In the past year, soft drink companies, and fast food
businesses alike, have spent millions campaigning against what they fear of as
a national movement to raise money for national healthcare, by taxing sweetened
beverages. Around $24 million has been spent on such lobbying, $5 million of
which has been geared towards promoting a newly formed interest group: American
Against Food Taxes. The group
has about 400 or so members, however a few powerhouse firms in the fast food
industry, such as Burger King Corporation, Coca Cola, Pepsico and others,
dominate the group.
Health
experts have argued that Soft Drinks have been a key contributor to childhood
obesity over the years. Supporters
for a tax on soda have compared the market to that of the tobacco industry,
claiming that the tax would help offset healthcare cost, generating revenue,
and help cutting back on overall consumption. However, lobbyist for such groups have argued that is unfair
to single out the soft drink companies as the reason for childhood obesity.
In
Olson’s Theory of Group’s and Organizations, he provides a taxonomy or classification of groups: the monopoly “group,”
which consists of a single individual in the market, seeking a collective good, an oligopoly group, and latent group.
A situation in which a firm’s action in the market has a noticeable
effect on other firms in that market, is recognized as an oligopoly. In context
of the above article, the groups that are formed in the fast food industry
would be that of the oligopoly type, as defined in the Olson article.
Oligopoly
can be further divided into two classifications, a privileged group, in which
there are dominant firms, and all others are privileged, and an intermediate
group. The groups in the fast food
and soda industries, I believe would be classified more as privileged. This is because the members of the
group would gain more from a public good than it would cost them to provide it
unilaterally. Whereas, in an intermediate group, if any members of the group do
not contribute, there is a noticeable decrease in supply of the good, or at least a rise
in the cost to other contributors. With dominant firms such as Coca Cola and
Pepsico, it would seem that the others smaller firms in the industry would
benefit off of their lobbying activities towards the government, being
privileged.
As
predicted by Olson, there is a presumption that in a group that is privileged, the
collective good will be provided. With a rise in the talk of a tax on junk food
products such as sodas, from President Obama, and other government officials on
Capitol Hill, we will have to see what the outcomes of these interest groups
activities will be. However, it does seem as if the concerns of soda are catching on in some of the big time states, such as California, who are holding meetings to further research the link between childhood obesity and soda consumption.