But due to consolidation within the industry, only a couple of incumbent companies have that ability to make it through low-demand periods. When demand surges, they are no longer forced to produce, but can focus instead on “efficiencies.” They can raise prices and generate shortages, knowing that no one else exists to meet the demand that they cannot or will not fill.

Such refusals to invest in increased capacity can clearly be seen as Vista’s plan over the last few years. According to their annual reports, Vista is focused on “long-term shareholder value,” and when they have influxes of cash, they acquire more companies that “deliver top-line growth … within one year of purchase.” They do not build more plants, even though they project more long-term increased demand; building a plant to increase capacity is a long-term project, one that does not return a profit in a year, much less a quarter.

THE SMALL ARMS AMMUNITION MARKET was not always controlled by two corporations. The industry roll-up involves a tale of brothers, bullets, and a dog guarding Hell.

In 1943, Vernon Speer started his Speer Bullet business. Admiring his success, Vernon’s brother Dick started a company which would eventually be known as Cascade Cartridge, Inc. (CCI), in 1951. But the Speers could not keep their businesses in the family. The Omark Company bought CCI in 1967 and Speer Bullets in 1975.

Omark was in turn bought by Blount International, Inc., in 1985. Blount also added Federal Premium to its assets in 1997. After a complicated series of mergers and spin-offs, the firm renamed itself Vista Outdoor. Last year, Vista added Remington Arms, one of America’s oldest gun manufacturers, to its list of brands.

Remington’s story involves some twists and turns and financial engineering. In 2007, private equity firm Cerberus Capital Management bought the then-thriving Remington, using it as a piggy bank. To execute the buyout, Remington borrowed hundreds of millions of dollars it immediately handed over to Cerberus, which meant that Cerberus would make money on the deal no matter whether Remington succeeded.

Initially, Cerberus made “hundreds of millions of dollars” from Remington, due to high gun sales during the Obama years. But when demand decreased after Donald Trump’s election, Remington was forced to file for bankruptcy in 2018. The firm restructured its debt and continued operating under new creditors, but due to continued mismanagement and lawsuits, Remington filed for bankruptcy again in 2020. Vista Outdoors bought Remington’s ammunition brand later that year.

Winchester’s story is more straightforward. Chemical producer Olin Corporation bought Winchester in 1931 and is now “a leading U.S. manufacturer of ammunition.” Olin’s most recent annual report revealed that Winchester sales increased from $665.5 million in 2019 to $927.6 million in 2020. This increase is reportedly due to “higher commercial and military sales, which included ammunition produced at Lake City, and higher commercial ammunition pricing.” Olin won a $28.3 million, ten-year contract to operate the Department of Defense’s Lake City Army Ammunition Plant in September of 2019. It also won contracts with the Secret Service, Customs and Border Protection, and the FBI.

Olin’s management of the Lake City plant illustrates another aspect of consolidation with small arms ammunition. During World War II, the U.S. government owned and operated 84 ammunition plants. Now there are soon to be just 14, and they require extensive modernization. Lake City is the only producer of military-grade small arms ammunition, producing “85 percent of DoD’s small caliber ammunition.”

The extensive restructuring of publicly owned ammunition capacity was done during the Clinton-era “reinventing government” privatization mania. With the end of the Cold War, the defense budget shrank and the Defense Department shifted from needing more traditional ammunition to higher-tech, increased-precision rounds. In the 1996 National Defense Authorization Act, Congress told the Army that they should write a report on ammunition production management. That study, completed the next year, recommended reliance on the private sector for ammunition procurement, and the conversion of government facilities to commercial entities.

Two years later, the Government Accountability Office released a report entitled “Army Could Achieve Efficiencies by Consolidating Ammunition Management” to review how the Army implemented the 1997 study objectives. This push for finding efficiencies in structure and business practices, and the commercialization of the sector, contributed to the market consolidation. This, combined with the consolidation of commercial small arms manufacturers, has created problems with prices, supply, and industry resiliency.

AS WITH OTHER INDUSTRIES, including health care, media, and tech, corporations and private equity firms involved in ammunition production thrive on consolidating markets and extracting profits at the expense of businesses, workers, and consumers.

But problems in the small arms ammunition market do not affect only the regular citizen trying to hunt or go to the shooting range. They also affect government costs and military readiness, which encompasses real-world mission accomplishment, safety, training, and logistics. This ultimately becomes a national-security issue.

For example, in 2014 government officials from Alabama agreed to pay Remington millions of tax dollars to open a new factory in their city. Government subsidized Remington’s refurbished plant, electricity, and tax abatements. The citizens of Alabama paid the price again when the jobs and wages that were promised as part of the deal never materialized.

Remington’s collapse and sale to Vista removed one of the few remaining independent small arms ammunition manufacturers in America. With a market controlled by two major players, companies have the latitude to raise prices without fear of competition. Vista sent a letter to dealers in January of this year stating that effective in March, ammunition prices would increase “3-15% across all products” due to hikes in raw-material costs and pandemic-induced effects. Even with these increases, they still cannot meet demand.

A lack of competition means fewer bids for government contracts and higher prices. In 2016, Olin was awarded a contract for .38 and .45 caliber and 9mm ammo worth $99 million. Only one bid was solicited and received. It must have been difficult for the contracting officer awarding the contract to determine a competitive price for small arms ammo, with no other company’s prices to compare. Bloated military budgets are in part caused by consolidation driving up prices.

A lack of competition means fewer bids for government contracts and higher prices. In 2016, Olin was awarded a contract for .38 and .45 caliber and 9mm ammo worth $99 million. Only one bid was solicited and received. It must have been difficult for the contracting officer awarding the contract to determine a competitive price for small arms ammo, with no other company’s prices to compare. Bloated military budgets are in part caused by consolidation driving up prices.

Too much efficiency can lead to a brittle industrial base, which is terrible for national security. In the case of large-scale demand, like a war, manufacturers would quickly hit their production capacity, leading to product shortages. Americans cannot hunt, and police officers cannot train, but tomorrow’s service members may not have enough bullets to send down range.

In a concentrated market, the government could face an even scarier problem. Instead of a situation where industry cannot produce to meet government requirements, there is a situation where industry will not produce. When a single company holds all the cards, it can call all the shots. This has happened before. During World War II, Alcoa had a monopoly on aluminum. They controlled supply and could raise prices indiscriminately, even if it meant that the U.S. didn’t have enough aluminum for the war effort.

Despite increasing revenue for the few companies that make small arms ammunition, there is still a shortage of ammo, with no end in sight. Small arms ammunition demand seems poised to grow globally due to an increase in sales for personal weapons, increased arming of law enforcement, and military modernizations around the world.

There are also supply chain issues that could become increasingly problematic. Lead, zinc, and copper (the latter two are used to make brass) are all necessary materials for making ammo, and the United States relies heavily on other countries to produce these materials. In 2020, the U.S. imported 710,000 metric tons of refined zinc products (83 percent of total U.S. consumption), mainly from Peru and Canada. About one-quarter of lead and one-third of copper was imported, mostly from the Americas.

While the U.S. is primarily getting its imports from nations in North and South America, China has a huge share in this market. In 2020, China produced 35 percent of the world’s zinc, and around 40 percent of the world’s refined copper and lead. If China decided it wanted to disrupt U.S. supply chains, who knows what effects it could have on the global market. The U.S. government has already expressed national-security concerns about the rare-earth mineral supply chain and China’s monopoly on production for years, but these more common metals could also be affected, especially as demand increases.

DESPITE ALL THE ISSUES with the small arms market, there are steps that can be taken to help.

As in other industries, the Federal Trade Commission has been lax when it comes to enforcing antitrust regulations, so the FTC must get quicker on the draw. Further consolidation of the market should be stopped, but this does not unwind the last 50 years of mergers, which must be studied and potentially unwound.

The boom-and-bust cycle of ammunition demand, changing with the occupant of the White House, can make consistent production difficult, especially for small companies that may not have enough cash flow to withstand periods of difficulty. But while it is harder to predict, much less control, commercial market whims, the Pentagon can change how and when they want ammo.

The government could set consistent purchase requirements over a period of time, and then ensure that there is enough ammo stored in reserve to absorb any variations. Need more ammo than purchased in a year? Pull the extra out of the reserves. Didn’t use all the ammo that year? Put the extra in storage. The Defense Department could absorb and account for shifting demand instead of the small business, leaving them able to maintain consistent and robust supply chains and production capabilities. The Pentagon could also buy ammunition as futures to smooth the demand signal so that it is more predictable.

The government should methodically support small businesses through reliable contracting to build back a robust industrial base. To encourage this, the government could also split contracts, awarding them to multiple smaller companies, versus huge winner-take-all contracts. This would ensure competition and give smaller companies consistent military demand, and cash flow, to help weather dry spells.

Americans need to get wise to this conspiracy by monopolists. Large corporations line shareholders’ pockets while killing American jobs, costing government resources, and harming national security, in multiple industries, including ammunition. In the name of liberty, let this be the shot heard round the world.