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March 10, 2003

Donald Luskin sharply questions the FTC's effort to block a merger in the "market" for superpremium ice cream. "What if consumer choice in 'The Market for Superpremium Ice Cream' was narrowed to a single brand and prices became astronomical? What if 'The Market for Superpremium Ice Cream' vanished from the face of the earth altogether? So what? Consumers would simply choose from the dozens of remaining premium, regular, and cheap-o ice cream brands. Or they could switch to some other desert. Let them eat superpremium cake!"

Some other points worth noting. The FTC's vote in favor of a preliminary injunction was 5-0. The complaint is not yet online but the press release states, ". . . entry into the market would not be likely or sufficient to outweigh the anticompetitive harm."

But superpremium ice cream constitutes just 11% of total ice cream sales. At least in 1999-2000, the top two ice cream brands based on dollar sales volume in food, drug and mass merchandising outlets were private label, $942.3 million and Breyers, $500.7 million. The two companies involved in the proposed merger, Nestle and Dreyer's, account for only 25% of total U.S. ice cream sales.

This is where "unilateral effects" theory is leading the FTC.

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