Food For Thought

The real reason why grocery prices are up 25%-50% since 2020 isn't inflation or supply chain issues, it's good old fashioned corporate greed in the food industry.

 

A level playing field was long a tenet of U.S. antitrust policy. In the 19th century, Congress barred railroads from favoring some shippers over others. It applied this principle to retailing in 1936 with the Robinson-Patman Act, which mandates that suppliers offer the same terms to all retailers. The act allows large retailers to claim discounts based on actual volume efficiencies but blocks them from extracting deals that aren’t also made available to their competitors. For roughly four decades, the Federal Trade Commission vigorously enforced the act. From 1954 to 1965, the agency issued 81 cease-and-desist orders to stop suppliers of milk, tea, oatmeal, candy and other foods from giving preferential prices to the largest grocery chains.

As a result, the grocery retailing sector was enviable by today’s standards. Independent grocery stores flourished, accounting for more than half of food sales in 1958. Supermarket chains like Safeway and Kroger also thrived. This dynamism fed a broad prosperity. Even the smallest towns and poorest neighborhoods could generally count on having a grocery store. And the industry’s diffuse structure ensured that its fruits were widely distributed. Of the nearly nine million people working in retailing overall in the mid-1950s, nearly two million owned or co-owned the store where they worked. There were more Black-owned grocery stores in 1969 than there are today.

Then, amid the economic chaos and inflation of the late 1970s, the law fell into disfavor with regulators, who had come to believe that allowing large retailers to flex more muscle over suppliers would lower consumer prices. For the most part, the law hasn’t been enforced since. As a top Reagan administration official explained in 1981, antitrust was no longer “concerned with fairness to smaller competitors.”

This was a serious miscalculation. Walmart, which seized the opening and soon became notorious for strong-arming suppliers and undercutting local businesses, now captures one in four dollars Americans spend on groceries. Its rise spurred a cascade of supermarket mergers, as other chains sought to match its leverage over suppliers. If the latest of these mergers — Kroger’s bid to buy Albertsons — goes through, just five retailers will control about 55 percent of grocery sales. Food processors in turn sought to counterbalance the retailers by merging. Supermarket aisles may seem to brim with variety, but most of the brands you see are made by just a few conglomerates.

These food giants are now the dominant buyers of crops and livestock. The lack of competition has contributed to the decline in farmers’ share of the consumer grocery dollar, which has fallen by more than half since the 1980s. In the absence of rivals, food conglomerates have over time increasingly been able to raise prices and as a result have reported soaring profits over the past two years. Inflation gives them a cover story, but it’s the lack of competition that allows them to get away with it. Meat prices surged last year among the four companies that control most pork, beef and poultry processing. Companies like PepsiCo and General Mills have also jacked up prices without seeing any loss of sales — a sure sign of uncontested market power.

This has resulted in an ever-worsening cycle: As a system dominated by a few retailers lifts prices across the board — even at Walmart — consumers head to those retailers because of their ability to wrest relatively lower prices or simply because they’re the only options left. Walmart’s share of grocery sales swelled last year as more people flocked to its stores.

Meanwhile, the decline of independent grocers, which disproportionately serve rural small towns and Black and Latino neighborhoods, has left debilitating gaps in our food system. If Food Fresh were to close, residents of Evans County, where the store is, would have to subsist on the limited range of packaged foods sold at a local dollar store or drive about 25 minutes to reach a Walmart. (Nearly a quarter of Evans County residents live in poverty.) Living without a grocery store nearby imposes a daily hardship on people and could lead to an increased risk of diabetes, heart disease and other diet-related illnesses.

Losing small retailers also stifles innovation. New food companies rely on independent retailers to introduce products. But as this diversity of retailers gives way to a monocrop of big chains, start-ups have fewer avenues to success. This results in diminished selection for shoppers, who find store shelves stocked with only what the big food conglomerates choose to produce.

We need to stop big retailers from using their enormous financial leverage over suppliers to tilt the playing field. By resurrecting the Robinson-Patman Act, we could begin to put an end to decades of misguided antitrust policy in which regulators abandoned fair competition in favor of ever-greater corporate scale. There is promising momentum. Last year an unusual coalition of Democratic and Republican lawmakers sent a letter to the F.T.C. urging it to dust off Robinson-Patman. The agency began a broad inquiry in late 2021 into grocery supply issues, which could uncover evidence of price discrimination. This year the agency opened investigations into soft drink and alcohol suppliers for possible violations of the act.

 

So yes, it turns out that America has long had a solution to runaway grocery inflation, it's just that it stopped being enforced (and once again, the culprit was Reagan, the genesis of the modern GOP we see today.) Getting the Robinson-Patman Act retooled for 2023 would be a powerful solution to lower food prices for families across the country.

Of course, as with guns, pharma, housing and basically every other sector of the American economy, it's corporations telling lawmakers how things will be, and the Roberts Court making sure that remains the case. No doubt that the second this act gets used, the Supremes will dismantle the law as unconstitutional against the free speech of Kroger, Walmart, and General Mills.