The Cents-Off Coupon Game
The Opinion page article "Cents-Off Store Coupons Are Less Than Meets the Eye," Jan. 26, identifies some of the hidden costs of store coupons but misses the largest one: Coupons allow issuing manufacturers legally to engage in a form of unfair competition that keeps lower-priced, higher-quality new products off grocers' shelves. The result is that consumers pay billions more for products than they would in a truly free market.
A new competitor will never have the millions of dollars needed to enter every market at once. It will be limited to entering a few markets. This gives the established manufacturers an opportunity to make up losses in one market by raising prices in other markets.
This strategy, known as predator pricing, is prohibited by antitrust laws. It is unfair and detrimental to our economy. Because the practice is prohibited, manufacturers must either compete on quality and nonpredatory pricing or find a way around the prohibition. Enter the coupon.
Antitrust laws require companies to sell their products to all their customers around the country at the same price. Strangely, under these laws, the breakfast cereal manufacturers' customers include only the grocery stores.
Because of this narrow definition of customer, the manufacturers can simultaneously comply with the letter of the law by charging grocery stores all over the country the same price. And they flout the spirit of the law by flooding battleground markets with high value coupons - effectively lowering the price to consumers in those markets.
Whether consumers pay less because of illegal coupons or because of illegal price cuts to the grocer, the results are the same. Consumers buy the product they pay less for instead of the product whose price reflects the true production costs. The targeted new competitor fails. Paul R. Ward, San Diego
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