
note 1l2,
at 48.
48.
MACY'S
127. JEFFREY
JEFFREY A. TRACHTENBERG,
TRACHTENBERG, THE RAIN ON MACY'
S PARADE:
PARADE: How GREED, AMBITION,
AMBITION, AND
AND
FOLLY
RUINED AMERICA'S
GREATEST STORE
27 (Random
(Random House
House 1996).
FOLLY RUINED
AMERICA'S GREATEST
STORE 27
1996).
128. At
At least one author who has studied
studied this
this era
era would argue that
that the merger,
merger, bankruptcies,
bankruptcies, and
consolidation
the national
national department
began in
in 1984
1984 when
when Limited
Limited Brands,
Brands, owner
of The
The
consolidation of
of the
department stores
stores began
owner of
Limited,
Limited, Victoria's
Victoria's Secret, Express,
Express, and
and other popular
popular brands, attempted aa hostile takeover of CHH
stores,
owner of
of Neiman-Marcus,
Wanamaker's, and
other major
department
stores, owner
Neiman-Marcus, The
The Broadway,
Broadway, John
John Wanamaker's,
and other
major department
stores.
id, 26-27.
of John
stores. See id.
26-27. The
The takeover
takeover bid failed
failed but ended
ended with the bankruptcy
bankruptcy of
of CHH,
CHH, the
the sale of
John
Wanamaker's
Alfred Taubman,
and the
The Broadway
Chicago billionaire
billionaire Sam
Sam Zell.
Wanamaker's toto Alfred
Taubman, and
the sale
sale of
of The
Broadway toto Chicago
Zell.
Taubman
Wanamaker's with Washington,
D.C.'s
Taubman combined Wanamaker's
Washington, D.C.
's Woodward && Lothrop, later
later putting
putting both
both
into bankruptcy
the chains.
Zell sold
sold The
The Broadway
Federated, and
and Federated
Federated
into
bankruptcy and
and shuttering
shuttering the
chains. Zell
Broadway toto Federated,
Bloomingdale's. Another
converted them
them to Macy's and
and Bloomingdale'S.
Another larger merger occurred in 1986 when May
acquired
Associated Dry Goods,
Goods, which
which included
Taylor, L.S.
L.S. Ayre
(Indiana), Joseph
Joseph Home
acquired Associated
included Lord
Lord && Taylor,
Ayre (Indiana),
Home
(Pittsburgh),
(Pittsburgh), Hahne & Co. (New
(New Jersey), and Robinson's (Los Angeles and
and St. Petersburg, FL). See
generally Eric
Schmitt, May Stores
Chain, N.Y. TIMES, June 23, 1986, at
Al; Martha
generally
Eric Schmitt,
Stores Seek Associated Chain,
at AI;
Martha
Groves,
Discloses Sweetened Bid for Associated,
11, 1986,
Groves, May Discloses
Associated, L.A.
L.A. TIMES, July II,
1986, Part
Part 4,4, atat 1;
I;
Associated, May Merger
Talks Confirmed,
TRIB., July 11,
1986, at
C3; Martha
Martha Groves
Groves &
& Greg
Associated,
Merger Talks
Confirmed, CHI. TRm.,
11, 1986,
at C3;
Greg
Braxton,
Merger ofMay, Associated
AssociatedFaces
Opposition, L.A.
Braxton, Merger
Faces Grass-Roots
Grass-Roots Opposition,
L.A. TIMES,
TIMES, Aug.
Aug. 25,
25, 1986, Part
Part 4,4,
at
at 1.1.
129. TRACHTENBERG,
TRACHTENBERG, supra
supra note
note 127, atat 97.
97.
21
276
GEORGIA STATE
STATE UNIVERSITY
REVIEW
[Vol. 26:2
(Vol.
Finkelstein
Finkelstein repositioned
repositioned Macy's to appeal to affluent consumers
wanting high fashion, not bargains. 130
130 The changes
changes led to record sales
earnings.131
J3l
and earnings.
Department
Department stores were stable businesses
businesses with consistentconsistentalthough perhaps not earth-shattering-profits.
But
department
earth-shattering-profits.
department store
companies,
incredibly
companies, particularly
particularly in the older urban
urban markets, owned incredibly
valuable real estate "often
books at only a fraction of
of
"often valued on 1their
32
debt.
no
or
little
had
and
worth,"
little or no debt. 132
true worth,"
In 1985,
Herbert
and Robert Haft of the Dart Group separately
separately
1985,
34
profit. 1134
making millions
FDS, 133 making
millions in
in profit.
greenmailed both May
May and FDS,133
Other targets of the Hafts, including Eckerd Drugs, Safeway, and
& Shop supermarket
supermarket chains, were forced to sell parts of their
their
Stop &
companies to pay the enormous debt incurred in leveraged
leveraged buyouts
"Safeway sold or
designed to save the companies from the Hafts. "Safeway
or
closed 300 stores and laid off 8,000 employees. Stop & Shop sold or
[thirty-seven] of its Bradlee's stores and laid off 5,000
closed [thirty-seven]
,
35
jobS.,,135
jobs. '
In April of 1985,
1985, Business
Business Week predicted that Macy's would be a
136
target for a corporate raider or greenmailer. 136
Macy's was in a
dangerous situation
situation and Finkelstein
Finkelstein decided it was time to take the
13 7
company private. 137 "Using
"Using the company's own cash flow and assets
as collateral,"
collateral," 384 insiders invested a mere $17.5
$17.5 million, and
borrowed
company
borrowed almost $4 billion to buy Macy's, taking the company
130. Id.
Id. at 24.
131. !d.
Id.
131.
132. Id.
Id. at 28; TRAUB,
TRAUB, supra
supra note 88,
88, at 271.
271. See also BARMASH, supra
133. TRACHTENBERG,
TRACHTENBERG, supra
127, at 27; ROTHCHILD, supra
supra note 113, at 153. See also Rudolph
Rudolph
133.
supra note 127,
A. Pyatt, Jr., SEC Warnings Should Wake Up
Up the Hafts, WASH. POST,
POST, Mar. 5,
5, 1990,
1990, at F3.
F3.
TRACHTENBERG, supra note 127,
134. TRACHTENBERG,
127, at 27; Caroline E. Mayer, Hafts Turn Failure
Failure into Large
Profits, WASH. POST, July 12,
Al. In 1987, the Hafts
12, 1987, at AI.
Hafts made a run on Dayton Hudson
Hudson stock,
eventually
bid ROWLEY, supra note 87, at 162.
162. The
The state of Minnesota passed a
eventually mounting
mounting a takeover
takeover bid.
law to make hostile takeovers of Minnesota
Minnesota companies
companies more difficult, but the 1987
1987 stock market crash
bid. Id.
Id. at 163-65.
dissuaded the Hafts from their bid
135.
Carlson,
Herbert
Haft,
WASH.
Herbert
Haft,
Always Coming Up Aces,
WASH.
POST,
135. Peter
http://www.washingtonpost.com/wp-dyn/articles/A99300-1989Augl3.html
http://www.washingtonpost.comlwp-dyn/articlesJA99300-1989 Aug 13.htrnl (last visited
visited Aug. 17, 2008).
136. Gene G. Marcial,
Retailing Is
Is Ripe for
BuS. WK.,
1985, at 101.
101. In
Marcial, Why Retailing
for the Raiders,
Raiders, Bus.
WK., Apr. 29, 1985,
1985, there was $24 billion of leveraged
leveraged buyouts, fives times
times as much as two years earlier. BARMASH,
BARMASH,
supra
102.
137.
137. TRACHTENBERG,
TRACHTENBERG, supra
supra note 127, at 28. See BARMASH,
BARMASH, supra
22
20101
2010)
ANTITRUST QUANDARY
QUANDARY
AN ANTITRUST
277
1922.138
private for the first time since 1922.
\38 The financing was
collateral connected
complicated with different instruments and collateral
connected to
Hanover Trust, Goldman Sachs, and
Citibank, Manufacturers Hanover
139
39
Prudential, among others.
others.' It would not be obvious until 1993 that
Prudential's one billion dollar investment secured by mortgages on
the department store's valuable urban real estate was the most
140
pivotal. 140
G.
Campeau Buys Allied Stores
Stores
G. Campeau
Campeau began secretly buying shares of Allied
In March of 1986, Campeau
14 1
Stores through a dummy corporation. 141
Though the Campeau
Campeau
142
Corporation was "quite profitable,,,142
Corporation
profitable,"'
only the leveraged-buyout
leveraged-buyout
Campeau Corporation, a real
craze of the 1980s could have allowed Campeau
estate firm with a market
market value of $200 million and fewer than one
43 Allied Stores had a market
market
thousand employees, to take on Allied.1
Allied. 143
value of two billion dollars; twenty-four
divisions,
including
Brooks
twenty-four
Marchd, and Stem's;
Stern's;
Brothers, Jordan Marsh, Bonwit Teller, Bon Marche,
l44
144
670 separate
separate stores; and 70,000
70,000 employees.
By 1986,
it
was
apparent
that Campeau's raid on Allied required
1986,
required
1145
45
an unrealistic
rate
of
return
that
doomed
it
from
the
start.
But the
unrealistic
return
doomed
fees were too large to caution
caution more
more prudent behavior. First Boston,
for example, stood to earn more than approximately
approximately $60 million in
fees for various services, not including
including interest and additional
additional fees if
146
pay off debt. 146
Eleven
Allied had to be chopped up to payoff
Eleven law firms and
147
fees. 147
enormous fees.
sixteen banks were
were involved,
involved, each
each generating
generating enormous
138.
138. Id.
Id. at
at vii,
vii, 19.
19.
139.
139. TRACHTENBERG,
TRACHTENBERG, supra
supra note 127,
127, at 88-89.
88-89.
140.
140. Id.
Id. at
at 226.
226.
141.
supra note
note 113,
113, atat 43.
43.
142.
142. Id. at
at 33.
33.
143.
28-29, 36-42.
143. Id.
/d. at
at 14,
14,28-29,36-42.
144.
144. Id.
Id. at
at 29.
29. This entire
entire series
series of
of events
events may
may have
have been caused
caused simply
simply by
by Campeau's
Campeau's desire to bring
bring
a Brooks Brothers store into
into one
one of his
his Canadian
Canadian shopping malls. See id.
id. at 29,
29, 93.
93.
145.
supra note
note 113,
113, atat 115.
liS.
146.
146. Id.
/d. at
at 99.
99.
147.
147. See
See id.
id. at
at 105.
105.
23
278
STATE UNIVERSITY
GEORGIA STATE
[Vol. 26:2
[Vol.
Campeau/Allied deal work, however, required a return
return
Making the Campeau/Allied
48
on investment
investment of twelve percent.
percent.'148
The best any division of Allied
had ever done was nine to 9.S
9.5 percent and the company
company average was
149
six to seven percent. 149 Campeau was forced to raise one billion
immediately by selling sixteen of Allied's twenty-four
twenty-four
dollars almost immediately
divisions, including Block's in Indianapolis,
Indianapolis, Donaldson's in
In
50
Minnesota, Joske's in Texas, and Bonwit Teller in New York. 150
1
H. Campeau
CampeauBuys FDS
FDS
H.
Although it was still unclear
of
unclear whether Campeau's
Campeau's purchase
purchase of
Allied would ever be profitable-and
while
various
Allied
divisions
profitable-and
various
were still on the market-Campeau
market--Campeau decided it was time for another
another
15
1
major acquisition. 151 He was interested
interested in acquiring May, but decided
1 52
to buy FDS.
FDs.152 Some at First Boston questioned
questioned the wisdom
wisdom of being
involved
in
such
a
risky
transaction,
but
Campeau
involved
Campeau was responsible
responsible
153
for half of the firm's 1986 and 1987
1987 profits. 153
Though
Though the other
banks that financed Campeau's acquisition of Allied were unwilling
148. Id
Id. at
at 116.
149. Id
Id. at
at 115.
115.
150.
154 (quoting
ISO. Id
Id. at 121-123,
121-123, 154
(quoting letter from FDS
FDS to shareholders).
shareholders). In the opening
opening credits during the
the
first season of The Mary Tyler Moore Show (the opening sequence
seasons), it is
sequence was
was changed
changed in later
later seasons),
possible
possible to
to see
see a Donaldson's
Donaldson's sign as Mary Tyler
Tyler Moore
Moore is tossing her
her hat in the air. The Mary Tyler
Moore
Moore Show
Show (20th
(20th Century Fox television broadcast 1970-77).
1970-77). See generally
generally The Mary Tyler Moore
Moore
Show--Overview, http://www.imdb.com/titlelttOO65314/
10, 2009). At
visited Oct. 10,2009).
At the right price,
http://www.imdb.comititleitt00653141 (last visited
Bonwit
been profitable,
profitable, "but
"but First Boston's job was to insure that [the buyer]
buyer] wouldn't
wouldn't
Bonwit Teller
Teller could
could have been
pay
price." ROTHCHILD,
ROTHCHILD, supra
supra note 113,
113, at 123. Bonwit Teller's
Teller's new buyer
buyer placed
placed the chain
chain
pay the
the right
right price."
into
Donaldson's at an
and liquidated
liquidated the franchise;
franchise; Carson
Carson Pirie
Pirie Scott, which bought
bought Donaldson's
into Chapter II and
excessive
excessive price,
price, took on too
too much
much debt to
to avoid
avoid being
being taken
taken over
over Campeau
Campeau and was another
another corporate
corporate
casualty.
Id. at
casualty.ld.
at 125.
125. Proffitt's
Proffitt's (which
(which later
later changed
changed its corporate
corporate name to Sak's
Sak's Fifth Avenue)
Avenue) bought
bought
Carson
2006 that itit would
would close
close
Carson Pirie
Pirie Scott, later selling
selling itit to the Bon-Ton;
Bon-Ton; Bon-Ton
Bon-Ton announced
announced in 2006
Carson Pirie
Jones,
Pirie Scott's downtown
downtown Chicago
Chicago store,
store, which is
is on the
the national historic
historic register.
register. Sandra
Sandra lones,
Flag
Change on
Flag of
of Change
on State:
State: Carson's
Carson's Closing Historic
Historic Store;
Store; New
New Uses for Landmark
Landmark Building, CHI.
CHI.
TRIB.,
TRm., Aug.
Aug. 26,
26, 2006, atat Cl.
CI. Dillard's purchased
purchased the
the twenty-seven
twenty-seven Joske's
loske's department
department stores,
stores, located
located
mostly
in Texas. ROSENBERG,
ROSENBERG, supra note 72,
72, at 99.
99. Because
Because of the purchase
purchase of
of Joske's,
loske's, the Texas
Texas
mostly in
attorney general
general investigated
investigated Dillard's
Dillard's to determine
determine whether
whether it was
was attempting
attempting to monopolize
monopolize the
the
department
Id.
department store
store market; the investigation
investigation was later
later dropped. Id
151.
lSI. See ROTHCHILD,
ROTHCHILD, supra
supra note
note 113,
113, at 137.
137. At the same
same time, the
the banks, law firms, investment
investment
partners,
$130 million
million in fees and
and severance
severance packages,
packages,
partners, and former
former executives
executives were
were sharing more than
than $130
while
3,500 Allied
Allied employees
employees were
were being laid off. Id
Id. at 145-46.
145-46.
while 3,500
152.
152. Id
Id. at
at 138-40.
138-40.
153.
153. Id at
at 139.
139.
24
20101
2010]
AN
ANTITRUST QUANDARY
QUANDARY
AN ANTITRUST
279
at first to extend themselves further, Security Pacific
Pacific decided to take
54
the risk. 1154
offer,' 55
tender offer,155
Campeau's tender
down Campeau's
immediately turned down
FDS's board immediately
5 6 Ohio, the
but the company was now in play with multiple suitors.
suitors.'156
home of FDS, hastily passed an antitakeover
antitakeover bill,157
bill, 157 but the bill was
58 Campeau
quickly declared
declared unconstitutional
unconstitutional by a federal judge. 1158
Campeau
raised his bid higher than the others interested in FDS, including
including
Kohlberg
Co., the Pritzker
and
Kohlberg Kravis Roberts & 159
Pritzker family of Chicago and
Stores.
Department
Dillard's Department Stores. 159
FDS instead tentatively agreed to sell itself to Macy's.160
Macy's
Macy's. 160 Macy's
had taken on considerable
considerable debt to go private, but some of that was
paid off,
off, and a properly
structured acquisition
properly structured
acquisition of FDS would have
resulted
considerable profit for Macy's executive
resulted 161
in considerable
executive and institutional
owners. 161
Campeau began a bidding war; as the price went
Macy's and Campeau
higher,' 62 Campeau's
Campeau's backers consoled themselves upon
higher and higher,162
reviewing the higher bids with the assumption that Macy's certainly
certainly
163
offering to
in offering
doing in
must have known what it was
was doing
to pay
pay so
so much.
much. 163
154. Id.
140-41, 162-63.
Id. at 140--41,
162-63. Although
Although Security Pacific was later
later largely cut out of the deal in favor of
Security Pacific's paying Citibank
Manufacturers Hanover Trust the
Citicorp, the terms included
included Security
Citibank and Manufacturers
the
loans--each bank made more than $20 million in profits, its largest profit
entire balance of their Allied loans-each
142, 181.
181. A sense of urgency was also created by the chance
on this type of loan ever. Id.
Id. at 142,
chance of an
antitakover statute
statute under
under consideration
consideration in Federated's
Federated's home jurisdiction
jurisdiction of Delaware, and Donald
announcement to the Securities
Trump's announcement
Securities and Exchanges
Exchanges Commission
Commission that he intended to purchase up to
$15 million of Federated shares, perhaps to be used as greenmail. See id.
$15
id. at 147.
155.
TRAUB, supra
ISS. Id.
Id. at 153. See also TRAUB,
supra note 88, at 270, 272. One reason that First Boston
enthusiastically went
enthusiastically
went ahead
ahead with the hostile takeover
takeover attempt was because
because its star banker, Bruce
Bruce
supra
Wasserstein, left the firm in a disagreement over policies and opened his own shop. ROTHCHILD, supra
note 113, at 158. Unless First Boston
Boston could prove that it could
could do billion dollar deals without
Wasserstein, its future was questionable-and
Wasserstein,
questionable--and the only billion dollar deal on the horizon
horizon was working
with Campeau
Campeau to acquire Federated. Id.
Id. at 159-60.
156. Id.
165--66.
Id. at 165-66.
REV. CODE ANN. § 1701.01 (1986),
amended by Act of Nov. 22,1986
22, 1986 (codified as
157. OHIO REv.
(1986), amended
(2006)).
amended at Ohio Rev. Code § 1701.01 (2006».
158. Campeau Corp. v. Federated Dep't Stores, 679 F. Supp. 735,
735, 739 (S.D. Ohio 1988); CRFT Corp.
ROTHc-ILD, supra
113, at 166v. Federated
Federated Dep't Stores, 679 F. Supp. 731 (S.D. Ohio 1988);
1988); see ROTHCHILD,
supra note \13,
16667.
supra note 113,
113, at 168;
TRAUB, supra
168; see TRAUB,
supra note 88,
88, at 275-76. An inside group at
Federated was also unsuccessful
Id. at 274-75.
unsuccessful at putting together a management
management buyout. Id.
274-75.
TRAUB, supra
supranote 88,
supra note 113, at 179; see TRAUB,
88, at 279-82.
279-82.
161.
supranote 88,
162. TRAUB, supra
88, at 282-84.
282-84.
163.
25
280
[Vol.
[Vol. 26:2
The final compromise allowed Campeau to acquire FDS, with
Bullocks/Wilshire,
Macy's acquiring three FDS divisions (Bullock's, BullockslWilshire,
and I. Magnin-all West Coast stores) for just over one billion
cash
dollars, with Macy's also receiving a $60 million dollar cash
l64
64
lawyers.1 Campeau also agreed to
settlement to pay its bankers and lawyers.
department stores,
lower debt and raise cash by selling two FDS department
Foley's (founded in Houston) and Filene's (founded
(founded in Boston), to
165
May. Campeau borrowed
May.165
borrowed more than $6.5 billion dollars to pay for
purchase
Federated, in addition to the $3.6 billion he had borrowed to purchase
167
166
1 66
million.
$350
earned
sides
all
on
bankers
and
Advisors
and bankers on all sides earned $350 million. 167
Allied.
DeclareBankruptcy
/.. Allied/FDS and Macy's Declare
Bankruptcy
of
Because of the enormous
enormous debt incurred, Campeau's
Campeau's acquisition of
FDS was doomed from the start. 168 Campeau
Campeau paid more than $200
million for fees and charges
to
acquire
FDS, which was more than the
charges
169
year. In an industry traditionally
traditionally focused
entire chain earned in a year.169
outstanding customer
eliminated almost
almost
on outstanding
customer service, 3,400
3,400 jobs were eliminated
1
7
0
immediately.
At first, the financial situation of the combined
combined
immediatelyPO
Allied/FDS
was
blurred
by
layoffs
and
consolidation
consolidation of certain
certain
Allied/FDS
1989, it was clear the companies
companies were
were doing
functions, but by 1989,
17 1
terribly.
In order to service the debt, the bankers
bankers had projected
projected
terribly.l7l
profits at $740 million for the year, but reached
reached only $372 million; at
the same
time,
interest
on
the
debt incurred
$516
Campeau was $516
same
incurred by Campeau
172
million. 172
164.
164. Id.
Id. at
at 186;
186; TRAUB,
TRAUB, supra
supra note 88,
88, atat 284.
284. The
The final deal was personally
personally negotiated
negotiated by
by Joseph
Joseph
Flom
Skadden, Arps, Slate, Meagher
Meagher &
& Flom.
Flom. Id.
Flom of Skadden,
165.
165. Bryan
Bryan Burrough,
Burrough, Jacquie
Jacquie McNish
McNish &
& Carol Hymowitz,
Hymowitz, Betting
Betting the Store:
Store: Campeau at Last Gets
Gets
Federated,
WALL ST.
ST. J.,
J., Apr. 4,
4, 1998.
1998.
Federated, WALL
166.
166. Id.
Id.
167.
167. TRAUB,
TRAUB, supra
supra note
note 88,
88, atat 284.
168.
168. ROTHCHILD,
ROTHCHILD, supra
20~5.
169.
169. Id. at 205.
205.
170.
170. Id.
Id. at
at 210. Bloomingdale's,
Bloomingdale'S, for example, was
was given
given thirty days notice
notice to
to cut $50
$50 to $60
$60 million.
TRAUB,
TRAUB, supra
supra note
note 88,
88, atat 290.
290. The
The cuts
cuts may
may have been
been counter-productive;
counter-productive; for example,
example, the
the cuts turned
Jordan
!d.
Jordan Marsh
Marsh from
from a profitable
profitable department
department store into a money loser. Id.
171.
note 112,
112, at
171. Loomis,
Loomis, supra
supra note
at 48.
48. For example,
example, the
the deal was
was structured
structured based
based on
on budget
budget cuts
cuts and
and
gains
of the
the department
department stores whether
whether the
the projections
projections
gains in
in sales,
sales, but
but no
no banker
banker had
had ever
ever asked
asked the
the heads
heads of
were
TRAUB, supranote
note 88,
88, atat 293.
293.
were realistic.
realistic. TRAUB,
172.
172. Loomis, supra
supra note
note 112,
112, at 48.
48.
26
AN ANTITRUST
ANTITRUST QUANDARY
QUANDARY
AN
2010]
20101
281
By early 1990, the Campeau Corporation board of directors
Campeau of all authority and put FDS, Allied, and
stripped Robert Campeau
sixty-five subsidiaries
subsidiaries into Chapter 11 bankruptcy, after seventy-five
seventy-five
operations. 173 Vendors for the most part
years of continuously solvent operations.173
Allied/FDS
essentially
continued shipping goods to AlliedIFDS
because they had essentially
74
1
goods.
their
for
purchasers
no other
for their goods. 174
Meanwhile, Macy's
Macy's had trouble digesting the Bullock's,
Bullocks/Wilshire and I. Magnin acquisitions
BullockslWilshire
acquisitions and began to struggle
1 75
76
175
turmoil, 176
the turmoil/
in the
resigned in
executives
Many
well. Many executives resigned
as well.
under its debt as
177
and in 1988, Macy's began to lose money.
money.177
Finally, in 1992, as a
consequence
of
Robert
Campeau's
buying
spree,
consequence
Macy's filed for
fired.178
was fired.
Finkelstein was
I78
bankruptcy and
and Finkelstein
J. FDS
FDS Buys Macy's
Although Macy's made progress in its bankruptcy
bankruptcy proceedings, an
unexpected
1993. Prudential, which held
unexpected event changed everything
everything in 1993.
one billion dollars in mortgages on Macy's real estate, sold half of its
17 9
claim to FDS,
which
emerged from bankruptcy
FDS,179
which had emerged
bankruptcy a year
year
180
1
80
earlier.
FDS also received
an
option
to
purchase
Prudential's
received
purchase Prudential's
173.
173. Id.;
/d.; see also,
also, e.g.,
e.g., In
In rere Federated
Federated Department Stores, Inc., 1990 Bankr. LEXIS 2075
2075 (S.D.
(S.D. OH
OH
1990);
Campeau Corp.
Cal., 1990
1990 Bankr.
LEXIS 1778
1778 (N.D.
1990). Just
1990); InIn rere Campeau
Corp. Ca\.,
Bankr. LEXIS
(N.D. Calif.
Calif. 1990).
Just before filing
filing
bankruptcy,
bankruptcy, Campeau
Campeau said
said toto Marvin Traub, CEO
CEO and
and Chairman
Chairman of Bloomingdale's, "Chapter
"Chapter Eleven
Eleven isis
because you
all the
lay off all
pay reduced
salaries with
aa good
good thing
thing because
you can
can layoff
the people
people you
you want,
want, pay
reduced salaries
with greater
greater
incentives, and
and stop
stop paying pensions."
pensions." TRAUB, supra
supra note
note 88,
88, at 332.
332. Today,
Today, Robert
Robert Campeau isis inin his
his
mid-80s and
on his
Waldie, Collected
mid-80s
and living
living on
his savings
savings inin aa rented
rented townhouse
townhouse inin Ottawa,
Ottawa, Ontario.
Ontario. Paul
Paul Waldie,
Woes,
2006, at
Woes, CANADA
CANADA GLOBE
GLOBE AND
AND MAIL,
MAIL, Nov.
Nov. 24,
24,2006,
at 37;
37; Paul
Paul Waldie,
Waldie, Fallen
Fallen Titan Campeau
Campeau in Bitter
Divorce
Spat, CANADA
18, 2006, at
Divorce Spat,
CANADA GLOBE
GLOBE AND
AND MAIL,
MAIL, Nov.
Nov. 18,2006,
at Al.
AI. He
He isis involved inin aa highly
highly public
public
lawsuit demanding
demanding $25,000
$25,000 (Canadian)
(Canadian) per
per month
month from
from his
his former
former wife
wife inin spousal support.
support. Id.
[d. lisa
lisa
Campeau, his
ex-wife, maintains
(last visited
Campeau,
his ex-wife,
maintains aawebsite
website giving
giving her
her side
side of
of the
the story,
story, http://www.ilsa.at/
http://www.ilsa.atl(last
visited
2008).
Aug. 17,
17,2008).
174.
See Loomis,
113, at
174. See
Loomis, supra
supra note
note 112,
112, atat 48;
48; ROTHCHILD,
ROTHCHILD, supra
supra note
note 113,
at 255;
255; see generally
generally TRAUB,
TRAUB,
supra note
note 88,
88, atat 333.
333.
175.
127-28; see
175. TRACHTENBERG,
TRACHTENBERG, supra
supra note
note 127,
127, atat 127-28;
see Kara
Kara Swisher,
Swisher, I.l. Magnin
Magnin at White Flint
Flint Mall
Mall to
to
Close, WASH.
1992, at
WASH. POST,
POST, Mar.
Mar. 6,6,1992,
at D10.
010.
Close,
176.
135. Terry
176. See, e.g.,
e.g., TRACHTENBERG,
TRACHTENBERG, supra
supra note
note 127,
127, atat 135.
Terry Lundgren,
Lundgren, who
who resigned
resigned from
from Bullocks
Bullocks
Wilshire
Wilshire after
after itit was
was acquired
acquired by
by Macy's,
Macy's, later
later became
became CEO of Federated
Federated after
after itit acquired
acquired Macy's.
Macy's.
177.
177. See, e.g.,
e.g., id.
id. at
at 138.
178.
178. Id.
/d. at
at 207,
207, 213-16;
213-16; TRAUB,
TRAUB, supra
supra note
note 88,
88, atat 338.
338.
179.
note 127,
127, at
179. TRACHTENBERG,
TRACHTENBERG, supra
supra note
at 226.
226. FDS
FDS had
had atat this
this point
point consolidated
consolidated all
all Allied
Allied operations
operations
that
that itit still
still owned
owned into
into FDS.
FDS. See
See American
American Retailing,
Retailing, ECONOMIST,
ECONOMIST, Jan.
Jan. 8,8, 1994,
1994, atat 65.
65.
180.
180. TRACHTENBERG,
TRACHTENBERG, supra
supra note
note 127,
127, atat 197-98;
197-98; Wade
Wade Lambert,
Lambert, Federated
Federated May
May Face
Face Sharp Curbs
As
ofR.H. Macy, WALL
J., Jan.
1994, at
As a Major
Major Creditor
CreditorofR.H.
WALL ST.
ST.J.,
Jan. 4,4,1994,
at B5.
B5.
27
282
STATE UNIVERSITY
GEORGIA STATE
(Vol.
[Vol. 26:2
of
remaining share at a later date-giving FDS ownership or control of
one billion dollars of Macy's, which had been valued by its board at
dollars.'81
billion dollars.
two billion
at two
181
the time of its bankruptcy at
FDS was in a no-lose position. Even if a merger did not occur,
Macy's.182 Finally, in
FDS would end up owning a substantial part of Macy's.182
July of 1993, Macy's agreed
agreed to be acquired by FDS, just five years
183
after Macy's had almost purchased
purchased FDS.
FDS.183
The New York Attorney
FDS/Macy's would own thirty-nine
General raised concerns
concerns that FDSlMacy's
department stores in the New York City metropolitan area and
84 But FDS
consumer groups expressed fears about higher prices.'
prices. 184
"attempt" to sell six department stores and that resolved the
agreed to "attempt"
85
concerns.'185
state's antitrust concerns.
K
K. The Industry
Industry Regroups;
Regroups; Macy's Buys May
recovered
In some respects, the department store industry
industry never recovered
Campeau-related bankruptcies, cuts in service,
service, and store
from the Campeau-related
86
186
closures. The "stores
"stores were boring, the service nonexistent
nonexistent and the
closures.1
merchandise
ubiquitous
without
being
interesting."'
merchandise
interesting." I8877 The
customer: affluent
affluent
mainstream department
department stores
stores lost sight of their customer:
customers turned to luxury
luxury purveyors
purveyors like Neiman
Neiman Marcus,
Marcus,
Nordstrom,
Nordstrom, Saks Fifth Avenue, and Bloomingdale's,
Bloomingdale's, while bargain
bargain
Target.188
and
Wal-Mart
at
for
looking
were
they
what
found
hunters
were looking for at Wal-Mart and Target. 188
181. TRACHTENBERG,
TRACHTENBERG, supra
181.
supra note
note 127, at 207.
182. TRACHTENBERG,
TRACHTENBERG, supra
127, at 228.
182.
supra note
note 127,
183. Id.
1994,
183.
Id. at
at 231-32;
231-32; Edward R.R. Silverman,
Silvennan, Federated,
Federated. Macy's Merger
Merger OK'D, NEWSDAY,
NEWSDAY, Dec.
Dec. 9,9,1994,
at
Laura Jereski,
at A63;
A63; see
see also Patrick
Patrick M.
M. Reilly
Reilly & Laura
Jereski, Macy,
Macy, Federated
Federated Reach Accord in
in Merger
Merger Talks,
WALL
J., July
WALL ST.
ST.J.,
July 15,
IS, 1994,
1994, atat A3.
A3.
184. TRACHTENBERG,
184.
TRACHTENBERG, supra
supra note
note 127,
127, atat 232.
232.
185. Id.; see also Margaret
185.
Margaret Webb
Webb Pressler,
Pressler, N.Y. Attorney
Attorney General
General Challenges
Challenges Macy's Deal,
Deal, WASH.
WASH.
POST,
1994, at
POST, Aug.
Aug. 24,
24, 1994,
at Fl;
FI; Edward
Edward R.
R. Silverman,
Silvennan, Sears
Sears Mulls Buying NY
NY Stores
Stores from Federated,
Federated,
NEWSDAY,
8, 1994, at
at A19; Edward
NEWSDAY, Oct.
Oct. 8,1994,
Edward R.
R. Silverman,
Silverman, Federated
Federated Will Sell Six Stores, NEWSDAY,
NEWSDAY, Sept.
Sept.
20,
A33; Laura
20, 1994,
1994, atat A33;
Laura Bird,
Bird, Macy
Macy, Federated
Federated Plan
Plan Hits Snag in New York, WALL
WALL ST.
ST. J., Aug.
Aug. 24,
24,
1994. The FTC took
took no
no action. Margaret
Margaret Webb
Webb Pressler,
Pressler, FTC
FTC Will Not Block Merger
Merger Between
Between
Federated,
F1.
WASH. POST,
POST, Aug.
Aug. 20,
20, 1994,
1994, atat FI.
Federated. Macy's,
Macy 's, WASH.
186. See,
186.
See, e.g.,
e.g., TRAUB,
TRAUB, supra
supra note
note 88,
88, atat 290.
290. Deep
Deep cuts
cuts inin operations
operations atat Jordan
Jordan Marsh
Marsh turned
turned itit from aa
profitable
profitable department
department store
store into
into aamoney
money loser.
loser. Id.
Id.
also Loomis,
187. Dody
Dody Tsiantar,
Tsiantar, Department-Store
Department-Store Superstar,
Superstar, TIME,
TiME, Feb.
Feb. 6,6, 2006.
2006. See
See also
Loomis, supra
supra note
note
112,
112, atat 48.
48.
188.
188. Tsiantar,
Tsiantar, supra
supra note
note 187.
187.
28
AN ANTITRUST
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AN
ANTITRUST QUANDARY
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20101
283
Macy's, for example, no longer had "its own feisty identity.
Instead, a new culture [was
emphasized cost[was created], one that emphasized
89
cutting, controls, and uniformity."'
uniformity.,,189 Departments
Departments unique
unique to Macy's
Macy's
were closed or reduced
reduced in size and the store began to sell
clothing
country. 190
the country.190
across the
chains across
that could be found in dozens of chains
The Campeau-related
Campeau-related bankruptcies may even be responsible, at
least in part, for the ascendancy
ascendancy of Wal-Mart
Wal-Mart and Target. It was only
after the these bankruptcies
department stores
stores
bankruptcies and consolidation of department
that "discount
"discount stores first made inroads in winning many popular
popular
department
department store brand
brand accounts, to which they would not have
ordinarily
had
access.
ordinarily
This helped stoke the fires at Wal-Mart
Wal-Mart and
Target and helped catapult
both retailers to their current leadership
catapult
leadership
91
positions.,,191
positions."'
A tension existed between cost-cutting
cost-cutting and business
rationalization,
and
making
department
rationalization,
department stores desirable places to
shop. After Campeau, department stores stopped innovating
innovating and
192
192
Department stores historically had the
launching new concepts.
foresight, entrepreneurial
entrepreneurial spirit, and nerve to experiment and remain
remain
relevant; Campeau
sucked
the
"lifeblood"
out
of
department
department stores,
Campeau
"lifeblood"
forcing them to focus only on "better
"better efficiencies
efficiencies and financial
streamlining."' 93 In recent years, department
department stores have become
streamlining.,,193
imitators,
borrowing coffee shops from Starbucks;
imitators, not innovators, borrowing
cosmetics
marketing
from
Sephora;
and
cosmetics marketing
Sephora; store layouts, shopping
shopping carts, and
central
central checkout
checkout from Kohl's; and designer shops from Ralph
194
Lauren. 194
department stores to tum
turn over
In fact, the current
current trend of department
considerable
"a street
street
considerable space to brands
brands like Ralph Lauren
Lauren makes it "a
filled with boutiques,"
which
resembles-and
fails
to
distinguish
boutiques,"
itself.195
itself from-the mall
mall itself.195
189.
127, 236.
189. TRACHTENBERG,
TRACHTENBERG, supra note 127, at 236.
190. Id.
!d.
191. Sway, supra
1.
supra note 50, at I.
Id.
192. ld.
Id.
193. !d.
194. Id.
!d.
195. Adam
Under One Roof,
Adam Gopnik, Under
Roof, NEW
NEW YORKER,
YORKER, Sept. 22, 2003, at 92.
191.
195.
50,
22, 2003, 92.
29
284
[Vol.
[Vol. 26:2
Retail Forward,196
compiled a list of
Retail
Forward, 196 an industry consulting
consulting group, compiled
of
consumers' complaints about department
department stores, which included
consumers'
included
look-alike stores; inconvenient
inconvenient mall locations;
locations; time-consuming
time-consuming and
difficult to shop stores; shoddy
shoddy service; no pricing credibility;
credibility; and
1 97
discontinued
one-stop-shopping appeal. 197 Stores have discontinued
loss of one-stop-shopping
of
management training programs and terminated many layers
layers of
executives, which may be contributing to a perceived
perceived decrease
decrease in
customer service-the area that distinguished
distinguished department
department stores for
98
1
years.
more than one hundred
hundred years. 198
Consolidation, however, continued. Dayton Hudson bought
Marshall Field's in 1990 and renamed
renamed all the Dayton stores in
Minnesota and Hudson stores in Michigan to Marshall Field's.199
Field's. 199 In
In
1998, Dillard's acquired
1998,
acquired Mercantile Stores, which had operated under
under
2 °0 In 2004, May bought Marshall
approximately thirteen local names.
Marshall
approximately
names?OO
20 1
billion.
$3.24
for
Hudson)
Dayton
former
(the
Target
Field's from
former Dayton Hudson) for $3.24 billion. 201
In 2005, Bon-Ton
acquired Carson Pirie Scott, Younkers,
Bon-Ton acquired
Y ounkers,
20 2
Saks Fifth
Boston Store
Herberger's, Bergner's, and Boston
Store from
from Saks
Fifth Avenue
Avenue202
(which soon afterwards
afterwards sold off Proffitts,
Proffitts, McRae's, and the Parisian
stores not already sold to Bon-Ton,
Bon-Ton, to Belk's).
03
billion2203
$3.24 billion
of
purchase
2004
May's
May's
of Marshall
Marshall Field's
Field's for
for $3.24
received considerable
considerable attention. Target had announced three months
2008).
196. Retail
Retail Forward,
Forward, http://www.retailforward.com
http://www.retailforward.com (last visited
visited Aug.
Aug. 17,
17, 2008).
197. Sway,
Sway, supra
supranote
50, at
197.
note 50,
at 1.1.
id.
198. See
Seeid.
199. Jennifer
Jennifer Dixon,
MarshallField's
Chain Sold to May in $3.2 Billion Deal,
DETROIT FREE
FREE PRESS,
199.
Dixon, Marshall
Field's Chain
Deal, DETROIT
PRESS,
June
2004, at
June 10,
10,2004,
at IA. See Palmieri,
Palmieri, supra
200.
Dina BuDD,
Bunn, Dillard's
ROCKY MOUNTAIN
200. Dina
Dillard's Extends Offer to Purchase Joslin
Joslin's's Stores,
Stores, ROCKY
MOUNTAIN NEws,
NEWS, Aug,
Aug,
OK'D, ROCKY MOUNTAIN
7, 1998, at 2B;
2B; Dillard's
Dillard's Acquisition ofMercantile
Mercantile OK'D,
MOUNTAIN NEWS,
NEWS, Aug. 12, 1998,
1998, at
2B. A
A complicated
complicated swap
was arranged
arranged with
swap was
the FfC
FTC to
with the
concerns that
that included
2B.
to satisfy
satisfy antitrust
antitrust concerns
included selling
selling
twenty-six stores to May and Proffitt's (which later became
became Saks Fifth
Fifth Avenue,
Avenue, and sold these
these stores
stores to
to
Belk's).
201.
Co. Will Buy Marshall
Field's, ST. LoUIS
LOUIS POST-DISPATCH,
POST-DISPATCH, June
201. Allyce Bess,
Bess, May Co.
Marshall Field's,
June 10, 2004,
2004, at
Al.
AI.
Pleasedwith Growth,
Growth, Carsons
Expand, CHI. TRIB.,
TRIB., Dec.
202. See Sandra Jones,
Jones, Pleased
Carsons to Expand,
Dec. 22,
22, 2006, at CI;
CI;
Dees Stribling,
Saks Appeal, RETAILING
Stribling, Sales
TODAY, June
June 2006.
2006.
Dees
RETAILING TODAY,
supra note
Id.
203. Bess, supra
note 201. The
The transactions also included
included aa "handful of Mervyn's stores."
stores." /d.
Mervyn's is
discount soft
with aa format
to J.C.
similar to
Mervyn's
is aa discount
soft goods
goods store
store with
format similar
J.C. Penney
Penney and Kohl's.
Kohl's.
30
2010]
20101
AN
ANTITRUST QUANDARY
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QUANDARY
285
department stores were on20
the auction block, leading to
earlier that its department
May. 4
and May.204
Macy's and
a bidding war between Macy's
suggesting that May
"bewildering," suggesting
Some found the transaction "bewildering,"
20 5
overpaid by as much as $1.5
$1.5 billion.
billion?05 A year earlier, May had
overpaid
announced
the
closing
of
thirty-two
Lord & Taylor stores, many
announced
operating
Macy's
operating in direct competition
competition to Bloomingdale's
Bloomingdale's and other Macy's
206
stores. It is possible that May's closing of so many Lord &
& Taylor
stores?06
stores was an effort to groom May for eventual sale to Macy's: May
made itself more enticing
enticing by buying Marshall
Marshall Field's, which spoke to
Macy's
Macy's geographic gap in the Midwest, and growing so large that it
2 7
0 May's closing of Lord &
was too big for Macy's to ignore. 207
& Taylor
Taylor
stores in many markets where Macy's operated stores might have
been a reaction to declining business prospects, or could have been an
attempt to resolve potential FTC antitrust concerns before May put
itself up for sale.
Regardless
Regardless of whether May
May intended to put itself up for sale when
it bought Marshall Field's, in 2005-just one year later-Macy's
later-Macy's
acquired May for $17
acquired
$17 billion?08
billion.20 8
After a six month investigation,
investigation, the FTC allowed the merger
merger to
209
20
9
proceed
proceed as planned.
Several state attorneys general,
general, however,
determined
that
the
merger
between
Macy's
and
May would hurt
determined
between
competition
competition and consumers through diminished choices and higher
higher
2lO
2
prices.
prices.
The Attorneys General of California, Maryland,
204. Id; Dixon,
supra note
note 199;
199; Allyce
May Co. Might Be Overpayingfor
Overpayingfor Field's,
Dixon, supra
Allyce Bess,
Bess, May
Field's, ST.
ST. LOUIS
loUIS
POST-DISPATCH,
11, 2004, at AO
POST-DISPATCH, June
June 11,2004,
AOI.1.
205.
Overpayingfor
ST. Louis
June 11,
205. Allyce
Allyce Bess,
Bess, May Co. Might Be Overpaying
for Field's,
Field's, ST.
loUiS POST-DISPATCH,
POST-DISPATCH, June
11,
2004,
2004, at AO1.
AOI.
206.
Jones, Lord
Lord &
& Taylor to Leave City,
City, CHI.
TRIB., Oct.
Oct. 5,2006,
5, 2006, at
at Cl.
Cl. See generally
206. Sandra
Sandra Jones,
CHI. TRIB.,
generally Dixon,
Dixon,
supra
supra note 199.
207. See generally
Overlap with May Stores,
Stores, Dow
generally Christina
Christina Cheddar
Cheddar Berk, Federated
Federated Says Not Much Overlap
JONES
NEWSWRES, Feb.
JONES NEWSWIRES,
Feb. 28, 2005.
208.
billion was
was in
in cash
and $6
$6 billion
billion was
Macy's stock.
supra note
note 4;
4; Moin
supra note
note
208. $11
$11 billion
cash and
was inin Macy's
stock. Daly,
Daly, supra
Moin supra
55.
209. See, e.g.,
FT.C.Ends Inquiry
Inquiry into
into Macy Deal,
Deal, N.Y. TIMES,
e.g., Stephanie Strom, F.T.c.
TiMES, Aug. 20,
20, 1994, at
37; Statement of the Commission
Commission Concerning Federated
Federated Department Stores, Inc./The
lnc.rrhe May Department
Department
Stores Company,
051-0111 at
at 11 (2005).
(2005). See also
also FTC,
FTC, Pre-Merger/Hart-Scott
Stores
Company, F.T.C.
F.T.C. File
File No.
No. 051-0111
Pre-MergerIHart-Scott Rodino
Act, supra
CurrentHSR Thresholds,
Thresholds, supra
supra note 5.
supra note 5; FTC, Current
210. See Terence
O'Hara, Federated
Stores to Rivals, WASH. POST, Aug.
31, 2005, at
Terence O'Hara,
Federated Must Sell Stores
Aug. 31,2005,
at DI;
CaliforniaRequires
Requires SpinojJS
Spinoffs to Clear
Clear Federated-May
Federated-May Merger,
Merger, 89 ANTITRUST &
California
& TRADE REG. DAILY
DAILY
258 (BNA),
(BNA), Sept.
Sept. 2, 2005;
2005; Press Release,
Release, N.Y.
N.Y. St.
St. Att'y Gen.,
Gen., Department
Department Store Chain to Divest Three
31
286
GEORGIA STATE
STATE UNIVERSITY
(Vol.
[Vol. 26:2
Pennsylvania mandated that Macy's
Massachusetts, New York, and Pennsylvania
Macy's
divest twenty-six duplicate stores in malls, and further required that
the stores could only be sold to traditional department store
companies,
companies, 211 even if Macy's
Macy's received
received higher offers from other
2 12
212
parties.
New York's then Attorney General Eliot Spitzer said that the
divestiture agreement
because otherwise Macy's
Macy's
agreement was necessary because
acquisition
department store competition
acquisition of May would end department
competition for some
213
21
3
consumers:
"[w]ith
consumers will benefit from
"[w]ith the divestitures, consumers
increased services that will result
lower prices, greater choice, and increased
from the competition
competition generated
generated by placing the divested department
department
21
4
ownership."
stores under new ownership.,,214
At least publicly, Macy's indicated
acquiescence
acquiescence to the divestiture;
divestiture; James Sluzewski, a spokesman for
Macy's, said that "the
"the agreement
agreement with state antitrust regulators was
the
large
number
expected,
given
and Bloomingdale's
Bloomingdale's
expected,
number of Macy's
215
stores."
May
with May stores.,,215
stores that overlap in malls with
ordered divestitures, Macy's chose to sell off an
In addition to ordered
additional eighty stores, or approximately
approximately twenty percent
percent of the entire
216
216
May
purchase.
To
increase
geographic
concentration,
increase
concentration, Macy's sold
May
to, or swapped locations with, other department
department stores, including
NY
NY Stores As Part
Part of
of Acquisition
Acquisition (Aug. 30, 2005),
2005), http://www.oag.state.ny.
us/press/2005/aug/aug3ObO5.html; Press
uslpressl2OO5/auglaug30b_05.html;
Press Release, Mass.
Mass. Att'y
Att'y Gen., AGS
AGS Reach
Reach Multi-State Antitrust
Antitrust
Agreement
Retail Rivals
Rivals to Take
Take Over
Space Currently
by Filene's
Filene's and
and Macy's
Macy's
Agreement Requiring
Requiring Retail
Over Space
Currently Occupied
Occupied by
(Aug. 30,
30, 2005) (on file with
with author).
the attorneys
included Nordstrom,
Nordstrom,
211. The traditional
traditional department
department stores acceptable
acceptable to the
attorneys general
general included
Dillard's, Gottschalk's,
Gottschalk's, Neiman Marcus, Saks
Saks Fifth
Fifth Avenue,
Avenue, Sak's Department Store
Store Group (which
included Parisian), Bon-Ton, Elder-Beerman, Boscov's,
Boscov's, Belk
Belk and
and Von
Von Maur.
Maur. O'Hara, supra note
note 210.
210.
212. See id; William
T. Lifland
Lifland &
Elai Katz, Department Store Combination
Scrutinized by
States,
212.
William T.
& Elai
Combination Scrutinized
by States,
State of California,
California,Commonwealth
Commonwealth of
of
234 N.Y.
N.Y. L.J.
LJ. 22 (Sept. 22, 2005);
2005); Assurance,
Assurance, State of
ofNew York, State
Massachusetts, Commonwealth
Commonwealth of Pennsylvania and State of Maryland Against Federated Department
Massachusetts,
Department
Inc. at
20Assurance.pdf (last
at 6,6, http://www.oag.state.ny.us/mediacenter/2005/aug/Federated
http://www.oag.state.ny.uslmedia_centerI2005/auglFederated%20Assurance.pdf
(last
Stores, Inc.
visited Aug. 17, 2008). Another
Another copy
copy of the Assurance can be
be found
found atat
http://ag.ca.gov/newsalerts/cms05/05-071_Oa.pdf
(last visited Aug.
http://ag.ca.gov/newsalertslcms05/05-071_0a.pdf(last
Aug. 17,
17, 2008). The settlement
settlement required
required
only that
that the offers from traditional
department store companies
companies be "commercially reasonable."
reasonable." Id.
Id.
213. Press Release, N.Y.
N.Y. St. Att'y Gen.,
Gen., Department Store Chain
Chain to
to Divest
Divest Three NY Stores As Part
30, 2005), http://www.oag.state.ny.us/press/2005/aug/aug3ObO5.html.
of Acquisition (Aug.
(Aug. 30,2005),
http://www.oag.state.ny.uslpressl2005/auglaug30b_05.html.
Id.
214. /d.
supra note 210.
215. O'Hara,
O'Hara, supra
210. Though Mr.
Mr. Sluzewski's comment
comment is interesting,
interesting, it does
does not explain
why
why the
the FTC
FTC reached
reached such
such aa different conclusion
conclusion after its
its own investigation.
216. Federated Announces Plan to Expand Macy's Brand in 2006; About 330 May Company Stores
to Convert
Convert to Macy's
Macy's Nameplate
Merger, Macy's Inc., Bus. WIRE,
WIRE, July
July 28, 2005,
2005,
Nameplate Following
Following Merger,
http://www.macysinc.com/investors/maymerger/template/pressrelease.asp?item-id=736315.
http://www.macysinc.comlinvestors/maymerger/templatelpressrelease.asp?item_id=7363 15.
32
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20101
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287
2 17 Macy's converted a
Boscov's
and Belk.
former May
May stores
stores
Boscov's and
Belk.217 Macy's
converted a few
few former
218 But
into its
upscale department
store, Bloomingdales.
Bloomingdales. 218
But the
majority
into
its upscale
department store,
the majority
of the
closed department
department stores
were sold
sold to
to Target
of
the closed
stores were
Target or back to
to the
219
mall owners?19
owners.
Mall owners
owners recognize
new department
store
mall
Mall
recognize that
that new
department store
entry is
is unlikely
unlikely and
former department
stores were
were
entry
and many
many of
of these
these former
department stores
turned into
multi-tenant space,
restaurants, food
turned
into multi-tenant
space, restaurants,
food courts,
courts, movie
movie
theaters,
goods stores,
perhaps permanently
theaters, or
or sporting
sporting goods
stores, perhaps
permanently eliminating
eliminating
220
competition.
and
entry
store
department
future
of
the possibility
the
possibility of future department store entry and competition?20
Macy's also
also sold
sold what
what remained
remained of
Lord &
& Taylor
chain to
to
Macy's
of the
the Lord
Taylor chain
2211
billion dollars. 22
over one
for just
equity group,
private equity
NRDC,
NRDC, aa private
group, for
just over
one billion dollars.
Lord
Lord
& Taylor's
Taylor's flagship
flagship store
store in
in New
New York
York City
City by
itself was
was valued
valued
by itself
222
at
at $384 million
million dollars?22
dollars.
DepartmentStores
L. Department
Stores Today
few years,
years, there
been many
many attempts
attempts to
to label
In the
the past
past few
there have
have been
label
department
stores, particularly
particularly middle-market
department stores
such
department stores,
middle-market department
stores such
217. Id;
Exchange Stores
Stores with Belk, BUS.
http://findarticies.com/p/
Id.; Federated
Federated to Exchange
Bus. WIRE, Nov. 9, 2006, http://findarticles.com/p/
articles/mi_mOEIN/is_2006_Nov_9/ai n27046988; Shopping
articleslmi_mOEIN/is_2006_Nov_9/ai_n27046988;
Shopping Centers Today, Boscov's Buys 10
Federated
Stores, INT'L COUNCIL
CENTERS, Feb. 6, 2006, http://www.icsc.org/srch/
http://www.icsc.org/srch/
COUNCIL OF SHOPPING CENTERS,
Federated Stores,
apps/newsdsp.php?storyid=2103. Boscov, the last remaining large family owned
owned department
department store,
appslnewsdsp.php?storyid=2\03.
Closing Sales Begin Soon,
II bankruptcy
bankruptcy in August of 2008. Kim Leonard, Boscov's CloSing
declared Chapter 11
PITTSBURGH TRIB.-REv.,
TRIB.-REV., Aug. 5,2008.
5, 2008. Boscov's acquisition of Macy's stores
PmSBURGH
stores came at a bad time.
Because of the slow-down
slow-down in the economy in 2008, compounded
compounded by the expense of buying so many
Macy's stores, Boscov's filed for bankruptcy in 2008. Id.
Id. After closing
closing several stores, Boscov's intends,
intends,
however, to remain in business. Id.
Id.
218. Shopping Centers Today, Federated
Federatedto Close
Close Six More Stores,
Stores, INT'L COUNCIL OF SHOPPING
http://www.icsc.org/srch/apps/newsdsp.php?storyid=2030.
CENTERS, Oct. 27, 2005,
2005, http://www.icsc.org!srch/appslnewsdsp.php?storyid=2030.
219. Shopping Centers
Federated Sells 4 Mall Anchor Stores to Target,
Target, INT'L COUNCIL
COUNCIL OF
Centers Today, Federated
http://www.icsc.org/srch/apps/newsdsp.php?storyid=2213;
SHOPPING CENTERS,
CENTERS, July 20, 2006, http://www.icsc.org!srch/apps/newsdsp.php?storyid=2213;
Nine Federated
Federated Stores,
Stores, INT'L COUNCIL OF SHOPPING
Shopping Centers Today, Simon Buys Back Nine
http://www.icsc.orgtsrch/apps/newsdsp.php?storyid=2164. See also,
also, e.g., Dana
CENTERS, May 2, 2006, http://www.icsc.org/srch/appslnewsdsp.php?storyid=2164.
Dana
Hedgpeth &
& Michael
Shaking up Regional
Retail, Federated-May
Michael Barbaro, Shaking
Regional Retail;
Federated-May Merger
Merger Likely to Bring
Closings,ReshufJ/ing,
Reshuffling, WASH. POST, Mar. 1,2005,
1, 2005, at EI.
El.
Closings,
220. Id.
Id.
221.
FinalizesSale, CHI. TRIB., Oct. 4, 2006,
221. Federated
Federated Finalizes
2006, at C2; Press Release, NRDC Equity Partners,
NRDC Completes
Completes Acquisition
& Taylor (Oct. 3,
2006), http://www.nrdcequity.com/pdf/pr/
http://www.nrdcequity.com/pdf/pr/
Acquisition of Lord &
3,2006),
NRDCequityLandTacquisition.pdf;
&
NRDCequity_LandTacquisition.pdf; Press Release, NRDC Equity Partners, NRDC to Acquire Lord &
Taylor
062206.pdf.
Taylor (June 22,
22, 2006), http://www.nrdcequity.com/pdf/pr/nrdcacquiresLT
http://www.nrdcequity.com/pdf/pr/nrdc_acquiresLT_062206.pdf.
222. Sharon Edelson, With Federated-May
Federated-MayMerger,
Merger,Developers
Developers Eye L&T Flagship,
Flagship, WOMEN'S WEAR
DAILY,
17, 2005. The same Wall Street
& Taylor's flagship at $384
DAILY, June 17,2005.
Street analyst
analyst who valued Lord
Lord &
"(t]here is no way the FTC will allow Federated to keep Macy's, Bloomingdale's
million said "[t]here
Bloomingdale's and Lord
& Taylor ....
&
.... Federated would
would become too dominant
dominant a presence."
presence." Id.
Id.
33
288
[Vol.
(Vol. 26:2
23
as Macy's, as a dying breed.2223
Some economists have suggested that
under-one-roof convenience,
the under-one-roof
convenience, the bailiwick
bailiwick of department stores,
is now pushing consumers desiring an easier and quicker
quicker shopping
224
experience
experience towards specialty stores such as Gap and Limited.224
In 2008 and 2009, the American
American economy slowed and entered
entered into
substantially all sectors, largely related
recession in substantially
related to difficulties
difficulties in
the real estate market and related financial institution
institution shake-outs. The
economy
year 2007, after the Macy's/May
Macy's/May merger but before
before the economy
strengths of retail and
slowed, may give a better
better indication of the strengths
department
department stores.
In 2007, department
department stores were alive and well, and doing better
225 In fact, it is the specialty stores that may be
than specialty
specialty stores. 225
226
the most endangered. 226
advantage the department
department store
"The great advantage
has is the ability to quickly move from one brand to another
another to keep
keep
fresh," said Stephen
Stephen I. Sadove, chief executive of Saks; "[t]he
itself fresh,"
"[t]he
227
that luxury."
have that
specialty store does not have
lUXury. ,,227
During the past few years, Limited Brands, Inc. has sold off Lane
Bryant, Lerner New York, Abercrombie
Abercrombie & Fitch, and Tween Brands,
228
consolidated Structure and Express
of
In May of
and consolidated
Express into one chain.228
2007,
Limited
announced
that
it
would
sell
a
majority
interest
in
its
2007,
announced
underperforming
considering options for its
underperforming Express stores, and is considering
229
229 The
Limited stores.
goal of all these divestitures is to allow
allow
223. JefUey
Jeffrey A. Trachtengerg
Trachtengerg &
& Ann Zimmerman,
Department Stores
Dying? WALL
Zirnmennan, Are Department
Stores Dying?
WALL ST.
ST. J.
Edition),
May
2002,
http://www.wsjclassroomedition.com/archive/02may/
(Classroom
Edition),
2002,
http://www.wsjclassroomedition.comlarchiveI02may/
COVR_department.htm.
department.htm.
224. Id.
Id
225.
Stores Surge,
2006, at
225. Michael Barbaro, Showing a New Style, Department
Department Stores
Surge, N.Y. TIMES,
TiMES, Nov. 17,
17,2006,
Al; Anne
Retailers Post
Post Weak April Sales, ASSOCIATED
AI;
Anne D'lnnocenzio,
D'lnnocenzio, Retailers
AsSOCIATED PRESS
PRESS (May 10, 2007),
2007),
available at http://www.usatoday.comlmoney/markets/2007-05-1O-1947799814_x.htm.
http://www.usatoday.com/money/markets/2007-05-10-1947799814_x.htm. See Sandra
available
Shoppers Buying into Department
DepartmentStore Makeovers,
Makeovers, CHI.
CHI.TRm.,Oct.
17, 2006, at CI; see
Jones, Young Shoppers
TR!B.,Oct. 17,2006,
also generally
Macy's Net Slips; Warning
Issued,CHI.
CHi. TRIB.,
TRIm., Aug. 14,
2008, at C2.
also
generally Macy's
Warning Issued,
14,2008,
Substance: Liz Clairborne's
Clairborne's Unexpected
Unexpected Stumble-Buying Up
Up Juicy
226. Rachel Dodes, Style & Substance:
Couture, Lucky Jeans
Wasn't Enough
Enough to Escape
2, 2007, at BI (Gap
WALL ST. J.,
J., May 2,2007,
Couture,
Jeans Wasn't
Escape Industry Woes, WALL
& Towne chain).
closes Forthe &
227. Barbaro,
supra note 225.
Barbaro, supra
Express, CIN.
1; Reuters, Limited to Sell
228. Limited to Sell Most of Express,
CIN. POST, May 16, 2007, at BI
BII;
Interest in a Unit
Unit and Explore
Explore the Sale of Another, N.Y. TIMES,
CS; Bloomberg News,
TIMEs, May 16, 2007,
2007, at C5;
Interest
Quarterly
Profit Plunges
Plungesat Limited Brands,
TIMES, May
17, 2005, at C3.
Quarterly Profit
Brands, N.Y. TIMEs,
May 17,2005,
229. Id.
Id
34
2010]
20101
AN
QUANDARY
AN ANTITRUST
ANTITRUST QUANDARY
289
"intimate apparel,
Limited Brands
to focus on "intimate
apparel, and personal care and
0
23
beauty. ,,230
beauty.
In May of 2007, Gap, Inc., owner of Gap, Banana
Banana Republic, and
consecutive quarterly decline in
in
Old Navy, reported its seventh consecutive
23
1
profits.
profitS?31
Gap's chief executive was fired in January 2007 after a
third year
of
dismal holiday sales, and the chain is considering selling
232
232
itself.
itself.
During the past two years there has been a cooling of the retail
market, and that has included
included a decline in sales in most clothing
233 Some of this can be attributed to rising fuel prices and
outlets. 233
inflationary pressures, as well as a decrease in consumer
other inflationary
consumer
234
234
Specialty
discretionary spending.
Specialty retailers such as Gap,
Abercrombie &
& Fitch, and Limited have had a significant
significant drop in
235
sales.
department stores, however, such as
same-store sales?35
Upscale department
gains. 236
substantial gains?36
posted substantial
Saks Fifth Avenue and Nordstrom, posted
department stores and specialty stores showed
Although many department
showed slower
slower
growth or losses in 2007 as compared to 2006, the department
department stores
stores
237 In
as a whole are doing no better or worse than specialty stores. 237
In
specialty
fact, Macy's did better than many of the most famous specialty
stores.
stores.
For example, Liz Claiborne, which operates retail stores under
several brand names and also sells to department stores, experienced
experienced
2007.238 During the
a sixty-five
sixty-five percent drop in profits from 2006 to 2007?38
3,000
same period, Gap, which is planning on laying off as many as 3,000
employees,
had
a
drop
in
same-store
sales
of
sixteen
percent,
and
and
employees,
same-store
230. Id.
Id.
and Gap
Gap Say Earnings
EarningsFell
Fell in
in the Quarter,
231. Bloomberg News,
News, Ann Taylor and
Quarter, N.Y.
N.Y. TIMEs,
TiMES, May
May 25,
2007, atC2.
at C2.
2007,
Gap Chief
Steps Down, N.Y. TiMES,
TIMES, Jan.
232. Michael Barbaro &
& Andrew Ross
Ross Sorkin,
Sorkin, Under
Under Fire,
Fire, Gap
ChiejSteps
23, 2007, at
at CI;
Andrew Ross
Ross Sorkin,
Gap Is Said to Explore Selling Itself,
N.Y.
23,2007,
CI; Michael
Michael Barbaro
Barbaro && Andrew
Sorkin, Gap
Itself, N.Y.
TIMEs, Jan. 9,
2007, at
C 1.
TIMES,
9,2007,
at CI.
Clairborne's Unexpected Stumble-Buying Up Juicy
233. Rachel Dodes,
Dodes, Style && Substance:
Substance: Liz Clairborne's
Juicy
Couture,
Wasn't Enough
Enough to Escape
Industry Woes, WALL ST.
ST. J., May
May 2,2, 2007,
2007, atat BB1.
I.
Couture, Lucky Jeans
Jeans Wasn't
Escape Industry
234. Id.
Id.
235. Id.
Id.
236.
Profits Grow,
Grow, ASSOCIATED
236. Emily Fredrix,
Fredrix. Kohl's,
Kohl's, Penney,
Penney, Nordstrom
Nordstrom Profits
AsSOCIATED PRESS, May
May 17, 2007.
D'Innocenzio, supra
supra note 225.
237. D'lnnocenzio,
238. Dodes, supra
supra note 233.
35
290
[Vol.
[Vol. 26:2
Abercrombie &
& Fitch had a fifteen percent drop m
in same-store
Abercrombie
239
239
sales.
Wal-Mart may have been exaggerated,
exaggerated,
Fears of competition
competition from Wal-Mart
Wal-Mart's attempt to sell better fashions and more
at least for now. Wal-Mart's
240 "[o]ne
Wal-Mart's main
"[o]ne of
ofWal-Mart's
upscale clothing has been unsuccessful:
unsuccessful: 24o
broaden its appeal to higher-income
higher-income
problems is that its strategy to broaden
shoppers with upscale merchandise
merchandise was poorly executed. It filled its
fall clothing racks with too many trendy items like skinny jeans that
want." 24 1
shoppers just didn't want.,,241
Meanwhile,
Meanwhile, Macy's stock rose for most of 2007, with as much as a
forty-three percent
percent increase in its share price from the time it
242 "The
announced
2005.242
announced its merger with May in February 2005.
"The merger is
not just going well,"
well," said Terry Lundgren, Macy's chief executive.
2 4 3 Such an outcome was in fact predicted
"It's going extremely
extremely well.
well.,,243
predicted
by two FTC economists, who studied May's earlier
of
earlier acquisition of
Associated
Associated Dry Goods and found that May experienced
experienced "positive
abnormal returns,"
returns," suggesting
had lessened competition
competition
abnonnal
suggesting the merger
merger
244
consumers.
for
prices
higher
prices for consumers.244
and led to
Same-store sales, for Macy's
Same-store
Macy's stores open at least one year and that
had not been part of May, were
were up more than seven percent
percent for the
245
2007.
In 2006, same-stores sales were up more than
first part of 2007.245
2466 Macy's has experienced
three-and-one-half percent. 2246
experienced difficulties
difficulties
three-and-one-half
digesting the former May stores, but even with the May stores,
239.
D'Innocenzio, supra
239. D'innocenzio,
supra note 225.
Wal-Mart May Fashion a Comeback in Apparel,
240. Sandra O'Loughlin, Research:
Research: Wal-Mart
Apparel, BRANDWEEK,
BRANDWEEK,
http://www.allbusiness.com/marketing-advertising/branding-brandApr. 2, 2007, available
available at http://www.allbusiness.com!marketing-advertising/branding-branddevelopment/4675186-1.html; Wal-Mart
Wal-Mart ShujJIes
Shuffles Chief
Chief Marketing
INT'L,
developmentl4675186-l.html;
Marketing Officer, UNITED
UNITED PRESS iNT'
L, Jan.
at
http://www.upi.com/BusinessNews/2007/01/24/WalMart-shuffles
24, 2007, available
available
http://www.upi.com/BusinessNewsl2007!01124IWaIMart_shuffies
chiefmarketingofficer/UPI-73631169661284; Parija B.
Branding Oops,
chieCmarketinILofficer/UPI-73631169661284;
B. Kavilanz,
Kavilanz, Corporate
Corporate Branding
CNNMONEY.COM,
available
at
CNNMONEY.COM,
Mar.
19,
2007,
available
at
http://wakeupwalmart.com/mews/article.htm?article=696 (last
http://wakeupwalmart.com!mewslarticle.htm?article=696
(last visited
visited Oct. 13, 2009).
2009).
241. Anne
Anne D'innocenzio,
D'Innocenzio, Wal-Mart
Wal-Mart Sales Decline;
Results, Alarms
241.
Decline; Report Contrasts
Contrasts with Rivals' Results,
Industry, FT.
FT. LAUDERDALE
SUN-SENTINEL, Dec.
Dec. 1,2006,
1, 2006, at
at 3D.
3D.
Industry,
LAUDERDALE SUN-SENTINEL,
FederatedAs Flush
FlushAs
It Looks?, BUS.
May 28,2007,
28, 2007, at
at 71.
71.
242. Robert Berner, Is Federated
As II
Bus. WK., May
Id.
243. Id.
244. John
John David
David Simpson
David Hosken,
Retailing Mergers
244.
Simpson && David
Hosken, Are
Are Retailing
Mergers Anticompetitive?:
Anlicompetilive?: An Event Study
Study
Analysis, http://www.fic.gov/be/workpapers/wp216.pdf
(last visited
visited Aug.
http://www.ftc.govlbe/workpapers/wp216.pdf(last
Aug. 17,
17, 2008).
2008).
Analysis,
245. Bemer,
Berner, supra
supra note 242.
246. Barbaro,
note at
at 225.
246.
Barbaro, supra
supra note
225.
36
20101
2010)
AN ANTITRUST
AN
ANTITRUST QUANDARY
QUANDARY
291
experienced an overall increase
Macy's experienced
increase in same-store
same-store sales of almost
247
one-half-of-one percent during the first part of 2007.
2007.247
one-half-of-one
In 2007, Macy's
Macy's operating
operating income as a percentage of net revenues
jumped sixty-four
sixty-four percent, up to more than four percent
percent from twoand-one-half
percent in 2006?48
and-one-half percent
2006.248 Some analysts suggested
suggested that
Macy's profitability
took
a
hit
from
the
inevitable
difficulties
of an
profitability
inevitable
enormous corporate
enormous
corporate merger and consolidation, and predicted a threesales, at least before the
to-four percent increase in same-store
249
249
sectors.
all
in
slowed
economy
economy
in all sectors.
Other department
same-store sales
department stores did well, too: Saks had same-store
increases
of
increases of almost twelve percent
percent and Nordstrom had an increase of
250
25
over three percent.
Sales rose almost seven
seven percent at Neiman
Neiman
of
Marcus and almost nine percent
percent at Saks in the first three months of
251
2007.251
According
to
the
chief
executive
of
J.C.
Penney,
after
four
2007.
executive
decades
"[t]he department
department store has become
destination
become a destination
decades of decline, "[t]he
'252
again.
,,252
again.
II. ANTITRUST
ANTITRUST FRAMEWORK
FRAMEWORK
A. Background
For decades, courts and commentators
commentators have cited the Supreme
Supreme
Court's admonition
admonition that the antitrust laws were enacted
protect
enacted to protect
,253
66
competition, not competitors.,,253
competitors.
But according to Judge Robert
Robert
"competition,
Bork-a major contributor
economicsBork-a
contributor to the doctrine of law and economics"preservation of competition was often cited as the aim of the
though "preservation
Id.
247. Jd.
Federated?MOTLEY
248. Jeremy MacNealy, Will "M" Be a Moneymaker for Federated?
MOTLEY FOOL,
FOOL, May 18, 2007,
2007,
http://www.fool.com/investing/general/2007/05/18/will-m-be-a-money-maker-for-federated.aspx.
http://www.fool.comlinvestingigeneraU2007/05/18/will-m-be-a-money-maker-for-federated.aspx.
249. Federated
STANDARD &
Apr. 21,
21,
249.
Department Stores,
Stores, Inc.,
Inc., STANDARD
& POOR'S
POOR'S STOCK
STOCK REP.
REp. (McGraw-Hill,
(McGraw-Hili, Apr.
2007).
2007).
250. D'Innocenzio,
D'Innocenzio, supra
supra note 225.
225.
251. Barbaro, supra
251.
supra note 225.
252. Jd.
Id. After
After losing more
more than $900 million inin 2003, J.C.
J.C. Penney
Penney earned more than $1
$1 billion in
in
Id.ItIt planned to open
2006. Jd.
open 28 new stores
stores inin 2007.
2007. Id.
Jd.
See, e.g., Brunswick
253. See,
Brunswick Corp.
Corp. v. Pueblo Bowl-O-Mat,
Bowl-O-Mat, Inc., 429
429 U.S. 477,
477, 488 (1977);
(1977); Brown Shoe
Shoe
Co.
U.S., 370
294, 320
Co. v.v. U.S.,
370 U.S.
U.S. 294,
320 (1962).
(1962).
37
292
GEORGIA STATE
STATE UNIVERSITY
REVIEW
[Vol 26:2
[VoL
law, there seemed
seemed no agreed definition
of
definition of what, for the purposes
purposes of
254
antitrust, competition is."
is. ,,254
55
Law and economics
economics 2255
pro-market and largely antioffers a pro-market
256
government
government view of antitrust policy,
policy,256 firmly rooted in neoclassical
257 assumption that minimizing
price theory and with a Coasian 257
transaction
transaction costs will promote perfect
perfect (or near perfect)
58
competition. 2258
Law and economics informs that at least in the long
run, markets tend to correct
correct their own imperfections. In fact,
government
interference tends only to prolong the distortion or create
government interference
259 And "court-ordered antitrust
new imperfections.
actually
imperfections. 259
"court-ordered
fixes actually
make markets
competitive, or injure consumers
markets less rather than more competitive,
260
for the benefit of competitors."
competitors.,,260
competition itself is less
Markets dynamics aside, the concept of competition
clear. Some would argue that competition
competition is about keeping prices
prices low
low
26
1
consumers;
or
for consumers;261
others suggest it is about consumer
consumer welfare, or
societal wealth maximization
maximization through allocative efficiency.262
efficiency. 262 Some
of
antitrust regimes support the notion of competition
competition as a means of
263
263
protecting small businesses. Others debunk the entire field, arguing
that law and economics-if
economics-if not all of antitrust-is based on an
unrealistic economic model that compares the structure
structure of existing
254. Id.
Id.
and economics
often referred
referred to
to as the "Chicago School,"
School," because of its association with
255. Law
Law and
economics is often
discussion supra
supranote 7. According to Judge
Judge Bork, the books and articles
the University of Chicago. See discussion
transformed and infused antitrust with economics began
began at the University of Chicago Law School
that transformed
and to a lesser extent, the Department of Economics
Graduate School of Business. ROBERT H.
Economics and Graduate
BORK,
BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 427 (Basic Books 1993). But see
Herbert
Post-ChicagoAntitrust:
and Critique,
Critique, 2001 COLUM. Bus.
BUS. L. REv.
REV. 257,
Herbert Hovenkamp,
Hoveokamp, Post-Chicago
Antitrust: AA Review and
257,
259
(2001) (noting that "[c]ontrary
"[c]ontrary to common
259 (2001)
common perception, the Chicago
Chicago School was hardly the first time
time
economic theory").
that United
United States antitrust law confronted economic
256. See generally
id
generally id.
Kahneman, Jack L. Koetsch,
Knetsch, &
& Richard H. Thaler, Experimental
257. See generally
generally Daniel Kahneman,
Experimental Tests of
of
the Endowment Effect and the Coase
Coase Theorem,
Theorem, 98 J. POL. ECON. 1325
1325 (1990).
(1990).
Chicago's Procrustean
ProcrusteanBed: Applying Antitrust Law in
in Health
Health Care,
258. Thomas L. Greaney, Chicago's
Care, 71
ANTITRUST
ANTITRUST L.J. 857, 859
859 (2004).
(2004).
supra note
note 256, at
at 257,
259. Hovenkamp,
Hovenkamp, supra
257, 269-70; Greaney, supra
supra note 258, at 857, 860-61.
860-61.
260. Hovenkamp,
Hovenkamp, supra
257, 267.
261.
261. Id
Id.
262. Id.
Id.
263. See ANDREW I.I. GAVIL,
JONATHAN B. BAKER, ANTITRUST
ANTITRUST LAW IN
IN
GAVIL, WILLIAM E. KOVACIC
KOVACIC &
& JONATHAN
CASES, CONCEPTS AND
(Thomson/West
PERSPECTIVE; CASES,
AND PROBLEMS IN COMPETITION POLICY
POLICY 31-32 (Thomson/West
2002);
OtherSide ofHarmony:
Harmony: Can
Trade and
and Competition
in
2002); Julian Epstein, The Other
Can Trade
Competition Laws Work Together in
U. INT'L L. REv.
REV. 343, 360
17 AM.
AM. U.!NT'L
360 (2002).
(2002).
the International
International Marketplace?,
Marketplace?, 17
38
20101
2010)
ANTITRUST QUANDARY
QUANDARY
AN ANTITRUST
293
markets with an arbitrary abstract
abstract and unattainable
unattainable ideal of perfect
264
264
competition.
The question of whether department store mergers
mergers are (or can be)
anticompetitive raises these threshold questions and more. Most
anticompetitive
coordination between
between businesses,
schools of antitrust are fearful of coordination
but differ on the odds of success for potential cartels. According to
law and economics, two or three firms can make a market
market
dynamically competitive;
supra-competitive
dynamically
competitive; if that is insufficient, supra-competitive
postpricing will be undermined
undermined by new entrants into the market. 265 Postcomplement to law and
Chicago antitrust-an alternative, or perhaps complement
266
economics266-believes
-believes that markets are "somewhat
"somewhat messier" than
economics
economics claims, and that law and economics
law and economics
economics is less robust
in explaining all behavior that arises through competition, or lack
267
thereof.267
Post-Chicago
"fearful of strategic
Post-Chicago antitrust is "fearful
strategic
thereof.
anticompetitive behavior
anticompetitive
behavior by dominant firms,"
firms," and also believes that
268
government
government intervention can be successful.268
Although Macy's acquisition
acquisition of May does not present the
opportunity to definitively resolve this long debate, the question of
of
whether the FTC correctly
correctly applied the relevant antitrust merger law
remains.
remams.
generally Colin Camerer,
Behavioral Economics,
Economics, Past,
264. See generally
Camerer, Behavioral
Past, Present
Present &
& Future,
Future, in COLIN
CAMERER,
ADVANCES IN BEHAVIORAL
ECONOMICS (2003);
CAMERER, GEORGE LOEWENSTEIN
LOEWENSTEIN &
& MATHEW
MATHEW RABIN, ADVANCES
BEHAVIORAL ECONOMICS
Christine Jolls, Cass Sunsetein &
& Richard H. Thaler, A Behavior
Behavior Approach to Law and Economics,
Economics, 50
50
STAN.
REV. 1471
(1998); Daniel Kahnemann
Kahnemann &
& Amos Tversky, Prospect
of
STAN. L. REv.
1471 (1998);
Prospect Theory,
Theory, An Analysis of
Decision
UnderRisk, 47 ECONOMETRICA
ECONOMETRICA 263, 263 (1979).
(1979).
Decision Under
supranote 256, at 257,
257, 266.
265. Hovenkamp,
Hovenkamp, supra
& BAKER, supra
supra note 263, at 68. See Hovenkamp, supra
266. GAVIL,
GAVIL, KOVACIC
KOVACIC &
supra note 256, at 257, 25825859.
267. Hovenkamp,
258. See also Barry
IT Grinnell Corp.,
257,258.
Barry Wright Corp. v. ITT
Hovenkarnp, supra
724
(1983) ("Nonetheless,
("Nonetheless, while
724 F.2d 227, 234 (1983)
while technical
technical economic
economic discussion
discussion helps to inform
infonn the
antitrust laws, those laws cannot precisely replicate the economists'
economists' (sometimes
(sometimes conflicting) views. For,
unlike economics, law is an administrative system
system the effects of which depend upon the content of rules
and precedents
precedents only as they are applied by judges and juries in courts and by lawyers advising their
clients. Rules that seek to embody
embody every economic
economic complexity
complexity and qualification may well,
well, through
through the
vagaries
counter-productive, undercutting the very economic ends they seek to
vagaries of administration, prove counter-productive,
serve.").
268. Hovenkamp, supra
supranote 256, at 257,
257, 267.
39
294
(Vol.
[Vol. 26:2
B.
B. Clayton § 7
269
empowers the
government 269
to enjoin
enjoin mergers
mergers whose
whose
§§ 7 empowers
the government
to
effect
"may
be
substantially
to
lessen
competition, or
or to
to tend to create
create
effect "may be substantially to lessen competition,
270 This
This allows
allows the
the government
government to challenge
aa monopoly.,
monopoly.,,270
challenge mergers
mergers
before
are consummated
consummated and
and lead
lead to
to actual
anticompetitive
before they
they are
actual anticompetitive
effects, arresting
arresting mergers
mergers at
at aa time
time when the trend
trend towards aa
effects,
lessening
of
competition
in
a
line
of
commerce
was still
its
lessening of competition in a line of commerce was
still in
in its
incipiency.
incipiency.
Clayton § 77A,
the Hart-Scott-Rodino
Hart-Scott-Rodino Antitrust
Antitrust Improvements
Improvements Act
Clayton
A, the
Act
of 1976
(HSR), requires
to notify
notify the
the FTC
of
1976 (HSR),
requires parties
parties to
to large
large mergers
mergers to
FTC
and
United
States
of Justice
Justice (DOJ)
(and supply
supply
and United States Department
Department of
(DOJ) (and
substantial amounts
amounts of
information) before
before consummating
substantial
of information)
consummating the
the
271
27 1
transaction.
The
reflected aa Congressional
Congressional intent
intent
transaction.
The adoption
adoption of
of HSR
HSR reflected
to more
aggressively block
anticompetitive mergers
through the
to
more aggressively
block anticompetitive
mergers through
the
272
Act.
Clayton Act. 272
Horizontal combinations
antitrust concerns
concerns when
merging
Horizontal
combinations raise
raise antitrust
when the
the merging
parties
produce the
same (or
substitutable) products
products while
competing
parties produce
the same
(or substitutable)
while competing
273
273
in the
same geographic
Both
FTC and
in
the same
geographic market.
market.
Both the
the FTC
and DOJ
DOJ dedicated
dedicated
Clayton
Clayton
269.
Private parties
269. Private
parties also
also may
may sue to enjoin
enjoin a merger. 15 U.S.C.
u.s.c. § 15 (2000). Private
Private parties
parties would,
would,
however,
however, have aa difficult
difficult time
time bringing
bringing a claim under
under Clayton §§ 77 before
before a merger, because
because only
only the
government
government is given access
access to confidential
confidential transaction
transaction materials
materials and a waiting
waiting period
period before
consummation of the merger. See generally
18a(b) (2000) (amending
consummation
generally 15 U.S.C.
U.S.C. § 18a(b)
(amending 15 U.S.C.
U.S.C. § 7A).
Retrospective merger
Retrospective
merger reviews
reviews may
may present few choices
choices for an
an appropriate
appropriate remedy
remedy because it would
require
& BAKER,
require a court to "unscramble
"unscramble integrated
integrated business
business assets and activities."
activities." GAVIL,
GAVIL, KoVACIC
KOVACIC &
BAKER,
supra
supra note 263,
263, at
at 420. See also Hovenkamp,
Hovenkamp, supra
492-93.
270.
15 U.S.C.
(amending 15
270. 15
U.S.C. §§ 18
18 (2000)
(2000) (amending
15 U.S.C.
U.S.C. §§ 7).
7). As originally enacted,
enacted, Clayton
Clayton § 77 contained
contained a
significant weakness
weakness by not
not attempting to regulate
regulate asset
asset acquisitions
acquisitions or
or merger
merger of
of firms that were
were not
direct
In 1950,
direct competitors.
competitors. In
1950, the
the Celler-Kefauver
Celler-Kefauver Act
Act was
was passed
passed to
to amend
amend the
the Clayton
Clayton Act
Act and
and address
these
(1950) (codified as
these issues. Pub.
Pub. L. No.
No. 81-899,
81-899, 64 Stat. 1125
1125 (1950)
as amended
amended at
at 15
15 U.S.C.
U.S.C. §§
§§ 18,
18, 21
(1982
(1982 and Supp. V 1987)).
1987».
271.
271. Hovenkamp,
Hovenkamp, supra
supra note
note 256,
256, at 589.
589. See Introductory
Introductory Guide I to the Premerger
Premerger Notification
Notification
Program:
Program: What Is the Premerger
Premerger Notification
Notification Program?
Program? FTC,
FfC, http://www.ftc.govlbc/hsr/introguides/
http://www.ftc.govlbclhsr/introguidesl
guidel.pdf
(last visited Aug.
guidel.pdf (last
Aug. 17,
17, 2008).
2008). The
The "size of person"
person" and
and "size
"size of transaction"
transaction" tests were
were
increased
increased to
to higher
higher dollar
dollar amounts
amounts effective
effective February
February 21,
21, 2007.
2007. 72 Fed. Reg. 2692-93
2692-93 (Jan. 22,
22, 2007).
The
The tests
tests are
are quite complicated,
complicated, but, generally
generally speaking,
speaking, they
they capture
capture transactions
transactions where
where one
one party has
assets
assets in excess of
of $239.2
$2392 million,
million, or one
one party
party has assets in
in excess
excess of
of $119.6
$119.6 million and the
the other
other party
party
has
$12 million.
has assets
assets in
in excess
excess of
of$12
million. Id; 15 U.S.C.
U.S.C. §§
§§ 18a(aX2)(A)-(B).
18a(aX2)(A)-{B).
272.
324-25.
272. ROSS,
ROSS, supra note 8, at 324-25.
273.
273. Hovenkamp,
Hovenkamp, supra
supra note
note 256,
256, at
at 492;
492; Jonathan
Jonathan Baker, Market Definition: An
An Analytical
Analytical
Overview, 74
74 ANTrrRUST
ANTITRUST L.J.
LJ. 129,
129, 129-30
129-30 (2007).
(2007).
40
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20101
AN ANTITRUST
ANTITRUST QUANDARY
QUANDARY
AN
295
substantial resources
resources to examining
examining horizontal
horizontal mergers
mergers because
because it can
substantial
274
be a path
path to an oligopoly
oligopoly or
or monopoly.
monopoly.274
be
concerns,
order to determine
determine whether
whether a merger raises horizontal concerns,
In order
275
market,
product
relevant
the
determine
the government
government must determine the relevant product market,275
the
be the
the single most difficult task in all of antitrust.
although that may be
pristine formation
formation of
of
"One
reason
is
that
the
concept, even in the pristine
the
"One reason
deliberately an attempt
attempt to oversimplify-for
oversimplify-for working
working
economists, is deliberately
purposes-the very
very complex
complex interactions
interactions between
between a number
number of
of
purposes-the
differently situated
situated buyers and sellers,
sellers, each
each of whom in reality has
differently
' 276
different costs, needs, and
and substitutes.
substitutes.",,276
different
and Submarkets
1. Product
1.
Product Markets and
Submarkets
A relevant antitrust market under Clayton § 7 is one that includes
consider
consumers would consider
fIrms making goods or services that consumers
all firms
cross-elasticity
(considering the cross-elasticity
reasonable substitutes
identical--or
identical--or reasonable
substitutes (considering
demand)-sold within
within the trade area where consumers
consumers might
of demand)-sold
made
This
analysis,
or
services.
the
goods
reasonably
made by
reasonably purchase
customer
dynamics, corporate
corporate documents, and customer
studying industry dynamics,
fIrm in the
needs, leads to an estimate
estimate of the market share for each firm
relevant market. The market
market share data is then used to discern market
market
277
effects. 277
anticompetitive
power and potential anti
competitive effects.
278 the Supreme
Supreme Court stated
Co. v. United
United States,
States,278
In Brown Shoe Co.
determined by the
that "[t]he
"[t]he outer boundaries
boundaries of a market are determined
of demand
interchangeability of use or the cross-elasticity
reasonable
reasonable interchangeability
279
it.",,279
substitutes for
and substitutes
between the product
product itself and
for it.
"wellThe Court also held that within a broad product market, "welldefIned submarkets may exist which, in themselves, constitute
defined
INTEGRATED
OF ANTITRUST: AN INTEGRATED
S.GRIMES, THE LAW OF
SULLIVAN &
& WARREN S.
274. LAWRENCE A. SULLIVAN
Group 2000).
HANDBOOK 575 (West Group
2000).
275. !d.
Id.at 575-76.
275.
Workable
The Need for
and Differentiated
Differentiated Products:
276. James
James A. Keyte, Market
Market Definition
Definition and
Products: The
for aa Workable
Definition: Use and
also Dennis W. Carlton, Market
L.J. 697,
Standard,
63 ANTITRUST L.1.
Standard, 63
697, 703 (1995). See also
Market Definition:
COMPEmloN POL'Y
POL'y lNT'L
1, 3
3 (2007).
(2007).
INT'L 1,
Abuse, 3
3 COMPETITION
277. Id.
Id.
278. 370 U.S. 294 (1962).
Brown Shoe,
Shoe, 370 U.S. at 325.
279. Brown
41
296
GEORGIA
GEORGIA STATE
STATE UNIVERSITY
REVIEW
[Vol. 26:2
26:2
280 Because Clayton § 7
product markets
markets for antitrust purposes."
purposes. ,,280
created
defining a product
created no single standard
standard for derming
product market, the Court
directed
indicia" be used, including
directed that "practical
"practical indicia"
including industry or public
recognition
recognition of the submarket
submarket as a separate
separate economic entity, the
product's peculiar
peculiar characteristics
characteristics and uses, unique
unique product
product facilities,
distinct customers, distinct prices, sensitivity to price changes, and
2811 Examining
specialized vendors. 28
"practical indicia" in Brown
specialized
Examining the "practical
Shoe, the Court held that there were distinct submarkets for men's,
women's,
for
women's, and children's shoes, rather than just a broader market for
282
2
82
all shoes.
It is possible that department stores are a submarket of a greater
greater
products
market.
Many
goods
clothing market, or home
home
sold in
in
department stores can be purchased
purchased elsewhere,
elsewhere, but for more than one
preference to
hundred years, many consumers still continue to show a preference
department stores. This suggests at least some
buy these products
products in department
consumer inelasticity
inelasticity of demand, or refusal to substitute products
(and distribution channels) that law and economics scholars might
283 Indeed, many courts have found antitrust products
find fungible.283
284
the product's
markets limited by the
product's distribution
distribution channel.
channeL 284
Id.(citing United States
(there
280. Id.
States v. E. I. du Pont
Pont de
de Nemours
Nemours &
& Co., 353 U.S.
U.S. 586, 593-95
593-95 (1957)
(1957) (there
mid-1950s,
Motors")).
are two du Pont antitrust cases in the mid-I
950s, this
this case is usually
usually referred to as
as "General
"General Motors"».
281. /d.
Id.
281.
Id.
at
282. Id.
at 325-26. Since Brown
Brown Shoe, however, the
the concept
concept of "practical
"practical indicia" has often
often been
been used
used
by
by courts erroneously, leading
leading many
many commentators and other courts to
to be hostile
hostile to the concept
concept of
submarkets.
submarkets. Baker, supra
supra note 273,
273, atat 74. At least one
one Court
Court of
of Appeals has asked litigants to avoid
avoid the
the
term
term submarket
submarket because
because of
of its
its misuse and complexity. Satellite Television
Television && Associated Res., Inc.
Inc. v.v.
Continental
351, 355,
denied,465
Continental Cablevision of Va., Inc.,
Inc., 714 F.2d
F.2d 351,
355, n.5
n.5 (4th Cir. 1983), cert.
cert. denied,
465 U.S. 1027
(1984).
(1984).
U.S. App. LEXIS
283. See F.T.C. v. Whole Foods Mkt., Inc., 2008
2008 U.s.
LEXIS 16562; F.T.C.
F.T.C. v.v. Staples, Inc., 970
F.
(D.D.C.
F. Supp. 1066, 1076-77 (D.
D.C. 1997);
1997); Bon-Ton Stores, Inc. v. May Dep't Stores Co., 881 F.F. Supp.
860, 869-70 (W.D.N.Y. 1994); David
860,869-70
David J. Dadoun & Diana
Diana L. Dietrich, After Gillette: An Analysis ofof
Premium
Markets Under
17 HARv.
HARV. J.L. &
& PUB.
567, 577
Premium Product
Product Markets
Under the 1992 Merger
Merger Guidelines,
Guidelines, 17
Pus. POL'Y
POL'y 567,
577
(1Ith Cir.
(1994). See also U.S.
U.S. Anchor Mfg.,
Mfg., Inc. v. Rule Indus.,
Indus., Inc., 77 F.3d 986, 992-97 (11th
Cir. 1993), cert.
denied,
(1994); Keyte,
Keyte, supra
supra note
709, 712;
Vitale v.
v. Marlborough
Gallery, 1994
1994
512 U.S.
U.S. 1221
1221 (1994);
note 276,
276, atat 709,
712; Vitale
Marlborough Gallery,
denied, 512
(S.D.N.Y. 1994).
WL 654494, at *8 (S.D.N.Y.
284. See,
See, e.g., California v. Am. Stores Co., 872 F.2d
F.2d 837,
837, 841 (9th
(9th Cir.
Cir. 1989) (separate product
market for supermarkets); Henry v.v. Chloride,
Chloride, Inc.,
Inc., 809 F.2d
F.2d 1334, 1342 (8th Cir. 1987) (separate
(separate
product market
automotive battery
battery sellers);
Photovest Corp.
Corp. v.
v. Fotomat
Fotomat Corp.,
Corp., 606
606 F.2d
F.2d 704,
712
product
market for
for automotive
sellers); Photovest
704, 712
(1980) (separate product market
(7th Cir.
Cir. 1979), cert.
cert. denied,
denied, 445
445 U.S.
U.S. 917
917 (1980)
market for drive-through
drive-through film
processors); Bon-Ton
Supp. at
at 860
for department
department stores).
processors);
Bon-Ton Stores,
Stores, 881
881 F.
F. Supp.
860 (separate
(separate product
product market
market for
stores).
42
2010)
2010l
ANTITRUST QUANDARY
QUANDARY
AN ANTITRUST
297
2. Cluster
ClusterMarkets
Markets
2.
United States v. Philadelphia
Philadelphia National
National Bank ("PNB"),
("PNB"), the
In United
decisionSupreme Court-just one year after the Brown Shoe decision285
285
concept of a cluster market: a market comprised of a
endorsed the concept
cluster of goods or services that could be purchased separately, save
for a consumer preference
preference to buy them together.
In PNB, which concerned the merger of two banks, the Court
286
found that banks offered
offered a cluster of services. 286
For example, banks
often offer mortgages, personal loans, checking accounts, savings
accounts, safe deposit boxes, and notary services. Consumers may
purchase each of these services separately, seeking out the cheapest
287 But most consumers turn to one
or best provider of each service. 287
or
provider to bundle these separate services, even if better rates or
288 The Court quoted a trial
lower fees are available elsewhere. 288
witness who said:
comer of Broad and Chestnut. Three
There are four banks on the corner
of them are commercial
banks
all offering
commercial
offering 3 percent,
percent, and one is a
mutual savings bank offering
1/2. As far as I have
have been able to
offering 3 112.
discover, there
Philadelphia who will take the
there isn't anybody in Philadelphia
trouble to walk across
1/2 of 1 per cent more
across Broad
Broad Street to get 112
interest. If you ask me why, I will say I do not know. Habit,
custom, personal
personal relationships, convenience,
convenience, doing all your
banking under one roof appear
appear to be factors superior
superior to changes
changes
289
289
in the interest rate level.
Though
informs us that consumers
Though law and economics
economics infonns
consumers will
will
rationally
rationally maximize
maximize wealth, the Coase
Coase theorem
theorem itself notes that
290
people
costS?90
In PNB,
PNB, aa "settled
"settled
people will act to minimize transaction
transaction costs.
285.
321, 356
285. 374
374 U.S.
U.s. 321,
356 (1963).
(1963).
286. Id.
[d. at
at 357.
287. See id.
at 326-27.
326-27.
id at
288. Id.
[d. at
at 357.
357. When
When this
this case
case was
was decided,
decided, only
only commercial
commercial banks were
were permitted
permitted to offer
offer checking
checking
accounts.
accounts. See id.
id at
at 326.
326.
289. Id.
[d. at
at 357 n.34.
n.34.
290. See generally
generally Daniel
Daniel Kahneman,
Kahnernan, Jack
Jack L. Knetsch,
Knetsch, && Richard
Richard H.
H. Thaler,
Thaler, Experimental
Experimental Tests of
of
the Endowment Effect andthe Coase Theorem,
Theorem, 98
98 J.J. POL.
POL. EcoN.
£CON. 1325
1325 (1990).
(1990).
43
298
[Vol. 26:2
(Vol.
consumer preference"
preference" insulated individual
individual commercial banking
consumer
return. 29 1
of retum?91
rate of
better rate
offering aa better
competition offering
from competition
products from
Consumers see
see certain
certain goods and services as complementary
complementary to one
Consumers
another and
and seek
seek to
to buy them
them together.
together. In justifying them as aa
another
separate antitrust
antitrust product market, lower courts have applied this
separate
292
concept to
to several
several industries, including department
department stores.292
PriceDiscrimination
DiscriminationMarkets
Markets
3. Price
The U.S.
Government Horizontal Merger Guidelines
The
U.S.
Government
("Guidelines"),
jointly issued by the FTC and DOJ, disclose the
("Guidelines"), jointly
government's standards for evaluating
evaluating mergers under Clayton §§ 7.293
government's
7?93
Although an administrative
administrative guidance
guidance document, the Guidelines
Guidelines are
Although
294
mergers.
considering
courts
by
cited
routinely
and
influential and routinely cited by courts considering mergers?94
influential
The Guidelines
Guidelines recognize
recognize "price
"price discrimination,"
The
discrimination," in which
which
businesses
charge
different
prices
to
different
buyers
of
the
same
businesses charge different prices
different
295
product.295 "The
"The term price
price discrimination
discrimination is applied
product.
applied when a [seller
[seller
can] raise
to a class of targeted buyers,
can]
raise price profitably
profitably to
notwithstanding
the
incentive
of buyers
to substitute
to other
notwithstanding the incentive of
buyers to
substitute to
other products
291.
U.S. at 357.
291. 374 U.s.
292.
292. ABA
ABA SECTION
SECTION OF
OF ANTITRUST
ANTITRUST LAW,
LAW, MERGERS
MERGERS AND
AND ACQUISITIONS: UNDERSTANDING THE
ANTITRUST ISSUES 61-62
61-{;2 (2d ed. 2004). Cluster
Cluster markets
markets have also been
been used to challenge mergers
involving
involving supermarkets,
supermarkets, beauty
beauty products,
products, office
office supplies,
supplies, ammunition,
ammunition, rotary
rotary drills, marine
marine engines,
engines,
industrial
industrial gasses and
and aa variety
variety of
of medical
medical services.
services. Id.
Id at 62. See also Keyte, supra
supra note 276, at 727;
Gregory J.
History ofAntitrust
Gregory
J. Werden,
Werden, The History
Antitrust Market Delineation,
Delineation, 76 MARQ. L. REv. 123,
123, 166
166 (1992);
(1992);
but see generally
generally Baker, supra
supra note 273, at 157-58
157-58 ("[C]luster
("[C]luster market approach inappropriate
inappropriate for market
market
definition
because clusters
definition because
clusters include products
products and services that are no demand (or supply substitutes).").
293.
293. 1992
1992 Horizontal
Horizontal Merger
Merger Guidelines,
Guidelines, 57
57 Fed.
Fed. Reg.
Reg. 41,
41, 552 (Sept.
(Sept. 10, 1992).
1992). The
The Guidelines
Guidelines were
revised
1997 to
revised inin 1997
to update
update the
the policies
policies on
on efficiency.
efficiency. See 1992 Horizontal
Horizontal Merger
Merger Guidelines,
Guidelines, FTC,
FfC,
http://www.ftc.gov/bc/docs/horizmer.htm
2008). Earlier versions
http://www.ftc.gov/bc/docslhorizmer.htm (last
(last visited
visited Aug.
Aug. 17,
17,2008).
versions of
of government
government
merger
merger guidelines
guidelines were
were released
released by
by the
the DOJ
DOJ in
in 1982
1982 and
and the
the FTC
FfC in 1984.
1984. See
See Merger
Merger Guidelines,
Guidelines, U.S.
U.S.
Dep't
(last visited Aug.
17,
Dep't Just.,
Just., at n.4,
n.4, http'//www.usdoj.gov/atr/public/guidelines/horizbook/0.htm
http://www.usdoj.gov/atr/public/guidelineslhoriz_booklO.html(last
Aug. 17,
2008).
294.
1053 (8th
294. See,
See. e.g., F.T.C.
F.T.C. v. Tenet
Tenet Health
Health Care
Care Corp.,
Corp., 186 F.3d 1045,
1045, \053
(8th Cir.
Cir. 1999);
1999); United
United States
v.
1302, 1304
v. Engelhard
Engelhard Corp.,
Corp., 126
126 F.3d
F.3d 1302,
1304 (11th
(11th Cir 1997); United States
States v. Oracle
Oracle Corp.,
Corp., 331 F.
F. Supp.
2d
2d 1098,
1098, 1108
I \08 (N.D.
(N.D. Cal.
Cal. 2004);
2004); United
United States
States v.
v. Visa
Visa U.S.A.,
U.S.A., Inc.,
Inc., 163 F. Supp. 2d
2d 322,
322, 335 (S.D.N.Y.
(S.D.N.Y.
2001);
2001); F.T.C.
F.r.C. v.v. Cardinal
Cardinal Health,
Health, Inc.,
Inc., 12 F.
F. Supp. 2d 34,
34, 53
53 (D.D.C.
(D.D.C. 1998);
1998); Darren
Darren Bush &
& Salvatore
Massa,
Massa, Rethinking
Rethinking the
the Potential
Potential Competition
Competition Doctrine,
Doctrine, 2004
2004 Wisc.
WISC. L. REv. 1035,
1035, 1080 (2004);
(2004); GAViL,
GAVIL,
KOVACIC
455. But see Ronald
KOVACIC &
& BAKER,
BAKER, supra
supra note
note 263,
263, at
at 455.
Ronald Katz, Janet
Janet Arnold
Arnold Hart
Hart &
& Theodore
Theodore R.
Snyder,
Courts Adopt
Guide to Market
Snyder, Courts
Adopt aa Practical
Practical Approach:
Approach: AA Post-Kodak
Post-Kodak Working Guide
Market Definition,
Definition, 11
II
ANTITRUST
ANTITRUST 38,
38, 39 (1997).
(1997).
295.
295. Baker,
Baker, supra
supra note
note 273, atat 151.
lSI.
44
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20101
AN ANTITRUST
ANTITRUST QUANDARY
QUANDARY
AN
299
distant sellers
sellers ....
. . . .,,296
,,296 The
The sale
sale of
of airline
airline tickets is a
and more distant
commonplace
commonplace example
example of price
price discrimination.
discrimination. When
When buying
buying airline
airline
passengers sitting adjacent to one another may pay
pay
tickets, even passengers
297
297
plane.
same
the
on
fly
to
vastly different prices
prices to fly on the same plane.
Hypothetically, department
department stores
stores may
may find it possible
possible to engage
engage in
Hypothetically,
Macy's
price discrimination.
discrimination. For example,
example, as is common
common today, Macy's or
or
department store in a mall,
Dillard's may be the only middle-market
middle-market department
Dillard's
city or other
other geographic
geographic market. 2298
Such a middle
middle market department
department
98 Such
city
revise its strategies
strategies to: a) price clothing for older, non-computer
non-computer
may revise
alternative
savvy customers,
customers, at a supra-competitive
level, if the only alternative
supra-competitive level,
savvy
is making purchases
purchases on the internet; b) price
price business
business attire for busy
busy
executives at supra-competitive
supra-competitive levels, if the only alternative would
executives
one stop
be to shop at one or more specialty stores (as opposed to the one
clothing,
c)
price
tailored
store);
available at a department
shopping available
department store);
price tailored
shopping
often difficult to find outside department
supra-competitive
department stores, at supra-competitive
often
prices;
prices; and d) price gift items (such as those registered
registered for weddings
supra-competitive prices
showers) at supra-competitive
prices under the theory that
and baby showers)
friends
and family across
to
be
accessible
need
to
accessible
across the
gift registries
299
nation?99
nation.
4. Anticompetitive Effects
Macy's and May merged
merged in 2005 and at this time it is less
important to look at the antitrust theory behind the market definition
than to examine the anticompetitive
anticompetitive effects that might have resulted.
conducted as a companion to this article found
An empirical study conducted
300
less. 30o
and receiving
more and
paying more
fact paying
that Macy's customers
customers are in fact
receiving less.
296.
Qualified Praise
Praiseof Submarkets,
Shoe: In Qualified
in an
an Old Brown
Brown Shoe:
Stepping Out in
Jonathan B. Baker, Stepping
Submarkets, 68
1.12).
Horizontal Merger Guidelines at § 1.12).
(2000) (citing Horizontal
203, 207-08 (2000)
L.J. 203,207-08
297.
reacting to supply and demand.
antitrust violation, because airlines are reacting
297. This alone is not an antitrust
298. This hypothesis
hypothesis would also be appropriate if there were more than one middle-market
middle-market
parallelism, or collusion.
store and oligopolistic behavior, conscious parallelism,
department store
299. The challenge is charging a high price (and selling only to consumers
299.
consumers who do not search other
that bargain hunt). See
also selling to consumers that
stores), versus charging a low price (and potentially also
Multiproduct Retailers
Daniel S. Hosken &
Pricing Behavior
Behavior of Multiproduct
Retailers (June 2007), F.T.C.
& David Reiffen, Pricing
225.
Bureau of Economics Working Papers, Working Paper No. 225.
L. Rev.
It's Macy
Macy's,
What She Wants - As Long As It's
300.
·s. 80 Temple L.
300. Mark D.
D. Bauer, Give the Lady What
Snub
Bargain Hunters
Hunters Snub
Coupons to
to Clip.
Clip, Bargain
Fewer Coupons
Michael Barbaro, Given Fewer
949, 1006 (Winter 2007); Michael
also Statement
Statement of the Commission Concerning Federated
2007, at 1.
1. See also
29, 2007,
Macy·s.
Macy's, N.Y. TIMES, Sept. 29,
ANTITRUST
ANTITRUST
45
300
UNIVERSITY LAW
LAW REVIEW
REVIEW
GEORGIA
[Vol. 26:2
26:2
[Vol.
FTC "conducted an exhaustive six-month
Before the merger, the FTC
30
1
investigation," and subsequently
subsequently permitted Macy's to acquire May
investigation,,,301
of the deal
deal the parties suggested. Particularly
Particularly
without modification of
after considering the history of this industry, some of the FTC's
FTC's
reconsidered.
reasoning must be reconsidered.
MACY'S/MAY MERGER
III. FTC STATEMENT ON THE MACY'S/MAy
Although acknowledging
acknowledging that the Macy's/May
Macy's/May merger would
"create
by
far
the
largest
chain
of so-called
so-called 'traditional'
'traditional' or
"create by far the largest chain of
'conventional'
department
stores
in
the
country,"
'conventional' department stores in the country," and that the merger
would create "high levels of concentration
concentration among conventional
conventional
department stores in many areas of the country,"
country," the FTC cleared
cleared
30 2
May.
Macy's to acquire May.302
The FTC issued its Statement in accord with its policy "to help
help
3
0
3
provide transparency
for
matters.,,303 The
transparency
decisions in high-visibility matters."
FTC recognized that "consumers
"consumers mourn the gradual disappearance of
of
department stores in their hometowns,"
hometowns," and that traditional
department
department
merchandise best suited
suited [to]
department stores "stock[ed]
"stock[ed] the kinds of merchandise
their personal tastes"
tastes" as well as "provided
"provided a particular
particular ambiance that
Department
Stores, Inc./The
Department Stores,
Inc.me May
May Department
Department Stores
Stores Company,
Company, FTC
FTC File
File No.
No. 051-0111
051-0111 atat 33 (FTC
(FfC
2005).
301.
Release, FTC,
301. Press
Press Release,
FTC, FTC
FTC Issues
Issues Statement
Statement on
on Closure
Closure of Federated/May
FederatedlMay Investigation
Investigation (Aug.
(Aug. 30,
30,
2005),
2005), http://www.ftc.gov/opa/2005/08/federatedmay.shtm.
http://www.ftc.gov/opal200S/OS/federatedrnay.shtm.
302.
302. Statement
Statement of
of the
the Commission
Commission Concerning
Department Stores,
Stores, Inc./The
Inc.lThe May
May
Department
Department Stores
Stores Company,
Company, FTC
FTC File
File No.
No. 051-0111
051-0 III atat 1I (FTC
(FfC 2005).
2005). The
The FTC
FTC "conducted
"conducted an
an
exhaustive
exhaustive six-month
six-month investigation"
investigation" following
following notification
notification of
of the
the proposed
proposed merger
merger and
and aa second
second request.
request.
ld;
Id.; see
see also
also Briefs,
Briefs, FTC:
FTC: WATCH
WATCH (April
(April 25,
25, 2005);
2005); Letter
Letter from
from FTC
FTC to
to Phillip
Phillip A. Proger,
Proger, Esq.,
Esq., at
http://www.ftc.gov/os/caselist/0510001/0508301trfed051000l.pdf
http://www.ftc.gov/os/caselistlOSI0001l0S08301trfedOSI000I.pdf (last
(last visited
visited Aug.
Aug. 17,
17, 2008);
2008); Letter
Letter
from
from FTC
FTC toto Neal
Neal R.R. Stoll,
Stoll, Esq.,
Esq., available atat http://www.flc.gov/os/caselist/
http://www.ftc.gov/os/caselistl
051000i/0508301trmayO5
.pdf (last
051000 1I0S0S301trmayOSI10001
000 l.pdf
(last visited
visited Aug.
Aug. 17,
17, 2008).
2008).
303.
303. Press
Press Release,
Release, FTC,
FTC, FTC
FTC Issues
Issues Statement
Statement on
on Closure
Closure of
ofFederated/May
FederatedlMay Investigation
Investigation (Aug.
(Aug. 30,
30,
2005),
2005), http://www.flc.gov/opa/2005/08/federatedmay.shtm.
http://www.ftc.gov/opal200S/08/federatedrnay.shtm. On
On April
April i1,
II, 1997,
1997, the
the FTC
FTC announced
announced that
that
itit would
would publicly
publicly acknowledge
acknowledge that
that aa particular
particular merger
merger was
was being
being investigated
investigated under
under the
the Clayton
Clayton Act
Act
where
where aa party
party toto the
the transaction
transaction had
had disclosed
disclosed its
its existence
existence inin aa press
press release
release oror other
other public
public filing.
filing.
Notice
Notice of
ofPolicy
Policy of
ofDisclosing
Disclosing Investigations
Investigations of
ofAnnounced
Announced Mergers,
Mergers, 62
62 Fed.
Fed. Reg.
Reg. 18,630
18,630 (Apr.
(Apr. 16,
16,
1997);
1997); FTC,
FTC, FTC:
FTC: Merger
Merger Acknowledgement,
Acknowledgement, http://www.ftc.gov/opa/1997/04/mergdisc.htm
http://www.ftc.gov/opalI997/04/mergdisc.htm (last
(last
visited
visited Aug.
Aug. 17,
17, 2008).
2008).
46
20101
2010)
AN ANTITRUST
AN
ANTITRUST QUANDARY
QUANDARY
301
they found congenial,"
congenial," but in the end the FTC concluded
concluded
the merger
304
consumers."
on
effect
adverse
"any
have
would not
effect on consumers.,,304
An analysis of the FTC's more salient points follows below.
A.
Malls Replaced
ReplacedDowntown Shopping
A. Suburban
Suburban Malls
According
"[flifty years ago, many individual
According to the FTC, "[f1ifty
department stores were freestanding in cities, rather than suburban
malls, and they offered
offered consumers the convenience of one-stop
30 5 Today the
shopping, particularly for home furnishings or clothing."
clothing.,,305
"overwhelming
of department
"overwhelming majority
majority of
department stores are located in some
enclosed suburban shopping malls"
one-thousand-two
one-thousand-two hundred enclosed
malls" and
"malls
have
largely
replaced
flagship
downtown
"malls have largely replaced flagship downtown department stores as
shopping destinations.,,306
destinations." 30 6 Because of this, the FTC said, the merger
30 7
reduce competition.
substantially reduce
of Macy's and May would not substantially
ofMacy's
competition?07
statement is correct as far as it goes-the majority of
of
The FTC's statement
department stores are located today in suburban malls. The problem
problem
is that metropolitan
metropolitan areas, which often include a plethora of shopping
malls, are not the relevant geographic
geographic market for all shoppers.
Approximately thirty million Americans
Americans live within the confines of
of
Approximately
8
30
308
suburbs.
the
in
cities-not
the country's
country's twenty largest cItIes-not in the suburbs.
American households--or
households-or thirty
Approximately nine percent of American
309
million people-have
people-have no car.
Seventeen
elderly
car. 309 Seventeen percent of elderly
310
car.
no
have no car?IO
American households
households have
dependent upon public
Presumably most car-less Americans are dependent
transportation, which, if it exists at all, is designed
designed to carry
suburban locations and bring them into
commuters from far-off suburban
304.
Statement of
of the
Department Stores,
Stores, lnc.ffhe
Inc./The May
304. Statement
the Commission
May
Department Stores
Company, FTC
051-0111
(FTC 2005).
Department
Stores Company,
FfC File
File No.
No. 051-0
III atat 55 (FfC
2005).
305. Id.
[d. at
at 2.
306. Id.
[d.
307. Id.
[d.
308. See lnfonnation
Information Please
Cities in the U.S.
and Rank (2005),
Please Almanac,
Almanac, Top 50 Cities
U.S. by Population
Population and
(2005),
http://www.infoplease.com/ipa/A0763098.htmi (last
visited Aug.
Aug. 17,
17, 2008).
http://www.infoplease.comlipalA0763098.html
(last visited
2008).
Population and
and Housing
Housing Na"ative
Narrative Profile:
Profile: 2004,
2004,
309. U.S. Census Bureau, Population
http://factfmder.census.gov.servIet/NPTable?_bm=y&-geo-id=O1000US&http://factfmder.census.gov.servletINPTable?_bm=y&-geo_id=O
IOOOUS&qrname=ACS2004ESTGOONPOI&-ds_name=&-redoLog=false
qr
_name=ACS_2004_EST_GOO_NPO I&-ds_name=&-redoLog=faise (last visited Aug.
Aug. 17, 2008).
2008).
310. Chapter
Chapter 7: The Places
People Live: Housing,
U.S Census
Bureau,
Places People
Housing, 1999, U.S
Census Bureau,
http://www.census.gov/population/pop-profile/1999/chapO7.pdf (last visited
http://www.census.gov/population/pop-profile/1999/chap07.pdf
visited Aug. 17, 2008).
47
302
(Vol. 26:2
[Vol.
employment
employment centers in urban cores, not to take city dwellers to
311 In at least two cities, perhaps
suburban shopping
shopping malls. 311
perhaps perceiving
a risk of crime or as an attempt to keep inner-city minorities out,
suburban shopping malls have refused to allow buses from the city to
312
drop off passengers.
passengers. 312
In Cincinnati, the corporate headquarters
approximately
headquarters of Macy's, approximately
l3
dependent 313
are
and
car
have no
twenty-five percent
percent of households have
no car and are dependene
on the city's rudimentary
rudimentary bus system. 314 While car-less Cincinnati
"[i]t's
residents can enjoy the convenient
convenient downtown Macy's store, "[i]t's
headquarters were
true, we would not have built the store unless our headquarters
15
here," said Carol Sanger, a Macy's spokesperson. 3315
According to a
here,"
former Macy's chief executive:
I refer to the downtown
downtown ..... . store as enlightened
enlightened philanthropy
philanthropy
....
It
wasn't
intended
to
be
only
philanthropic.
But
would we
. . ..
have built it if our corporate
corporate headquarters
headquarters had been somewhere
else? Probably not. We had a store here, we had a history
history here
and we thought we had a chance to do our part to help in the
316
development of downtown.316
development
Of course department
department stores are in the business to make a profit
and do not ordinarily
ordinarily keep stores open unless it makes business sense.
And having closed downtown stores in numerous cities, Macy's
Macy's
apparently
apparently does not feel this obligation
obligation outside Cincinnati. But in
311.
South s 1st Rapid-Transit
311. See generally Robert Byrd, Bias Seen in Opposition to Expanding South's
Rapid-Transit
Lines, L.A. TIMES,
nMES, Oct. 15,
15, 1989, at A34 (racism
(racism may be behind decision
decision not to expand Atlanta's
Atlanta's
subway
BUFFALO
subway lines); Kevin
Kevin Collison, State Aid to Help NFTA
NFTA Expand Suburban Mall Service, BUFFALO
NEWS,
1996, at IB (state aid to help city residents reach shopping);
NEWS, Aug. 16, 1996,
shopping); Jean
Jean Grossman &
& Beth
Palubinsky, 'Bridges to Work'
Work' Can Change
of Opportunity, DENV.
1995,
Change the Geography o/Opportunity,
DENY. POST, Aug. 27,
27,1995,
at
H5 (difficult
urban residents
to get to suburbs on bus); Stephen
Tough for
at H5
(difficult for
for urban
residents to
Stephen J. Lynton,
Lynton, Commuting
Commuting Tough/or
D.C.
Poor, WASH.
WASH. POST, Dec. 9, 1985, at A25 (transit accessibility to suburbs poor).
D. C. Poor,
312.
NEWS, Jan. 30, 1996,
312. Editorial, Mall Discrimination Is Outrageous, BUFFALO NEWS,
1996, at 2B; Sabrina
Sabrina
17, 1997, at 3B.
Eaton, Public Transit Called Ticket to Jobs, CLEVELAND PLAIN DEALER,
DEALER, Jan. 17,
313.
313. Barry M. Horstman,
Horstman, Voters Say No to Higher Taxes: Proposed Light Rail System Loses Big, CIN.
Al.
POST, Nov. 6, 2002, at AI.
314. See Liz Oakes, Transit Meeting Feeling Gloomy, CIN. ENQUIRER,
ENQUIRER, Dec. 7, 2003,
2003, at 2C.
315.
& Alltucker, supra note 121.
315. Tucker &
121.
316. Randy Tucker, Better Than It Was, CIN. ENQUIRER,
ID.
ENQUIRER, Apr. 6, 2003, at 10.
48
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20101
AN
ANTITRUST QUANDARY
QUANDARY
AN ANTITRUST
303
317 In other cities,
many cities, downtown stores are in fact profitable. 317
downtown
downtown stores were either close to profitable,
profitable, or inconsistently
profitable, but the Campeau-related
Campeau-related bankruptcies-which
bankruptcies-which still haunt
many
many department stores because
because of deferred
deferred maintenance
maintenance and upkeep
or the transfer of a local headquarters
headquarters to a distant city-heralded
city-heralded the
3lS
store. 318
closing of the downtown
downtown store.
consumer
The field of behavioral
behavioral economics
economics suggests that not all consumer
purchasing
allocative efficiency
purchasing decisions are based on allocative
efficiency and wealth
maximization. 319 A "consumer's
"consumer's willingness to pay in the real world
is skewed by a variety
variety of biases and predictable
predictable misperceptions
misperceptions that
32
0
are also well understood by the seller.,,32o
consumer does
seller." The typical consumer
"not
approach
the
marketplace
with
a
series
of
predetermined
"not approach the marketplace with
predetermined
preferences,
preferences, precisely
precisely and numerically
numerically weighted, seeking like a
computer
computer algorithm
algorithm the package
package of goods and services that
cost." 321
the lowest
their preferences
of
maximizes
their
preferences at
at the
lowest cost.,,321
maximizes the fulfillment
A department
consumer sense of place, history,
department store appeals
appeals to a consumer
ambience, service, support, tradition, and convenience. Even the FTC
322
factors. 322
these factors.
swayed by
are swayed
consumers are
agreed
agreed that at least some consumers
by these
In another departure from law and economics, not even all
business decisions are rational with the goal of maximizing profits.
For example, some businesses
businesses seem to fear the inner city and do not
wish to do business there, even though a substantial profit could be
323
made. 323
Some department
department store chains just do not care to understand
understand
317. See Michael Barbaro, Retailers
Market Downtown, WASH. POST, Oct. 13,2004,
13, 2004, at Al;
Retailers Finding
Finding a Market
AI;
Nordstrom S.F.: Staying
Staying Hot;
Hot; San Francisco,
Steve Ginsberg, Nordstrom
Francisco, WOMEN'S
WOMEN'S WEAR
WEAR DAILY,
DAILY, Dec. 13, 1988,
19S5,
at 1;
LEACH, supra
I; LEACH,
318. See, e.g., Chris Burritt, Rich's Finally
Bit the Bullet,
Bullet, ATLANTA
CONST., Apr. IS,
18, 1991,
1991, at Cl.
31S.
Finally Billhe
ATLANTA J. CONST.,
CI.
319. See generally
generally Lauren E. Willis, Decisionmaking
Decisionmaking and the Limits of Disclosure:
Disclosure: The Problem
Problem of
of
Predatory
Lending: Price,
Price, 65 MD. L. REv.
BEHAVIORAL
Predatory Lending:
REv. 709, 754-57
754-57 (2006); HERBERT
HERBERT SIMON, A BEHAVIORAL
MODEL
MODEL OF RATIONAL CHOICE,
CHOICE, in MODELS OF MAN, SOCIAL AND
AND RATIONAL: MATHEMATICAL ESSAYS
ESSAYS
ON RATIONAL
SETrING (1955);
(1955); Daniel Kahneman, Maps
RATIONAL HUMAN
HUMAN BEHAVIOR IN A SOCIAL SETTING
Maps of
of Bounded
Rationality:
ECON. REV.
Behavioral Economics,
Economics, 93 AM. EcON.
REv. 1449 (2003), available
available at
Rationality: Psychology for Behavioral
http://www.aeaweb.org/aer/contents/dec2003.html
(last visited Aug. 17,
2008).
http://www.aeaweb.orglaer/contentsldec2003.htm1(last
17, 200S).
320. Alan
Behavior and
and Contract,
Contract,27 LAW & INEQ. 135,
Alan White, Behavior
135, 144
144 (2007).
321.
Id. at IS.
18.
321. [d.
322.
Concerning Federated Department
Inc.The May
322. Statement
Statement of the Commission Concerning
Department Stores, Inc./The
051-0111 at 5 (fTC
(FTC 2005). The question remains
Department Stores
Stores Company, FTC
fTC File No. 051-Oill
remains as to
to
whether
consumer preferences serve
whether these
these consumer
serve to restrain
restrain prices for all consumers.
consumers.
323.
IIl Served,
A8. See also
323. See James T. Madore,
Madore, Urban
Urban Markets III
Served, NEWSDAY, Jan. 20, 1999,
1999, at AS.
also May
Edwards
& Bill
Bill Ryan,
Ryan, Challenges
Challenges Facing
Facing Shopping
Shopping Malls:
Opportunities for Downtowns and
Edwards &
Malls: Opportunities
49
304
[Vol.
(Vol. 26:2
324
the inner city and have no interest
interest in doing business there. 324
operate
Dillard's, for example, does not325
operate a full service
service downtown
downtown store
325
States.
United
the
in any city in the United States.
of
Inner cities, however, represent a retail market larger than that of
326
Mexico--between
eighty-five
and
one
hundred
billion
In
Mexico-between
a year.
In
Cleveland
Cleveland alone, where Dillard's closed its historic but dilapidated
dilapidated
downtown
downtown store, hundreds
hundreds of millions of dollars in retail spending
327 Shoppers
flows from the city to the suburbs every year. 327
Shoppers might have
been more interested in spending money in downtown Cleveland's
Cleveland's
last department store had the landmark building, which opened in
1931, been
1931,
been well-maintained:
well-maintained: one year before
before it closed, the store had
red duct tape holding down the stained carpet, peeling paint, unlit
chandeliers,
chandeliers, and a Santa
Santa Claus with "a
"a busted eye, held together with
328
tape.,,328
tape."
Businesses
Businesses are apparently
apparently held back by the perception
perception that inner
329 But
cities are unprofitable and unsafe places
places to do business. 329
because
because of population density, inner cities can have more buying
330
power
Target
Target and Wal-Mart,
Wal-Mart, which the
power than an affluent suburb. 33o
traditional department stores sometimes claim are their competitors,
WISC.-COOPERATIVE EXTENSION,
CENTER FOR
FOR COMMUNITY
ECON.
Community Business Districts,
Districts, U.
U. WISC.-CooPERATIVE
EXTENSION, CENTER
COMMUNITY ECON.
available at http://www.uwex.edu/ces/cced/downtowns/ltb/lets/lets698.htmi
DEV., June 1998 No. 22,
22, available
http://www.uwex.edulceslccedldowntownslltblletsl1ets698.html
See, e.g., Mya Frazier, Downtown Dillard's
Dillard's in Decline,
324. See,
Decline, CLEVELAND PLAIN DEALER, Jan. 16,
2001, at2C.
at 2C.
2001,
Farewellto Downtown Dillard's,
325. Alison Grant, Mya
Mya Frazier && Marcia Pledger, Shoppers Say Farewell
Dillard's,
CLEVELAND PLAIN
DEALER, Jan.
Jan. 1,
2002, at
Al. Dillard's
operated aa store
store with
with limited
offerings in
in aa
CLEVELAND
PLAIN DEALER,
1,2002,
at AI.
Dillard's operated
limited offerings
portion of aahistoric department
department store building
building in downtown San
San Antonio,
Antonio, Texas,
Texas, next to the
the Alamo,
Alamo, but
that store
store is
Joske's Building
Mall
that
is now
now closed.
closed. Tricia
Tricia Lynn Silver,
Silver, Historic
Historic Joske's
Building Purchased
Purchased By
By Rivercenter
Rivercenter Mall
Owners,
(last visited February
February
Owners, http://www.bizjoumals.com/sanantonio/stories/2008/06/02/daily29.html
http://www.bizjoumals.comlsanantonio/storiesl200S/06/02ldaily29.html(last
2009). See generally
Mike Greenberg,
Greenberg, Building
Despite Growth,
Growth, Much of San Antonio's
9,9, 2009).
generally Mike
Building Boom; Despite
Antonio's
Downtown Retains
Retains Former
SAN ANTONIO EXPRESS-NEWS,
ExPRESS-NEWS, Dec.
Former Look
Look. Charm,
Charm, SAN
Dec. 28, 1999, at 3M.
3M.
Dillard's
new store
store in
in Midtown
the fringes
of Atlanta's
Atlanta's central
central business
business
Dillard's also
also operates
operates aa new
Midtown Atlanta,
Atlanta, on
on the
fringes of
district, in an enormous
enormous new suburban
suburban style development. See Deborah
Deborah Held Maslia, Atlantic Station
Shopping
Retail Rush for
City, ATLANTA
ATLANTA Bus.
Shopping a Retail
for
City,
Bus. CHRON.,
CHRON., Mar.
Mar. 3,3, 2006,
2006,
http://atlanta.bizjournals.com/atlanta/stories/
http://atlanta.bizjournals.comlatlantalstoriesl 2006/03/06/focus7.html#.
2006/03/06/focus7.html#.
326. Id.;
Chris Reidy,
Reidy, Inner
12, 1998,
1998, at
Id.; Chris
Inner Cities'Retail
Cities' Retail Punch,
Punch, BOSTON
BOSTON GLOBE,
GLOBE, June
June 12,
at Cl.
CI.
Developers Going Back to the Market
Market Recapturing
327. Sandra
Sandra Clark,
Clark, Developers
Recapturing Sales Lost to Suburbs
Suburbs Is
Incentivefor Inner-City
Investment, CLEVELAND
CLEVELAND PLAIN
Mar. 21,
1993, at
at 18A.
DEALER, Mar.
Incentive/or
Inner-City Investment,
PLAIN DEALER,
21,1993,
ISA.
328. Frazier,
supranote
32S.
Frazier, supra
note 324.
329. Reidy,
supra note
note 326.
329.
Reidy, supra
326.
Id.
330. !d.
50
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AN ANTITRUST
ANTITRUST QUANDARY
QUANDARY
305
have identified inner cities as areas for growth.331
33 I Cities are often
department stores substantial
substantial subsidies to open
willing to offer department
32
downtown
downtown stores as activity generators. 3332
But with mergers resulting
in fewer department
department store companies,
companies, and some of the remaining
stores making a decision to avoid downtowns,
downtowns, there may be no
"the cost to operate a store
takers. Even without subsidies,
subsidies, "the
[downtown] is much
higher than in a suburban mall, [but] the payoff
payoff
333
greater."
can be far greater.,,333
Department
accustomed to the safety and ease of
of
Department store companies, accustomed
operations
operations at a greenfield
greenfield suburban mall, may fundamentally
fundamentally
misjudge cities. For example, in downtown
Washington,
D.C., the
downtown
D.C.,
local May store, Hecht's, was profitable
profitable enough to justify $15
$15 million
334
334
in improvements
2004. Nonetheless,
Nonetheless, May
May
improvements and renovations
renovations in 2004.
headquarters
higher-end
headquarters originally resisted when customers
customers asked for higher-end
335
335
Apparently
merchandise.
May
executives
relied
on
demographic
merchandise.
Apparently
executives
demographic
data for the relatively small downtown residential population, rather
than taking into account
account the large number of people who work, but do
336
not live, in downtown
demographic data is
downtown Washington. 336
"The way demographic
compiled, [the May executives at headquarters]
could
not appreciate
headquarters]
what was happening
happening downtown,"
downtown," said a former Hecht's president and
337
executive. 337
chief executive.
See, e.g., Robert
TargetingInner
TRIB., Apr.
5, 2006, at
331. See,
Robert Manor, Wal-Mart
Wal-Mart Targeting
Inner City for Buildup,
Buildup, CHI. TRm.,
Apr. 5,2006,
at
CI;
CI; Lorraine
Lorraine Mirabella,
Mirabella, Inner-City
Inner-City Centers a Good Investment;
IftVestment; Rundown Retail Areas Draw
Draw Investors;
Money: The High
High Density
Density of Inner-City
Inner-City Neighborhoods
Neighborhoods Is Making Them
Targets for
Them Good Targets
for Retail
Development, BALTIMORE
BALTIMORE SUN,
SUN, Jan.
Jan. 13,
2005, at
13, 2005,
at IID.
D.
Development,
See, e.g.,
e.g., Barbaro, supra
332. See,
supra note 317 (Washington, D.C. offering
offering up
up to $30
$30 million);
million); Jackie Crosby,
St. Paul
Store Likely
2011, MINNEAPOLIS
STAR TRIs.,
TRIB., June
June 11,2004,
11, 2004, at
12A (St.
(St.
St.
Paul Store
Likely to Stay Open Until
Until 2011,
MINNEAPOLIS STAR
at 12A
supra note 324 (Cincinnati gave $26
Paul gave $7.8 million in subsidies); Frazier,
Frazier, supra
$26 million
million in subsidies).
333. Pia
Wes/ield San Francisco
FashionableExpansion;
333.
Pia Sarkar,
Sarkar, Westfield
Francisco Centre;
Centre; Fashionable
Expansion; Bringing
Bringing the Shoppers
Shoppers
Back to Downtowns, S.F.
S.F. CHRON., Sept.
Sept. 26, 2006,
2006, at El. See generally
generally J.K.
1.K. Wall
Wall && John
John Strauss, Centre
Centre
Transform the Culture
Culture and
and Economy of Downtown.
Downtown. But Will It
of Rebirth;
Rebirth; The Mall Has
Has Helped
Helped Transform
Continue to Thrive?,
Thrive?, INDIANAPOLIS
INDIANAPOLIS STAR,
STAR, Sept. 8,
2005, at IA.
8,2005,
IA.
downtown department
store
334. Barbaro, supra
supra note 317. The store itself was relatively
relatively new
new by
by downtown
department store
standards;
standards; Hecht's had
had an older store inin downtown Washington
Washington but sales justified
justified building
building a new store
closer
the heart
heart of
of downtown
1980. ZACHARY
SCHRAG, THE GREAT
SOCIETY SUBWAY
SUBWAY 205
closer toto the
downtown inin 1980.
ZACHARY M.
M. SCHRAG,
GREAT SOCIETY
205
(The
also Vlan
Ylan Q. Mui, Era
Ends With New Beginning;
(The Johns Hopkins Univ.
Univ. Press 2006).
2006). See also
Era Ends
Beginning;
Transformationfrom Hecht's
Macy's Will Be Completed
Completed Today, WASH. POST,
Transformationfrom
Hecht's to Macy's
POST, Sept. 9,9, 2006,
2006, at Dl.
D1.
335. Barbaro,
Barbaro, supra
supra note
note 317.
336. Id.
Id.
Id.
337. Id.
51
306
GEORGIA STATE
STATE UNIVERSITY
REVIEW
(Vol.
[Vol. 26:2
Despite the improvements to Hecht's (now Macy's) in downtown
downtown
Washington,
$1.1 billion is spent annually by D.C. residents
residents in the
Washington, $1.1
38 According
According to a recent study, the city's population and
suburbs.333s
income could support two additional
additional department
department stores
stores
339
33
9
downtown
-a place that that is easily accessible by public
downtown -a
340 for the thirty-seven
transportation
thirty-seven percent
percent of D.C. residents
residents that
transportation340
341
cannot necessarily
necessarily visit a suburban mall.341
have no car and cannot
B. Merger
Affect Non-Price
Non-PriceCompetition
Merger Will Not Affect
Competition
The FTC recognized that "many
"many of the products now sold in
apparel-have nondepartment stores-most particularly, women's apparel-have
consumers." 342 FTC staff
staff
price attributes that are also important to consumers.,,342
reviewed documents obtained in its investigation to look for
"potential effects in non-price competition,
competition, e.g., reductions in
"potential
merchandise
assortment
or
new
product
introductions, reductions in
merchandise
improvement and
store service and assistance, or reductions in store improvement
343
innovations.",,343 The FTC concluded
"found no reason to
innovations.
concluded that it "found
believe that [FDS] is likely to be able to reduce non-price
competition
May]." 3 "
competition [as a result of its merger with May].,,344
Of course, precisely what the FTC found in its investigation will
remain a secret protected
requirements of
of
protected by the confidentiality
confidentiality requirements
34S
34
5
Clayton § 7A. But in reviewing
reviewing the FTC's statement
statement that there will
be no reduction in non-price competition, several
several important issues are
of concern.
338.
Could Support
Support Big Stores,
Stores, Study Finds,
Finds,WASH.
28, 2005,
33S. Dana Hedgpeth,
Hedgpeth, Downtown Could
WASH. POST, Oct. 2S,
at D4.
atD4.
339. Id.
Id.
340. See generally
http://www.wmata.com (last
generally Washington
Washington Metropolitan Area Transit Authority, http://www.wmata.com
17, 2008).
visited Aug.
Aug. 17,200S).
CTPP2000 Status Report,
341. U.S. Department of
of Transportation,
Transportation, CTPP
Report, http://www.thwa.dot.gov/ctpp/
http://www.tbwa.dot.gov/ctpp/
srO103.htm (last visited
2008). Several Washington area
srQI03.htm
visited Aug. 17, 200S).
area suburban shopping malls are
are near
near
Metro subway stops, including Pentagon
Pentagon City,
City, Wheaton Plaza, and
and Ballston Commons. These malls,
malls,
however, may
may be quite
quite far from where the
the least affluent
affluent D.C. residents live.
342. Statement of
of the
the Commission Concerning
Federated Department Stores, Inc./The May
Department Stores Company,
Company, FTC File No.
No. 051-0111 at 44(FTC 2005).
2005).
Id.
343. Id.
Id.
344. Id.
345. 15
15 U.S.C.
U.S.C. § 18a(h)
345.
ISa(h) (2000).
(2000).
52
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AN ANTITRUST
AN
ANTITRUST QUANDARY
QUANDARY
307
1.
Service
1. Less Service
Customer
Customer satisfaction
satisfaction must be very important for a successful
346
346
retailer. If Macy's faces as much competition
competition as both Macy's and
the FTC claim, then, logically, it should have excellent
excellent customer
service to win over customers and keep them coming back. But
according to one widely reported
reported metric, Macy's does not make the
list; in fact in recent years, Macy's only made the list in 2006, and
then perhaps only because
because it knocked Marshall Field's off the list by
by
34 7
it. 347
buying it.
American Express in 2005
The National Retail Federation
Federation and American
developed a survey
survey to determine
determine who provided the best customer
customer
348
348
comparison fair,
service in a variety of areas. In order to keep the comparison
the index was weighted
weighted by each company's 2004 sales, in order to
compensate for retailers'
retailers' varying
geographic market
compensate
varying sizes or geographic
349
349
According to the 2004 survey, Nordstrom was rated
According
coverage.
number
number one for customer
customer service
service among all retailers,
retailers, and Marshall
350
0
Field's was rated number three. 35
The public results only reported
reported
the top ten, so it is not known where Macy's fell on this list. In the
2006 survey, Macy's
Macy's was ranked number ten and has not appeared on
35 1
351
again.
list
the
again.
& Emily Kaiser, SatisjiedShoppers,
Satisfied Shoppers, WOMEN'S
WOMEN'S WEAR
WEAR DAILY,
DAILY, Dec. 15,2005,
15, 2005, at 16.
346. Cecily
Cecily Hall &
347. Id.; see L.L.Bean
L.L.Bean Once Again Number One in Customer Service, According to NRF
Foundation/American
Foundation/American Express Survey, National
National Retail Federation
Federation (Jan.
13, 2009),
http://nrf.com/modules.php?name=News&op=viewlive&sp-id=653;
http://nrf.comlmodules.php?name=News&0p=viewlive&sp_id=653;
From
Retailers to Department
Stores, Best Retailers
Retailers for Customer
Customer Service Run the Gamut,
Gamut,
From Online Retailers
Depanment Stores.
National
National Retail
Retail Federation, http://www.nrf.conmcontent/default.asp?folder=press/
http://www.nrf.com/contentldefault.asp?folder=press!
release2006&file=custserv1 106.htm (last
17, 2008).
release2006&file=custservII06.htm
(last visited Aug. 17,2008).
348. Id.
Id.
349. Id.
of 8,648 consumers were surveyed
BlGresearch; the methodology
Id. A
A total of8,648
surveyed by BIGresearch;
methodology and results were
reviewed
Martin P. Block, Ph.D of Northwestern University. Id.
reviewed by Professor
Professor Martin
Id.
350. Id.
Id. Nordstrom was
was noted for its long commitment
commitment to customer service;
service; Marshall
Marshall Field's was cited
"fashion leadership, superb guest
commitment to community involvement."
involvement." Id.
for "fashion
guest service and a commitment
Id.
351.
Amazon.com was ranked number one in the 2006 survey; Nordstrom
351. Id.
Id. Amazon.com
Nordstrom was ranked number
two. Id.
Id. Macy's has not been ranked
ranked since 2006. Other
Other organizations
organizations conducting such surveys include
Business Week
Week magazine (Nordstrom
(Nordstrom and Neiman Marcus were the only two department
department stores ranked
ranked
in the top fifty of all companies)
companies) and Corporate
Corporate Research International
International (Nordstrom, Saks Fifth Avenue,
and Bloomingdale's ranked as top three department
department stores. See The Customer Service Elite,
http://bwnt.businessweek.com/interactive-reports/customer-service
17, 2008);
http://bwnt.businessweek.comlinteractive_reports/customer_service (last
2008);
Corporate Research
International Reveals Best Customer
Customer Service,
Service, Market
Corporate
Research International
Market Wire,
Wire, July 23, 2008,
http://www.reuters.com/article/pressRelease/idUS135334+23-Jul-2008+MW20080723.
http://www.reuters.comlarticleipressReleaselidUSI35334+23-Jul-2008+MW20080723.
53
308
STATE UNIVERSITY
REVIEW
GEORGIA STATE
(Vol.
[Vol. 26:2
Macy's may not even consider
consider a high level of customer service
service to
be an attainable or desirable metric. Terry Lundgren,
Lundgren, chief executive
executive
apparently believes that top-notch
officer
top-notch customer
customer
officer of Macy's, apparently
service is only appropriate
appropriate at higher-end stores. He "bristles when
customer
Macy's is compared
compared with Nordstrom
Nordstrom and its renowned
renowned customer
352
service.,,352
"We're going to be known for affordable
affordable luxury,"
service."
luxury," says
353
say."
never
could
Nordstrom's
something
Lundgren. "That's
"That's something Nordstrom's could never say.,,353
Lundgren's statements suggest that Macy's does not believe
Lundgren'S
excellent customer
excellent
customer service is possible
possible for a mid-priced store. This,
middle-market
however, is at odds with the fact that Boscov, another middle-market
department store competing against Macy's in several mid-Atlantic
department
mid-Atlantic
markets, was ranked sixth in 2006 and fifth in 2005, and Kohl's, a
Penney, was
discount clothing and housewares store similar to J.C.
354
354
2005.
in
fourth
and
2006, and fourth in 2005.
and 2006,
ranked seventh in 2008 and
Macy's has had customer
customer service problems
problems for many years and has
acknowledged-Lundgren's
withstanding-a need
acknowledged-Lundgren's recent remark not withstanding-a
355
35
5
to improve. In Chicago, where there was at least a perception of
of
better customer
customer service in the past (when Marshall Field's existed as
a separate
separate brand), according
Federation/American
according to National
National Retail Federation/American
Express survey, customers "are
increasingly bitter at what they see as
"are increasingly
lower levels of merchandise and customer
customer service at Macy's
Macy's
356
compared with Field's.,
Field's.,,356
Despite a pledge
operator
pledge by Macy's to make it easier to reach an operator
confusing
at its customer service
service number, customers
customers now face "a confusing
352.
Stores Get a Lot More
More Than
Than a New Name;
Name; Macy's
Macy's Swoops in with Big
352. Jayne
Jayne O'Donnell,
O'Donnell, Beloved Stores
Changes to Field's,
Hecht's, Others
Others but a Few Old Touches Will Stay,
Stay, USA TODAY,
TODAY, June
Changes
Field's, Hecht's,
June 8, 2006, at
lB.
353. Id.
Id.
354. National
National Retail Federation, supra
supra note 347. J.C.
J.C. Penney did not
not make
make the
the list
list in 2005, but was
was
ranked number
number seven inin 2006. ItIt returned toto the list, ranked number seven inin 2009.
http://mf.com/modules.php?name=News&op=viewlive&spid=653 (last visited February
http://nrf.comlmodules.php?name=News&op=viewlive&sp_id=653
February 9,9, 2009).
2009).
See, e.g., Matthew
Kauffman, Mall
Mall Competitors
Competitors Roll out Welcome Mat for
Nordstrom,
355. See,
Matthew Kauffman,
for Nordstrom,
HARTFORD
17, 1997,
Al; Tami
Convenience Counts As Macy's
Macy's Moves In,
HARTFORD COURANT,
COURANT, Aug. 17,
1997, atat AI;
Tami Luhby, Convenience
NEWSDAY, Feb.
13, 2001,
Retail Bankruptcy?
NEWSDAY,
Feb. 13,
2001, atat A42;
A42; Jennifer
Jennifer Steinhauer, Just Another Retail
Bankruptcy? Maybe Not.,
N.Y. nMES,
TIMES, July
1997, at
at DI;
Di; Andrea
Andrea K.
K. Walker,
Walker, Retail Makeover; The Challengefor
Challengefor Macy's
Macy's Is to
N.Y.
July 9,9, 1997,
Traditions,BALTIMORE
5, 2006, at IA;
Keep Hecht
Hecht's's Customers
Customers but Few Traditions,
BALTIMORE SUN, Sept. 5,2006,
IA; O'Donnell, supra
supra
note 352.
Faces the Music:
Music: Shoppers
Shoppers Tllning
Tuning alit
out Since
Since Name Change;
Change; Sears
Sears Outlook
356. Sandra
Sandra Guy,
Guy, Macy's Faces
Better, CHI.
CHI. SUN-TIMES,
SuN-TIMES, Dec.
12, 2006, at 50.
Beller,
Dec. 12,2006,
54
20101
2010]
AN
ANTITRUST QUANDARY
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309
array of menu options,"
options," and must enter their Social Security number
number
357
357
to speak to a live operator.
to
According to Macy's, it is trying
358
358
costs.
minimizing
and
service
customer
strike a balance
balance between
between
service and minimizing costS.
After acquiring May, Macy's cut at least 6,200 jobs, including
including
359
regional
eliminated in Boston,
regional buyers. 359
Regional headquarters
headquarters were eliminated
Los Angeles, Houston, and Arlington, Virginia, for a total loss of
of
36o
360
1,900
One-thousand-seven hundred jobs were eliminated in
1,900 jobs.
One-thousand-seven
36 1
St. Louis, May's former headquarters.
headquarters. 361
In contrast, Chicago,
Chicago, whose
residents may have complained
of
complained more vigorously than the residents of
tentatively
any other city, lost only 250 jobs; in addition, Macy's tentatively
area
agreed to bring Frango Mint production back to the Chicago area
362
36
2
with a test kitchen in the flagship downtown
downtown store.
purchasesIn addition to services directly
directly related to customer purchasesincluding store hours, the number of employees
employees available
available for
assistance, and brand selection--department
selection--<iepartment stores have long been
known for community
community service. Specifically, department stores have
of
typically been large contributors
contributors to local philanthropy, sponsors of
community events and the host of a variety
variety of in-store services not
363 It remains
all--elsewhere. 363
remains to be seen
conveniently found-if at all-elsewhere.
headquartered in a distant city with little local
whether a corporation headquartered
management or control will be as charitable to local organizations.
organizations.
of
From the first display windows that created the phenomenon
phenomenon of
364
shopping,
of
window shopping,364
department stores have been
been a nexus of
community events that promote shopping, but also create value for
of
communities by hosting cherished
cherished local traditions. A full catalog
catalog of
practices would fill a book, but they include
these long-time practices
include Jordan
357.
Our New List of Automated-Phone-System Tricks
Tricks
357. Jolayne Houtz,
Houtz, Navigating the Phone Maze; Our
Just
Wall, SEATTLE
TIMES, Nov.
2006, at MI.
MI.
Just Might Get You
You to a Human Before You Hit
Hit the Wall,
SEATILE TiMEs,
Nov. 12,
12,2006,
358. Id.
Id.
Moin, Terry Lundgren's
Lundgren's Macro/Micro
Macro/Micro Game Plan
Federated, WOMEN'
WOMEN'SS WEAR
359. David Moin,
Plan for Federated,
DAILY, Nov.
Nov. 28,
28, 2005,
2005, at 1.1.
Chicago, CHI.
TRIB., June 4,
360. Susan Chandler, Pain
Pain ofa Name Change
Change Cutting
Cutting Deeper
Deeper in Chicago,
CHI. TRiB.,
4, 2006,
2006, at
Cl.
CI.
361. Id.
Id. St. Louis
Louis retained other jobs because it was designated
designated headquarters of Macy's Midwest. Id.
Id.
Id.
362. Id.
Id. Target had outsourced
outsourced Frango Mint
Mint production
production toto aa company in Pennsylvania. Id.
Was the Heart
City, COLUMBUS DISPATCH,
363. See generally
generally Jeffrey
Jeffrey Sheban, For
For Many,
Many, It Was
Heart of the City,
DISPATCH,
Aug. 8, 2004, at IF.
55
310
[Vol.
[Vol. 26:2
3 66
Marsh's enchanted
enchanted village
village in
in Boston;365
Boston; 365 Rich's
Rich's pink
Marsh's
and
pink pig
pig train
train 366
and
the lighting
lighting of
of the
the tree
tree on
on the
the crystal
crystal bridge
bridge in
in Atlanta;367
Atlanta; 367 Burdine's
the
Burdine's
Circus in
the Sky
Sky in
Miami; 368 Foley's
Circus
in the
in Miami;368
Foley's Thanksgiving
Thanksgiving Day
Day Parade in
in
369
370 and Christmas parades,
Houston; local
Thanksgiving
Houston;369
local fireworks,
fireworks, Thanksgivi
parades,
ng370 and
and of
of course
visits by
Most local
local traditions
traditions have
have now
now
and
course visits
by Santa
Santa Claus.
Claus. Most
371
37
1
been replaced
one Thanksgiving
Thanksgiving parade
and one
one Fourth
Fourth of
been
replaced by
by one
parade
and
of July
July
372
fireworks display,372
display,
sponsored by
by Macy's
in New
New York
York City,
City, but
but
fireworks
sponsored
Macy's in
broadcast
national television.
television. This
This cost-cutting
cost-cutting is
is surely
surely aa
broadcast on
on national
rationalization of
of services,
services, but
but it
it suggests
suggests aa decrease
in service
service or
or
rationalization
decrease in
output, and
and an
an increase
increase in
in price-paying
price-paying the
the same
same or
or more
more but
output,
but getting
getting
less.
less.
73
3373
365.
365. Matt Viser, Enchanted Village Is a Broken Spell, BOSTON
BOSTON GLOBE, Nov. 29,2006,
29,2006, at lB.
366. See the Pink Pig at Macy's Lenox Square, Macy's, http://www.fds.com/
http://www.fds.coml
pressroom/macys/common/download.asp?fn=/pressroom/macys/media.kits/190/docs/ThePinkPigAt
pressroomlmacyslcommon/download.asp?fh=/pressroomlmacyslmedia_ kitsll90/docs!The_Pink]ilLAt
_Macys.pdf
(last visited Aug. 17,2008).
17, 2008). After closing Rich's downtown store, FDS eliminated the pink
_Macys.pdf(last
pink
pig
1991. To meet community demands,
demands, Macy's created a brand
brand new ride reminiscent
reminiscent of the
pig train
train in 1991.
pink
pink pig (the original
original was aa monorail; the new pink pig is a children's
children's ride on a short
short circular
circular track)
running in a tent at Macy's Lenox Square Mall. See generally Susan Chandler, Pain of a Name Change
TRIB., June
Cl; Macy's Pink Pig,
Cutting Deeper in Chicago, CHI. TRIB.,
June 4, 2006 at CI;
Macy's,
Pig, Macy's,
http://www.macys.com/campaign/pinkpig/index.jsp
http://www.macys.comlcampaign/pinkpig/index.jsp (last visited Aug. 17, 2008); Priscilla the Pink Pig,
The
The New
New Georgia
Georgia Encyclopedia,
Encyclopedia, http://www.georgiaencyclopedia.orglnge/Multimedia.jsp?id=m-9324
http://www.georgiaencyclopedia.org/ngelMultimedia.jsp?id=m-9324
17, 2008).
367.
367. M Rich and Brothers
Brothers and Co. Building, City of Atlanta,
Atlanta, http://apps.atlantaga.gov/
http://apps.atlantaga.gov/
citydir/URBAN/MRich%20and%2OBrothers%20and%2OCo.htm
citydirIURBANlMRich%20and%20Brothers%20and%20Co.htm (last
368.
14, 2005,
368. Robert
Robert Trigaux,
Trigaux, Burdines Not Alone in Retail Boneyard, ST.
ST. PETERSBURG
PETERSBURG TIMES,
TIMES, Feb. 14,2005,
at
ID.
at !D.
369.
Thanksgiving Day Parade Loses Title Sponsor, HOUSTON Bus.
BUS. J.,
369. See generally Thanksgiving
J., Jan. 11,
11,2006,
2006,
http://www.bizjournals.com/houston/stories/2006/01/09/daily26;
http://www.bizjournals.com/houston/storiesl2006/01l09/daily26; Press
Press Release, 57th Annual
Annual H-E-B
H-E-B
Holiday Parade
Thanksgiving Day: Themed
Will Float
Float Through the Streets
Streets of Downtown
Downtown Houston on Thanksgiving
Holiday
Parade Will
"Superheroes,"
Celebrate Both Favorite
"Superheroes," the Parade
Parade Will
Will Celebrate
Favorite Fictional
Fictional Characters
Characters and Everyday
Everyday Superheroes
Superheroes
Greater Houston
2006), http://www.wamuparade.com/media/
in the
the Greater
Houston Community (Oct. 12,
12,2006),
http://www.warnuparade.comlmedial
HEB%20Parade%20General%2ORelease%2OFINAL.pdf.
HEB%20Parade''1020General%20Release%20FINAL.pdf.
370.
Thursday by
370. Thanksgiving
Thanksgiving was moved
moved to the
the third
third Thursday
Thursday in November from the fourth Thursday
President
President Franklin
Franklin Roosevelt
Roosevelt at
at the behest
behest of
of chief
chief executive
executive of
of FDS, so
so the stores
stores would
would have an
an extra
extra
week
pre-Christmas shopping. Feran,
Feran, supra note 40;
40; Saitz,
Saitz, supra note
note 40.
40.
week of pre-Christmas
371.
Thanksgiving Day
371. Macy's
Macy's Thanksgiving
Day Parade,
Parade, Macy's, http://www.macys.com/campaign/parade/
http://www.macys.comlcarnpaign/paradel parade.jsp
parade.jsp
(last
17, 2008).
2008).
372.
372. Macy's
Macy's Fourth
Fourth of
of July,
July, Macy's,
Macy's, http://wwwl.macys.com/campaign/sitelets/fireworks/
http://wwwl.macys.comlcarnpaign/siteletslflreworksl
direction.jsp
direction.jsp (last
(last visited
visited Aug. 17,
17, 2008).
2008).
373.
however, agreed
373. Macy's
Macy's has,
has, however,
agreed to continue
continue certain
certain local traditions,
traditions, generally
generally after
after the
the local
local
community
community has
has protested.
protested. See,
See, e.g.,
e.g., Teresa
Teresa F. Lindeman,
Lindeman, Pittsburgh
Pittsburgh Traditions to Live on as
Kaufmann
's Stores
Kaufmann's
Stores Become
Become Macy's, PITTSBURGH
PITTSBURGH POST-GAZETTE,
POST-GAZETTE, July
July 27,
27, 2006,
2006, http://www.posthttp://www.postgazette.con/pg/06208/708982-28.stm
"Santaland");
gazette.comlpg/06208n08982-28.stm (Post-Thanksgiving
(post-Thanksgiving parade, holiday windows
windows and
and "Santaland");
Steve Tawa,
Opens in
Macy's Opens
in Former
Former John Wanamaker
Wanamaker Store,
Store, KYW
KYW NEWSRADIO
NEWSRADIO 1060
1060 PHILADELPHIA,
PHILADELPHIA,
Steve
Tawa, Macy's
http://www.kyw1060.con/pages/63717.php?contentType=4&contentld=181420
http://www.kywI060.comlpages/63717 .php?contentType=4&contentld= 181420 (last
(last visited
visited Aug.
Aug. 17,
17,
2008)
2008) (Wanamaker's
(Wanamaker's Christmas
Christmas Light
Light Show
Show in
in Philadelphia).
Philadelphia).
56
20101
2010)
AN
ANTITRUST QUANDARY
AN ANTITRUST
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311
2. Fewer
Fewer Choices
Choices
The FTC "carefully reviewed
reviewed the voluminous investigative record"
record"
merchandise
for indications
indications that Macy's would "[reduce
"[reduce the] merchandise
374
assortment"
efforts,
assortment" and found none. 374 Again, despite the FTC's best efforts,
Macy's has defied
defied predictions.
Even before
before Macy's
Macy's eliminated
eliminated the name Marshall Field's, Prada
Prada
375
Field's stores.
Marshall Field's
former Marshall
of the
the former
stores. 375
pulled its product
product out of
Though Prada refused to comment, a retail consultant suggested that
"[h]igh-end brands only want to be in high-end stores, places
"[h]igh-end
places that
....Perhaps some of
of
they think are consistent with their brand image ....
same level as Marshall
these designers
designers don't feel that Macy's
Macy's is the 376
either."
don't,
customers
Field's. I think most customers don't, either.,,376
Prada
Prada was only the first designer to jump ship. Also deciding not to
Gabanna (for
(for
sell in Macy's were Miu Miu, Dsquared, Dolce
Dolce & Gabanna
3377
77
men), and Jimmy Choo.
Elizabeth Arden
Arden pulled out of the
79
3378
7 8 YSL
salons.
left Marshall
Marshall Field's for Neiman Marcus.3379
Prada,
David Yurman, and Gucci (shoes) went to Nordstrom. For the most
8°
part, Macy's
Macy's in-house brands have taken their place.338o
Vendors, particularly
particularly smaller
smaller ones, fear Macy's enormous size,
"There's a
geographic markets. "There's
perhaps
perhaps even a monopsony in certain geographic
community that feels very threatened,"
threatened,"
huge portion of the vendor community
1
according to an investment
investment banker
banker specializing
specializing in apparel. 38
38I Not
of
only are vendors eliminated
eliminated simply because
because of the consolidation of
Inc./The May
374.
374. Statement of the Commission
Department Stores, Inc.me
051 -0111 at 4 (FTC 2005).
Department Stores Company, FTC File No. 051-0111
MINNEAPOLIS-ST. PAUL
Macy's Isn't
Isn't a Good
Good Fit,
High-End Prada
375. Allison Kaplan, High-End
Prada Decides
Decides Macy's
Fit, MINNEAPOLIS-ST.
PIONEER PRESS, May 17, 2006, at IIC.
C.
376. Id.
Id.
DepartmentStore;
Store; With
Uncertain Future
Future of the American Department
377. Thomas Lee && Sara Glassman, The Uncertain
FederatedHas
the Switch to Macy's,
Macy's, Federated
Has the Daunting
Daunting Task of Wooing Core
Core Marshall
Marshall Field's
Field's Shoppers,
Shoppers,
Care About Things
Things Like Holiday
Who Still Care
Holiday Windows, MINNEAPOLIS STAR TRIB.,
TIUB., Sept. 3, 2006, at IA.
Id.
378. Id.
Here for Macy's
Macy's Rivals;
Rivals; Other
Field Days Here
379. Sandra Jones, Field
Other High-End
High-End Stores in the Area Were
2007, at
Space When Designers
DesignersLoyal to Field's
Field's Were Displaced,
Quick to Offer Space
Displaced, CHI. TRIB., Feb. 28,
28,2007,
Cl.
CI.
Designers to Help
Help
at Macy's;
Macy's; Federated
Uses a Legion of Designers
House Brands
Brands Heavy at
380. Sandra Jones, House
Federated Uses
8,2006, at CI.
C1.
IncreaseProfitability,
Profitability,CHI.
Other Products
Set Its Clothes,
Clothes, Other
Products Apart,
Apart, Increase
CHI. TRIB.,
TRIB., Sept. 8,
Unhappy About Macy's
Macy's Owner's
Owner's Buy of
Change Local
Local Malls;
Shoppers Unhappy
381. Merger
Merger Could Change
381.
Malls; Retail:
Retail: Shoppers
of
1,2005, at Al.
Robinsons-May, loNG
LONG BEACH
Robinsons-May,
BEACH PRESS-TELEGRAM,
PRESS-TELEGRAM, Mar. 1,2005,
AI.
57
312
[Vol.
(Vol. 26:2
department2stores, but smaller vendors simply cannot serve the larger
38
structure. 382
C. State
State Action Will Cure
Cure Possible
PossibleProblems
Problems
C.
One puzzling statement
statement made by the FTC concerns remedial action
by other antitrust authorities. Specifically, in justifying the end of its
own investigation, the FTC said that "participation
"participation by state agencies,
specific local conditions, may be particularly
which are familiar with specific
...and we also note that inquiries by various individual
individual state
helpful ...
'
'383
antitrust agencies are ongoing. ,,383 Effectively, the FTC was ceding
its authority
authority to the states.
Every state can in theory pursue antitrust remedies
remedies in its capacity
capacity
84
law, 384
and most states
parens patriae
patriae under the federal antitrust law/
as parens
can bring antitrust actions based on their respective "Little
"Little FTC
3 85
Act. ,,38S
Many states have enacted
enacted specific antitrust laws patterned
patterned on
the federal Sherman and Clayton Acts.
In the Macy's/May
Macy's/May merger, the Attorneys General of California,
Maryland,
Pennsylvania conducted
conducted
Maryland, Massachusetts,
their own antitrust
antitrust investigation
investigation and required Macy's
Macy's to divest
twenty-six
duplicate
stores
in
malls,
demanding
that
the stores could
twenty-six
demanding
386
only be sold to other traditional department
department stores. But some states
so. 3 8 7
to do
claiming
suits
refuse
refuse to bring antitrust suits claiming aa lack
lack of
of authority
authority to
do SO.387
For example, in 1998, Daryl Robinson, deputy counsel to then
Georgia Attorney
"[w]e do not have a
Attorney General
General Thurbert
Thurbert Baker said, "[w]e
statutory authority to bring such
such
state antitrust law, and so don't have statutory
382.
382. Id.
Id.
383.
Statement of
Inc./The May
383. Statement
of the Commission
Department Stores, Inc.me
May
Department
Department Stores
Stores Company,
Company, FTC
FTC File
File No. 051-0111
OSI-OIII at 4 (FTC
(FfC 2005).
200S).
384.
384. See,
See, e.g.,
e.g., 15
IS U.S.C.
U.S.C. §§
§§ 15(f)-(g);
IS(f}-{g); California
California v. ARC
ARC Am.
Am. Corp.,
Corp., 490 U.S. 93 (1989);
(1989); Illinois
llIinois
Brick
(1977); Hawaii
431 U.S.
U.S. 720 (1977);
Hawaii v. Standard
Standard Oil Co.,
Co., 405
40S U.S.
U.S. 251
2S1 (1972).
(\972).
Brick Co.,
Co., v. Illinois, 431
385.
38S. See
See generally
generally Mark
Mark D.
D. Bauer,
Bauer, The
The Licensed
Licensed Professional
Professional Exemption
Exemption in
in Consumer Protection:
Protection: At
At
140-47 (2006).
Odds with Antitrust History
History and Precedent,
Precedent, 73 TENN.
TENN. L.
1. REV.
REv. 131,
131, 140-47
386.
California, Commonwealth of Massachusetts,
386. Assurance,
Assurance, State
State of
of New
New York, State of
of California,
Massachusetts,
Commonwealth of
Commonwealth
of Pennsylvania
Pennsylvania and State of
of Maryland
Maryland against
against Federated
Department Stores,
Stores, Inc.,
Inc.,
http://www.oag.state.ny.us/press/2005/aug/Federated%2OAssurance.pdf
http://www.oag.state.ny.uslpressl200S/aug!Federated%20Assurance.pdf(last
(last visited
visited Aug. 17,
17, 2008).
2008).
387.
ifFederated
387. See,
See, e.g.,
e.g., Jennifer
Jennifer Brett,
Brett, Rich's,
Rich's, Macy's Can Stay at Mall but if
Federated Sells Either
Either Store,
Store, J.B.
J.B.
White's
Company Spokesman
White's May
May Consider
Consider Move,
Move, Company
Spokesman Says,
Says, ATLANTA
ATLANTA J. CONST.,
CONST., Dec.
Dec. 1,
I, 1994,
1994, at B7;
B7;
Gene
Gene Tharpe,
Tharpe, No
No Antitrust
Antitrust Law
Law == No Antitrust Suit; But
But Why
Why Not?
Not? Citing Lack
Lack of
ofAuthority, Georgia
Georgia
Did
DidNot
Not Take
Take Part
Part in
in the
the Microsoft
Microsoft or
or Tobacco
Tobacco Cases, ATLANTA
ATLANTA J.
J. CONST.,
CONST., July
July 5,
S, 1998,
1998, at 4G.
58
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20101
AN ANTITRUST
QUANDARY
AN
ANTITRUST QUANDARY
313
actions[.] ...
government is filing
actions[.]
... But having said that, if the federal government
an antitrust suit, we will get the benefit
benefit of whatever relief they
388
get.,,388
get.
In Georgia, Rich's and Macy's consolidated during the Campeau
era (closing
(closing both downtown Atlanta stores), and the state was not
affected
affected by Macy's acquisition
acquisition of May. But states other than
California, Maryland, Massachusetts,
Pennsylvania
were impacted by this merger, and some of them may have been
been
relying on the FTC to take decisive action.
D.
DidNot Discuss:
And
D. What the FTC
FTC Did
Discuss: Entry Barriers,
Barriers, Monopsony And
Mall Owners
Owners
In trying to determine the effect of the Macy's/May
Macy's/May merger on
on
non-price
interested vendors and
non-price competition, the FTC interviewed interested
mall owners, viewing
viewing them as "particularly useful surrogates
surrogates for
389
consumers."
The problem is that the interests of mall owners and
consumers.,,389
consumers
consumers may be at significant variance.
At first glance, mall owners'
owners' interests
interests could conceivably
conceivably be in line
with consumers. Mall owners have an interest
interest in "maximizing
"maximizing
390
as well as keeping consumers
consumers happy and
and
consumer traffic,,390
traffic"
interested (and coming back for more). At least in theory, mall
department-store companies
companies
owners should prefer a large number
number of department-store
choices
and brand names in order to have the maximum number of choices
for anchor
anchor stores, and even to have the maximum number
number of anchors
physically
physically possible within the confines of the mall's real estate.
In fact, malls originally developed
corridors connecting
developed as long corridors
two or more department-store
department-store anchors, whose aggressive advertising
advertising
391
39
brought
brought ample traffic to the mall.
mal1. ' In turn, department
department stores either
either
owned their anchor space or were given long-term leases requiring
requiring
388.
388.
389.
Tharpe, supra
supra note 387.
Federated Department Stores, lnc.ffhe
Inc./The May
Statement of the Commission
Department Stores Company, FTC File No. 051-0111
051-0111 at4 (FfC
(FTC 2005).
2005).
390. Id.
ld
391. Andy Fixmer, Mall Owners
Owners Won't Lament Federated-May
Federated-May Deal:
Deal: Sales
Sales Rise As Department
391.
Department
Stores Depart,
Depart,L.A. Bus.
BuS. J.,
I., Mar. 7,
7, 2005,
2005, at 1.
59
314
REVIEW
STATE UNIVERSITY
GEORGIA STATE
[Vol. 26:2
little or no rent, and mall owners made money renting space in
392
between the department stores.392
But the answer to whether mall owners and consumers have
identical
identical interests is quite complicated today, and the FTC's reliance
on the opinion of mall owners may be misplaced. Shopping malls
have evolved from being relatively small or local efforts, often
substantially funded or owned by a local department store, to being
units in vast real-estate empires, often owned or controlled by Real
(REIT),393 which are often publicly owned
owned
Estate Investment Trusts (REIT),393
and traded on exchanges. As malls are traded and sold, their value
depends in part
part on the traffic, revenues, and the caliber of tenants.
Mall owners,
owners, therefore, have been substantially affected by both the
constant turmoil stemming from department
department store consolidation,
consolidation, as
394
and others.
CHH,
Allied,
FDS,
Macy's,
of
bankruptcies
the bankruptcies of Macy's, FDS, Allied, CRR, and
others. 394
well as the
The financial stability and credit worthiness of a major anchor
395
affects the value of the mall itself.
When a department
department store is
itself.395
owned by a venture capital firm-as is true for Lord & Taylor since
its divestiture from Macy's in 2007-there is a perception among
shopping center
anchor
center owners that it will not be a stable long-term
long-term anchor
396 All
tenant.396
this
instability
affects
the
value
of the shopping
All
instability
shopping center,
97
and in turn the stock price or credit worthiness
worthiness of the REIT.3397
For example,
Macerich Co.,
example, Macerich
Co., a REIT owning several
several shopping
398
malls,
malls,398 found itself with four anchors
anchors at The Oaks Mall in Thousand
Oaks, California, all owned by Macy's.399
Macy's. 399 Even worse, Macy's
Macy's had to
divest some of these stores
agreement with the
stores to comply
comply with an agreement
California
Macy's
California Attorney General,
General, and there was no guarantee
guarantee Macy's
392.
392. Id;
Id.; see
see also
also Sandra
Sandra Jones,
Jones, Water Tower Gets All
All Dolled Up, Boosts Sales; $35 Million
Million in
Updates, Including
Updates,
Including New and Renovated Stores,
Stores, Is Paying
Paying off
offfor
for the Mall,
Mall, Despite the Weakening
Weakening
Economy, CHI. TRIB.,
21, 2008,
TRm., July
July 21,
2008, at C1.
C I.
393.
393. See
See generally
generally Brannon
Brannon Boswell,
Boswell, Merger Good for
for Mall
Mall Industry,
Industry, Landlords
Landlords Say, SHOPPING
SHOPPING
CENTERS
CENTERS TODAY,
TODAY, Apr.
Apr. 2005.
2005.
394.
394. See generally
generally Comment,
Comment, Regional
Regional Mall REITs,
REJTs, MERRILL
MERRILL LYNCH,
LYNCH, Nov. 24,2003.
24, 2003.
395.
395. See generally Jon
Jon Springer,
Springer, Industry Weighs Implications
Implications of
of Grocery Mergers,
Mergers, SHOPPING
SHOPPING
CENTER
CENTERS TODAY,
TODAY, Oct.
Oct. 1999.
396.
396. Id.
Id.
397.
397. Id.
Id.
398.
17, 2008).
398. Macerich
Macerich Co.
Co. Overview,
Overview, http://www.macerich.com/overview.asp
http://www.macerich.com/overview.asp (last visited
visited Aug. 17,2008).
399.
399. Shelly
Shelly Garcia,
Garcia, Breakthrough
Breakthrough at the Oaks: Purchase
Purchase of Center Anchors Will Speed Expansion
Expansion
Plans,
Plans, SAN
SAN FERNANDO
FERNANDO VALLEY.
VALLEY. Bus.
BuS. J., June
June 5,
5, 2006,
2006, at 1.
60
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AN
315
°0
any entity
entity Macerich
Macerich would want at
at the mall.440o
would sell to any
Macerich agreed to purchase
purchase two of
of the anchor
anchor department
department store
Macerich
401
40
spaces from Macy's
Macy's and
and plans to tear them down. 1 In place
place of one
spaces
the
other
add
Nordstrom;
will
Macerich
Macy's stores, Macerich
other space
of the Macy's
include smaller
smaller retail stores
stores and, the REIT
REIT hopes, a movie
will include
40
2
theater. 402
Macerich is not alone in turning
turning department
department store anchor space into
Macerich
something else. In
In Phoenix,
Phoenix, Westcor
Westcor Partners turned three
three stories of
of
40 3
vacant department-store
Mel call
call center. 403 At
At
department-store space into an MCI
vacant
Westfield Shoppingtown
Shoppingtown Wheaton,
Wheaton, outside Washington, D.C., the
the
Westfield
Hecht's (a former May brand)
brand) and
mall was anchored by both Hecht's
4 04
from
Macy's
Macy's.404
mall
owners
will
store
Macy's
the
Hecht's
buy
The
Macy's.
and try to remarket it to Best Buy or some
some other big box
box
406
40540
405
6
40
discounter. These
These are just a few examples.
examples.
It is possible that several
several factors are at work: 1) mall owners are
loathe to continue
continue to see the value of their properties
properties decline
overnight because
department stores declare
declare bankruptcy, consolidate
because department
4
07
close;407 2) mall owners
owners have found that although they still cannot
cannot
or close;
4°8
live without at least some department stores,408
converting anchor
anchor
stores,
space into big box retailers
retailers (e.g. Best Buy or Barnes &
& Noble), movie
3)
suffice; 40 9 and 3)
theaters, restaurants
restaurants or other traffic generators will suffice;409
having gradually been weaned
weaned by department
department stores (whether
(whether by
by
California,
State of New York, State of California,
393; see also Assurance,
supra note
note 393;
Id. See Boswell,
400. Id.
Boswell, supra
Assurance, State
Maryland against
Pennsylvania and
against
and State of Maryland
Commonwealth of Pennsylvania
Massachusetts, Commonwealth
Commonwealth of Massachusetts,
http://www.oag.state.ny.us/press/2005/aug/
Federated
Department
Stores,
Inc.,
http://www.oag.state.ny.uslpressl200S/augl
Stores,
Department
Federated
17, 2008).
visited Aug.
Aug. 17,2008).
Federated%20Assurance.pdf (last visited
Federated%20Assurance.pdf(last
Id.
401. Id.
Id.
402. Id.
Centers, lNT'
INT'L
Uses for
Old Centers,
Finding New Uses
Watson, Owners Finding
403. Anne
Anne Watson,
403.
for Old
L COUNCIL
COUNCIL OF SHOPPING
2008).
(last visited
visited Aug.
Aug. 17, 200S).
CENTERS,
May 2002,
http://icsc.orglsrch/sctlsct0502/pageS2.php (last
2002, http://icsc.orglsrch/sct/sct502/page82.php
CENTERS, May
Federated-May Merger
Shaking Up
Up Regional Retail; Federated-May
Michael Barbaro,
404.
Hedgpeth and
and Michael
Barbaro, Shaking
404. Dana
Dana Hedgpeth
El.
1, 2005, at EI.
Reshuffling, WASH. POST, Mar. 1,2005,
Bring Closings,
Closings,Reshuffling,
Likely to Bring
Id.
405. Id.
Time, SHOPPING
Hazel, Check-in
Check-in Time,
note 391;
391; Debra
Fixmner, supra
supra note
406. See also
Debra Hazel,
SHOPPING CENTERS TODAY, Nov.
also Fixmer,
24,2006,
TAMPA TRIB., May 24,
Storefor
Malls, TAMPA
Changes in Store
2003;
for Malls,
2006, at I.1.
Michael Sasso,
Sasso, Changes
2003; Michael
1, 2002,
TRAFFIC, Aug. I,
Store, RETAIL TRAFFIC,
DepartmentStore,
The Future
Futureof the Department
407. See generally
generally Ben
Ben Johnson,
Johnson, The
2002,
http://retailtrafficmag.com/mag/retail-futuredepartmentstore.
http://retailtrafficmag.comlmaglretail_future_department_store.
13, 2006.
Superstar,TIME, Feb. 13,
Department-StoreSuperstar,
note 393;
393; Dody Tsiantar, Department-Store
Id.; Boswell,
Boswell, supra
supra note
408. Id.;
40S.
Id.
409. /d.
61
316
REVIEW
[Vol. 26:2
(Vol.
choice
circumstance), mall owners
choice or circumstance),
owners have come to enjoy410the benefits
them.4lO
rents from
generating
and
of owning
owning anchor
anchor space
generating rents
from them.
In the end, the Horizontal
Horizontal Merger
Merger Guidelines
Guidelines standard
standard of entry
'
411
being "timely, likely, and sufficient'.411
sufficient
is not being facilitated by
mall owners tearing
tearing down empty department
department stores. Though new
entry remains possible-assuming
possible-assuming there are any department store
position-expansion increasingly
increasingly
companies left to take an anchor position-expansion
requires the construction
construction of a new anchor building and potential
reconfiguration
reconfiguration of the mall.
Macy's
Macy's may be a monopsony in many geographic markets; mall
dependence on an organization
organization
owners are doing their best to reduce dependence
with market power and in fact have other options for traffic-building
traffic-building
tenants. Consumers, however, may not be as fortunate, and the FTC's
FTC's
reliance on mall owners as a proxy for consumer opinion may have
been misplaced.
announced its proposed
Furthermore, when Macy's
Macy's first announced
acquisition of May and antitrust concerns were raised in the media,
Macy's pointed out that the overlap between the department store
4 12
groups was limited to a few states. 412
This, however, discounts
competition (where the threat
theories of perceived
perceived potential
potential competition
threat of entry
4 13 or actual
limits anti
anticompetitive
behavior by the incumbent
firm)413
actual
competitive behavior
incumbent firm)
potential competition (where the incumbent
incumbent acquires a firm that
would otherwise have entered the market and made it more
competitive).414 The FTC did not publicly disclose whether it
competitive).414
410. See Boswell,
Fixiner, supra
supranote
supranote
Boswell, supra
supra note
note 393; Fixmer,
note 391;
391; Jones, supra
note 392;
392; Mega-Mergers:
Mega-Mergers: It's
Estate, 66 CO-STAR ADVISOR Issue
Issue 22 (on file with
with Georgia State
State University Law
All About the Real Estate,
Review) (hereinafter
Mega-Mergers); see generally
generally Garcia,
Review)
(hereinafter Mega-Mergers);
Garcia, supra
supra note 399; David
David Koch, Anchors
RETAIL TRAFFIC,
TRAFFIC, Dec.
1, 2004, http://retailtratlicmag.comlmaglretail_anchors_anew/index.htrnl;
http://retailtrafficmag.com/mag/retailanchorsanew/index.html;
Anew, RETAIL
Dec. 1,2004,
411.
http://www.usdoj.gov/atr/public/guidelines/
411. U.S. Horizontal
Horizontal Merger Guidelines
Guidelines 3.0,
3.0, http://www.usdoj.gov/atr/public/guidelinesl
horizbook/30.html (last visited
23, 2009).
2009).
horiz_bookl30.htrnl
visited Oct. 23,
412. Berk,
Berk, supra
supra note 207.
See, e.g., United States v. Marine
413. See,
Marine Bancorporation, 418 U.S. 602, 639-40 (1974);
(1974); United States v.v.
Falstaff
n.13 (1973);
(1973); F.T.C.
Falstaff Brewing
Brewing Corp.,
Corp., 410 U.S.
U.S. 526, 532-34, n.l3
F.T.C. v.v. Procter && Gamble
Gamble Co.,
Co., 386
386 U.S.
568,
also GAVIL,
supra note 263,
568, 581
581 (1967).
(1967). See also
GAVIL, KOVACIC
KOVACIC &
& BAKER,
BAKER, supra
263, atat 453-54. See generally
generally U.S.
U.S.
Horizontal
http://www.usdoj.gov/atr/public/guidelines/ horizbook/l0.html
Horizontal Merger Guidelines 1.0, http://www.usdoj.gov/atr/public/guidelinesl
horiz_bookllO.htrnl (last
(last
visited
visited Oct. 23,
23, 2009).
2009).
414. Tenneco,
Inc. v.
v. FTC,
689 F.2d
F.2d 346, 353-54 (2d Cir.
414.
Tenneco, Inc.
FTC, 689
Cir. 1982); Mercantile
Mercantile Texas Corp. v. Bd. of
Governors,
Int'l Ltd. v. FTC,
Governors, 638
638 F.2d 1255, 1265-66 (5th
(5th Cir. 1981); BOC
BOC Int'I
FTC, 557
557 F.2d
F.2d 24 (2d Cir. 1977);
In
916-48 (1984). See also GAVIL,
In re B.A.T. Industries,
Industries, 104 F.T.C.
F.T.C. 852,
852,916-48
GAVIL, KOVACiC
KOVACIC && BAKER, supra
supra note
note
62
2010)
20101
AN ANTITRUST
AN
ANTITRUST QUANDARY
QUANDARY
317
considered perceived potential competition or actual potential
competition. Unfortunately, it is not possible for even an interested
observer without the FTC's compulsory authority to hazard a guess
other's
as to whether Macy's or May would have entered the other's
415
·
k
.
c.
h
415
hIC market
geograp
mar et were It
lor the
t e merger.
geographic
it not for
CONCLUSION
CONCLUSION
The perfect
predict
perfect markets contemplated
contemplated by law and economics predict
that consumers
consumers always maximize
maximize welfare by making efficient
department stores
choices. Yet something
something important
important is going on with department
accurately reflected in a law and economics
economics analysis.
that is not accurately
These factors together have created
created a perfect storm of sorts that has
touched a nerve in many shoppers.
The experience of shoppers in Philadelphia
Philadelphia is illustrative. In 1979,
after more than one hundred
hundred years of family involvement,
Wanamaker's
was
sold
to
California-based
Wanamaker's
California-based CHH,416
CHH,416 which had just
tried and failed to buy Marshall Field's (which had just tried and
Wanamaker's.) 417 In 1986, after incurring considerable
failed to buy Wanamaker's.)417
debt to fight two hostile take-over
take-over attempts, CHH sold Wanamaker's
Wanamaker's
to real estate developer Alfred Taubman
of
Detroit,
who
had incurred
Taubman
considerable
& Lothrop
considerable debt a few years earlier
earlier acquiring Woodward
Woodward &
418
4 18
of Washington, D.C.
Taubman
Taubman converted most of the historic
Wanamaker's
Wanamaker's building in Center
Center City Philadelphia into offices,
leaving
a
pared-down
department
leaving
department store without most of its
419
419
departments.
departments. All management and fashion buying decisions were
taken out of local Philadelphia
consolidated in
in
Philadelphia hands and consolidated
263,
453-54. See generally
generally U.S. Horizontal Merger Guidelines
263, at 453--54.
Guidelines 1.0, http://www.usdoj.gov/atr/
http://www.usdoj.gov!atr!
public/guidelines/horizbook/l
0.html (last visited Oct. 23,
23, 2009).
2009).
public!guidelineslhoriz_booklIO.htrnl
415. It is possible that because the ITC
FTC defined
department
415.
defined the market as going far beyond traditional
stores
consider theories of perceived
perceived potential competition
competition or actual potential
potential competition.
stores that it did not consider
416.
& David
416. CHH
CHH eventually went
went bankrupt
bankrupt and was acquired by FDS. Diana B. Henriques &
David Cay
Johnston, Managers
Staying Dry As
TIMES, Oct. 14, 1996, at Al.
Managers Staying
As Corporations
Corporations Sink, N.Y. TiMES,
AI.
417. HENDRICKSON,
26, at 81;
81; WHITAKER,
WHrrAKER, supra
417.
HENDRICKSON, supra
supra note 26,
418.
supranote 23, at 28-29.
418. WHrTAKER,
WHITAKER, supra
28-29.
419. Id.
Id. See also Von Bergen, supra
supra note 43.
63
318
GEORGIA STATE
STATE UNIVERSITY
UNIVERSITY LAW
LAW REVIEW
[Vol. 26:2
(Vol.
Washington,
Washington, a city not generally
generally known as one of the great fashion
42o
42°
capitols of the world.
Taubman
Wanamaker's and Woodward
& Lothrop into
Taubman put both Wanamaker's
Woodward &
1995, May
bankruptcy in 1994 and then shuttered both chains. In 1995,
purchased
Wanamaker's stores,
Hecht's
purchased thirteen Wanamaker's
stores, renaming
renaming all of them Hecht's
42
1
(a Baltimore/Washington
store). In 1996, May
BaltimorelWashington regional department
department store).421
acquired
Philadelphia department
department store, the family-owned
acquired another Philadelphia
Strawbridge and Clothier, and renamed all the recently renamed
renamed
Strawbridge
Philadelphia
Philadelphia Hecht's
Hecht's stores as Strawbridge's,
Strawbridge'S, except for the original
Center City Wanamaker's
Wanamaker's store, which was recast as Lord &
422 When Macy's acquired May in 2005,
Taylor. 422
2005, it renamed all the
Strawbridge's stores (n~e
(nee Wanamaker's and n~e
nee Hecht's) Macy's.
Strawbridge'S
Then it closed the original
Strawbridge's store (doing
original Center
Center City Strawbridge'S
business
1868) and converted
converted what was left of the
business on that site since 1868)
original Wanamaker's
Wanamaker's store from a Lord & Taylor
Taylor into a Macy's.
department stores retail "dinosaurs,"
"dinosaurs," as many
Are these department
customers simply
commentators have called them, or are customers
423
confused?
confused?423
The mere fact that department stores have generally
generally
returned
steady
profits
despite
such
upheavals
is a testament to the
returned
profits
overall strength
of
the
institution.
strength
department
It is certainly possible that there was an oversupply of department
stores and some consolidation
consolidation and rationalization
operations was
rationalization of operations
necessary
necessary for efficiency. It is also possible that a lax Wall Street
regulatory climate and hunger for junk bonds allowed profitable
profitable and
popular
enterprises with valuable intangibles and real estate to be
popular enterprises
of
chopped up for short-term profit and then swallowed
swallowed by a sea of
424
424
debt.
Id. See generally Unspoken
for the Legislative Look, N.Y. TiMES,
TiMES, Apr.
Apr.
420. [d.
Unspoken Rule, Congress: Dressing
Dressingfor
26,
Dreamy. Congressman
26, 1984, atat BBI0;
I 0; Fay Fiore, California Dreamy:
Congressman Hunk,
Hunk, L.A. TIMES,
TIMES, Oct. 7, 1994, at A3.
42 !. WHITAKER,
supranote
421.
WHITAKER, supra
note 23,
23, atat 28-29.
28-29.
Id; Gopnik, supra
supranote
422. [d.;
note 195.
Department Store, DENY.
423. See, e.g.,
e.g., Suzanne
Suzanne S. Brown, Meet the New Department
DENY. POST,
POST, Sept.
Sept. 3, 2006, atat LI;
Ll;
Sandra
Sandra Guy, Changes Aim
Aim To Save Tradition, CHI.
CHI. SuN-TIMES,
SUN-TiMES, Sept. 8, 2006,
2006, at 55; Sandra Jones,
Jones, MayFederated Merger Could Add
Other
Add to Overstock of Space; Expected to Shut 75-100 Stores Even as Other
Retailers Jettison
CI. Bus., Mar.
Jellison Sites, CRAIN'S
CRAIN'S CHI.
Mar. 7,7, 2005, at 2; Lee
Lee &
& Glassman, supra note 377.
424. See Mega-Mergers,
Mega-Mergers, supra note
410.
note 410.
64
2010)
20101
AN
QUANDARY
AN ANTITRUST
ANTITRUST QUANDARY
319
None of these changes,
elsewhere, could
changes, in Philadelphia
Philadelphia and elsewhere,
could
short-term
possibly have been good for business. They were short-term
decisions
decisions made for immediate profit, and to monetize
monetize real estate
assets; they were not good for the long-term profitability of
of
department
stores
and
probably
the
department
reason the industry came to be
outdated and dying.
thought of as outdated
Antitrust
Antitrust has its roots in the same
same populist era in which department
department
stores
stores arose. Department stores and the antitrust laws share common
425 The
origins and ideals of consumerism
consumerism and democracy. 425
economics ignores its roots as a
to the field of economics
subrogation of antitrust
' 426
of
freedom.
"charter
"charter of freedom. ,,426
There
There is another side to antitrust: not every decision by consumers
is about buying the lowest-price
maximizing allocative
lowest-price good and maximizing
efficiency. And putting the department
department stores on sale-rather than the
goods contained therein-has done nothing to improve competition,
competition,
innovation, or consumer
consumer choice.
Consumers not only care about service and ambience-Macy's
ambience-Macy's
experience
concerned by a
experience shows that consumers
consumers are also concerned
homogenization
homogenization of retail choices, a loss of civic identity and at least
perceived
usurped
perceived disrespect by distant corporations
corporations that have usurped
cherished
local
institutions.
These
issues
demand
cherished
demand further
further
427
4
2
7
investigation by the FTC.
425. See 51 CONG.
11228, 11105,
14936 (1914)
(1914) (statements of Sens.
CONGo REc. 11228,
11105, 11109, 14936
Sens. Robinson,
Robinson,
Cummings, Newlands and Rep. Stevens); Averitt, supra
Winerman, supra
supranote
supra note 13,
13, at 225, 230-31; Winennan,
13, at 75-76, 90.
13,
426. United
v. Socony-Vacuum
150,221 (1940).
(1940).
United States V.
Socony-Vacuum Oil Co., 310 U.S. 150,221
427. The
The FTC has authorization
authorization to issue subpoenas
subpoenas to corporations
corporations whose business affects
affects commerce.
U.S.C. § 46(b).
15 U.S.C.
65
66

Department Stores on Sale: An Antitrust Quandary

Transcription

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