It's almost enough to make you feel sorry for Wal-Mart and Kmart. Almost. Tyco International Ltd. got taken to the woodshed last week when the Wall Street Journal discovered that the company's A&E Products Group unit has something akin to a monopoly in the production of cheap plastic hangers.
Retailers complained that A&E had raised prices twice in 1999, shortly after buying its top competitor, Batts Inc. of Zeeland, Mich.
Does A&E have a lock on the hanger market? In terms of market share, you can make a pretty strong case that it does, especially in the niche of garment hangers made for retailers.
But that's no surprise. A&E has been busily buying competing hanger molders since 1996, when Exeter, N.H.-based Tyco bought the business from Carlisle Plastics Inc.
With the high-profile exception of Microsoft Corp., federal regulators in recent years haven't had much of an appetite for blocking mergers that create companies like A&E. As a prime example, just look at how mergers in the rail industry have affected processors and resin suppliers.
Some observers now expect the Federal Trade Commission to scrutinize the merger of the chemicals units of Phillips Petroleum Co. and Chevron Corp., because it would create a dominant manufacturer of smooth-wall, high-pressure high density polyethylene pipe.
But given the attitude in Washington toward these deals, we wouldn't be surprised if FTC gave the deal its blessing.
Plastics processing isn't a natural place for monopolies. Acquiring the necessary technology is neither difficult nor prohibitively expensive.
If one processor tries to corner the market for HDPE pipe, garment hangers, egg cartons or fuel tanks, there's not much standing in the way of new firms that want a piece of the action. And in most cases, processors can't really win the upper hand, since their customers are usually much larger companies.
A&E looks like a rare case where the shoe is on the other foot. But if the margins for cheap hangers really were as healthy as retailers claim, there's nothing stopping a thousand other molders from entering the business.