Name: How a Salt Monopoly Could Spike Car Accidents in the Midwest
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How a Salt Monopoly Could Spike Car Accidents in the Midwest

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SubscribeSign inShare this postHow a Salt Monopoly Could Spike Car Accidents in the Midwestmattstoller.substack.comCopy linkTwitterFacebookEmailMar 15, 2021Share this postHow a Salt Monopoly Could Spike Car Accidents in the Midwestmattstoller.substack.comCopy linkTwitterFacebookEmailHi,I write a lot about big tech, but today’s issue is about something so basic and fundamental we literally don’t think about it. Salt. Salt mining is one of humanities’ oldest industries, with wars fought over this commodity. Cities like Venice monopolized the salt trade in the middle ages for geopolitical reasons, and the British tried to block colonists from access to salt during the American Revolution to prevent their ability to preserve food. Today salt is still used in everything from chemicals to food preservation. Its main use is deicing our roads, because salt from mines across North America, and shipped in from overseas, makes it possible to drive in all sorts of weather. Salt saves lives, stops car accidents, and makes our economy run. And in the U.S. and Canada, salt mining is being monopolized, as we speak.Plus I’ll have short items on a recent remarkable circuit court decision breaking up an industrial conglomerate, a discussion on the conservative legal movement’s relationship to monopoly, and a note on how Republican Marco Rubio endorsed the Amazon unionization drive in Alabama on right-wing cultural terms. And I’ll touch on Lina Khan’s nomination to the Federal Trade Commission, as well as several hearings that took place this week in the House and Senate on antitrust. First, housekeeping. I write a lot about big tech, but in the winter, when it’s really cold and snowy, what Americans need is not a competitive semiconductor industry or better app stores. They need salt. And not the kind of salt that flavors our food, but the kind that melts snow and ice. If we don’t have salt, no one can drive, because salt is what keeps our roads manageable. Without salt, trucks can’t deliver supplies, people can’t get to stores or work, and the economy comes to a standstill. And people die. A lot of them.This series of mergers should terrify cities across the upper Midwest, who have to buy salt in unpredictable spot markets and often deal with shortages when the weather gets bad. Minnesota, for instance, bought roughly 1.5 million tons of salt for the 2020 season. Salt is a regional business, it’s just not economical to move extremely bulky road salt over land more than 150 miles, so while port cities can get salt from abroad in ocean vessels, and salt can be barged up the Mississippi river, much of the upper Midwest and Canada has to buy local. (It doesn’t help that America’s rail system is monopolized.)And Kissner’s mine, called the Detroit Salt Mine, and Morton’s mine, in Windsor Ontario, are within a few thousand meters of each other. “You can literally connect the two salt mines underground,” someone in the industry told me. There are a few other players: Compass Minerals and Cargill also compete for Midwestern markets, but Cargill is a small presence and is essentially shutting down a good chunk of its operations because of problems with its mining capacity. American Rock Salt, another player, exists, but it is located in New York. The salt industry is an oligopoly, and the number of suppliers to Governments in regions of the Great Lakes markets will shrink from 4 to 3 and in some geographies from 3 suppliers to 2.&nbsp;There are two consequences of this consolidation of salt production. The first is that prices will go up, and municipal budgets will be stretched. Salt is sold in blind bidding processes. Governments put out tender offers, and then suppliers bid. When bidding, suppliers will set prices by considering the supply levels among competitors. If there are only two competitors in a market and one of them has committed their salt production for the year, then the remaining one is a monopolist who can just set the price. This is particularly true for a bunch of Midwestern states, like Michigan, Ohio, Indiana, Illinois, Wisconsin, and Minnesota.But the much more serious problem is that of shortages. The industry manages demand spikes from weather not by having spare production capacity or lots of storage, but by overpromising salt deliveries. The rule of thumb is that one out of every five years will see a mild winter with few sales, three out of five will be snowy but normal, and one out of five will involve extreme weather and much higher demand. Of course, rules of thumb have gone out of the window now that there’s more extreme weather, which means demand drops and spikes will be more common. It’s quite possible, and indeed likely, that shortages will worsen. Without competition, it will be much harder to go to a different supplier, because there won’t be any other suppliers. And private equity takeovers in general are operational nightmares, which means that it’s likely Kissner and Morton will have problems with production and distribution purely because mergers tend not to work out. There are other issues in this merger. Morton’s has a very popular consumer brand of salt, one of the most recognizable brands in the United States. And Kissner is a private label producer of salt, so it makes supermarket brands. Combining these two introduces a significant conflict of interest, because the combined firm will now be making consumer brands of salt for supermarket customers, even as it has a competitive product on their shelves. (This dynamic is a bit like Amazon controlling a marketplace and competing on it, though consumer salt is a more competitive market.)But mostly, this merger means stressed municipal budgets across the Midwest, car accidents, slipping and falling, more traffic, and no deicing salt for consumers and businesses when it really matters. And this brings me to the politics of antitrust.As we emerge from the pandemic, and as money floods into the economy from the Biden stimulus, we are on the cusp of a historic mergers and acquisitions wave. And so stories like this salt roll-up will become more even more common. Instances of financiers overpaying for mid-market companies are accelerating. That means the problems introduced by this roll-up are likely to be replicated across the economy, in every industrial sector, especially as Biden puts money to work in infrastructure.This current merger in the salt market would have been unthinkable just ten years ago. State attorneys general know about problems in this market, often investigating non-deliveries after municipal officials call them up angry that they can’t get the salt for which they contracted. But enforcement is so pathetic that now it’s happening with barely anyone noticing.What a difference a few years have made.That’s just in the last two weeks. And yet, the utter ridiculousness of these mergers goes on without pause, and virtually no one in a powerful position in Silicon Valley or on Wall Street believes political leaders are willing or capable of changing anything meaningful in how they organize markets. This disjuncture is profoundly weird. At any rate, if something can’t go on forever, it won’t. And for a lot of reasons, I think it’s unlikely the ridiculous post-1981 era of monopolization will continue as it has. And hopefully, an antitrust enforcer, either in one of these states, in Canada, or in the Federal government, will take a stand somewhere. It might as well be in the salt market.cheers,Matt StollerLike this postShare this postHow a Salt Monopoly Could Spike Car Accidents in the Midwestmattstoller.substack.comCopy linkTwitterFacebookEmail24 CommentsFor your security, we need to re-authenticate you.Click the link we sent to , or .Expand full commentExpand full commentNo posts© 2022 Matt Stoller ∙ ∙ &nbsp;is the home for great writingThis site requires JavaScript to run correctly. Please or unblock scripts

SubscribeSign inShare this postHow a Salt Monopoly Could Spike Car Accidents in the Midwestmattstoller.substack.comCopy linkTwitterFacebookEmailMar 15, 2021Share this postHow a Salt Monopoly Could Spike Car Accidents in the Midwestmattstoller.substack.comCopy linkTwitterFacebookEmailHi,I write a lot about big tech, but today’s issue is about something so basic and fundamental we literally don’t think about it. Salt. Salt mining is one of humanities’ oldest industries, with wars fought over this commodity. Cities like Venice monopolized the salt trade in the middle ages for geopolitical...

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