High cereal prices and the prospects for relief by expansion of private label and antitrust enforcement

This article responds to key points in the GMA Fact Sheet Analysis of cereal industry conduct and performance. It also explains the organization of the industry using research by Wall Street analysts that document high concentration, barriers to entry, and noncompetitive pricing games. The result is high price cost margins and high prices. The judge's decision in State of New York v. P. Morris Kraft General Foods et al. is critiqued. She relies upon a broad definition of competition that compromises the role of price in achieving allocative efficiency in markets. The new application of the antitrust laws to unilateral market power is explained. Finally the prospects for price relief through expansion of private label cereals, although complex, are reasonably good. lEconLit cites: L100, L410, L660r © 1999 John Wiley & Sons, Inc.