I was reading a USA today article today about the antitrust lawsuit brought against Starbucks. There was plenty of the olde standby argument ‘were just a poor ma pa store please federal government protect us from competition’. Underneath this tired argument there seemed to be a legitimate grievance. The lady bringing the suit against Starbucks alleges the company is offering exuberant payments well beyond market prices to lock up all the ideal coffee locations in an area of the city. Given Starbucks size they can offset the cost of paying large sums for prime real estate in a way other small coffee vendors can’t. I can see strong arguments for why this is wrong primarily because it enables Starbucks to eliminate competition not through efficiency but brute force. It’s possible I would support city regulation trying to manage this problem.

However one should note that Starbucks is leaving them selves vulnerable to a larger company that can take advantage of their strategy of tying up so much of their free capital in locking down prime real estate locations. In this way it’s possible to see free markets solving this problem without government intervention.

I advocate free markets as a function of generating competition. Business should remain unfettered provided this fosters an environment of competition. Business practices that reduce competition need to be regulated.

This entry was posted on Wednesday, December 20th, 2006 at 1:44 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.