No Matter How You Slice It, Consumers Should Be What Matters in Subway Antitrust Investigation

November 28th, 2023

Food is the theme of this season, in antitrust as it is on dinner tables.

The Federal Trade Commission is launching an investigation into Roark Capital’s almost $10 billion acquisition of the Subway sandwich shop chain.

Roark is a private-equity firm that owns Dunkin Brands, Arby’s, Jimmy John’s, and other major chains. On the one hand, Subway CEO insists that its 20,000 restaurants will not be combined with other chains. On the other hand, a source told The New York Post that FTC considers all businesses owned by a private equity firm worthy of treatment as the same operation.

The Post reports that if the merger is broken up by the government within 12 months, Roark Capital has agreed to pay Subway $360 million.

In another food-related development, a jury in a federal court in Illinois found the two largest egg producers, Cal-Maine Foods Inc., and Rose Acre Farms Inc., along with egg-industry trade groups, liable for restricting the national supply of eggs in order to raise prices from 2004 to 2008. The verdict was a big win for General Mills, Inc., a unit of Kraft Heinz Co., Kellogg, and Nestle SA.

Damages will be decided in a two-day trial scheduled to begin on Nov. 29. What does the Antitrust Education Project have to say?

The public will be well served if the courts and FTC adhere to the consumer welfare standard. Are consumers likely to be harmed by the prospect of higher sandwich prices? Were they harmed by higher food prices because of the price of eggs? Can those harms be quantified? And, regarding Subway, is the market elastic enough to continue supply competition?

There are nine sandwich places near me ranging from chains like Jersey Mike’s Subs and Firehouse Subs, as well as a Subway, and at least a half dozen independent restaurants. I find it a little hard to believe that anyone could come close to monopoly pricing in sandwich-making, a business with a low-barrier to entry. But I am willing to be persuaded otherwise if the facts can be marshalled from the perspective of consumer welfare.