Monday, September 25, 2006

What Part Of Monopoly...

...don't they understand?

Starbucks is being sued by the owner of a coffee shop with the claim that Starbucks forced the company out of business using anti-competitive business practices.

From the article: "According to court papers, Starbucks violated federal antitrust laws by leasing prime commercial real estate at above-market prices in return for the exclusive right to sell espresso drinks or specialty coffee in those locations."

The claim in the lawsuit is that Starbucks posses monopoly power because it hold a 73% market share of the U.S. Coffee shop industry. defines monopoly as such: 1.exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.

Per the complaint, Starbucks is bereft of 27% of the coffee shop market. That is hardly "exclusive control" is it? Do they have enough control to manipulate prices? If they did, wouldn't they undercut their competition by making prices LOWER?

Are they guilty of lousy business practices? If the article is correct they are. Standing in front of a competitor's shop and handing out flyers for your own seems a tad unethical or at the very least, petty. Should it be illegal? No. There are plenty of things that the other coffee shop could have done to prevent Starbucks employees from handing out their flyers. They could have tipped off the media and/or popular blogger to get the story out. Public pressure works wonders.

If the accusation of paying higher than market rents in exchange for exclusive control of selling coffee on a given property is true, Starbucks should be congratulated for understanding the economics of supply and demand. Dry cleaners rent space in a strip mall with the understanding that another dry cleaner won't be allowed in. Should that be illegal? Is it anti-competitive? Isn't it the goal of every business to limit the effectiveness of their competition? Paying more rent for a space you want to be in is hardly unethical. The building owners are in competition with other owners to provide space to desired customers. That the other coffee shop owner decided he couldn't compete with Starbucks offer to the building owner is of no consequence whatsoever. The market dictates prices. If Starbucks is willing to up the ante then that is what the market will bear.

I really wish people would stop complaining to the government because they can't succeed in business on their own.