Daily Archives: June 21, 2007

Fiddling while the Whole Foods-Wild Oats deal burns

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wholefoods062007.jpgGeoff Manne (see also here) and Thom Lambert (see also here) over at the Truth on the Market blog are having a field day bashing the misdirected FTC opposition of the Whole Foods-Wild Oats merger. And with good reason.
The latest development in this bizarre episode of excessive governmental regulation is the publication of the unredacted version of the FTC’s complaint against the proposed merger, which relies heavily on comments that Whole Foods CEO John Mackey made to his board about the merits of the merger. Not surprisingly, Mackey told the Whole Foods board members the straight truth as to why it would be good for Whole Foods to acquire Wild Oats and, in do doing, pooh-poohed the ability of other supermarket chains to compete with Whole Foods. This David Kesmodel/WSJ($) article sums it up well:

The lawsuit quotes Mr. Mackey as saying that the company “isn’t primarily about organic foods” but “only one part of its highly successful business model,” citing as others “superior quality, superior service, superior perishable product, superior prepared foods, superior marketing, superior branding and superior store experience.”

What is wrong with that? All Mackey is saying is that other supermarkets are not currently a direct competitor of Whole Foods because they are focused on price rather than the Whole Foods shopping experience. But nothing is stopping those other chains from changing course and imitating the Whole Foods karma if it’s in the interest of their shareholders to do so. The FTC’s theory that Whole Foods is attempting to monopolize the “hip” grocery shopping experience borders on the absurd.
Mackey has fired back with his own blog post, which is well worth reading. Among other things, he points out that Whole Foods’ prices are unaffected by whether it is competing in a particular area with a Wild Oats store and that several other grocery chains are bigger and more direct competitors to Whole Foods than Wild Oats. Frankly, Mackey’s blog post would be an excellent affidavit in support of a summary judgment motion for Whole Foods and Wild Oats.
Wouldn’t it be interesting if Whole Foods could, through discovery, find out why the FTC is pursing this costly regulatory charade in the first place?

Want a season ticket? Take out a mortgage

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Yankee%20stadium%20new.jpgConde Nast’s Megan Barnett reports on how the lion’s share of the new Yankee Stadium is apparently going to be financed. The idea is that the seats in the new Yankees Stadium will be sold in advance to investors who will own them in perpetuity. Morgan Stanley and its partner, a start-up entity called Stadium Capital Financing Group, are hoping that their structure becomes the accepted way of privately-financing sports stadiums. They have even applied for a patent regarding the concept, which seems like a stretch. Here’s how it would work:

Fans would buy seats for a designated period of time and finance them much like a mortgage. Pricing mechanisms can vary, but the most appealing option for buyers might be a 30-year loan with an annual payment equal to the current price of a season ticket. In exchange, the seat becomes real property, equivalent to, say, a condominium. The team (or university or other owner) receives the principal amount of the loan up front, to put toward construction costs.
This arrangement is different from seat licensing, which gives the holder the right to buy a season ticket for a specific seat. . . . Under [the] system, people own seats, not shares of a team.
Say, for instance, the current price of a season baseball ticket is $3,240. A 30-year loan at 6 percent interest with an annual payment of $3,240 results in a principal amount of $45,000. Even if the price of the seat doubles in the next 20 years, the seat owner still pays $3,240. Investors will have the option of making annual payments over 30 years, paying the entire amount up front, or something in between. Owners can also sell their seats at any time for market value, but rest assuredóthe team will get a cut of any profits.

At least one expert on financing stadiums, though, does not believe the financing technique will be all that earth shattering:

Roger Noll, a Stanford University economics professor who has written extensively about stadium financing, says that such an approach might make a dent in required public funding but will never replace it. Noll points out that most teams can’t afford to sacrifice future revenues in order to pay for their ball fields. “At the end of the day, stadiums are not good investments,” he says. “This isn’t going to be a revolution.”

H’mm, think this might work to defray the cost of this proposed boondoggle?

Saving for a boondoggle

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metroraillogo062007.gifBuried in this Chronicle article about increasing tolls on the Harris County toll roads and congestion on the Westpark Tollroad is the following nugget about yet another of the Metropolitan Transit Authority’s decisions that is contrary to its purpose of improving mobility in the Houston metro area:

Six months after the four-lane Westpark Tollway opened in 2004, traffic backups began occurring in certain areas, said Peter Key, toll road authority deputy director. Congestion has worsened since then.
The toll road authority would have preferred building a six- or even eight-lane tollway, Key said. The Metropolitan Transportation Authority, which owned the land in the area, was willing to sell only enough for a four-lane tollway, he said. Metro wanted to keep the remaining land in case it builds a commuter rail line along the tollway, Key said.
Metro vice president John Sedlak said Metro has considered using the corridor for rail for several decades and may build a light rail line along parts of the corridor, from the Hillcroft Transit Center to an undetermined distance east of the West Loop.

As noted in this previous post, Metro’s bias in favor of inefficient rail lines is a costly bet for Houstonians. Those who are driving the Westpark Tollroad on a daily basis are finding out that such costs far exceed even the formidable expense of building inefficient rail lines.