The National Grocers Association (NGA), the trade association representing the independent supermarket industry, outlined today how big box stores and e-commerce giants have used their influence during the pandemic to further disadvantage independent grocery stores and the communities they serve through economic discrimination. The NGA released a white paper that takes a bold swipe at the largest retailers in the world and includes private brand.
“Unfortunately, this is not a new reality in the grocery marketplace for dominant firms to use their buying power to take greater control of the market and demand special treatment from suppliers without an economic justification,” said NGA CEO and President, Greg Ferrara. “Independent grocers have been feeling the financial squeeze from these anti-competitive tactics for years, and the pandemic has brought these illegal tactics to the kitchen table of every American. As families struggle under the weight of the pandemic, the dominant food retailers are squeezing suppliers and as a result, forcing higher prices and fewer products on independent grocers and their customers. Congress has to stand up for local businesses and consumers to demand an end to these harmful tactics and restore a competitive marketplace that benefits the economy and grocery shoppers alike.”
In light of the pandemic’s supply chain disruption, NGA members are feeling the heat more than ever. Walmart alone captures one out of every four dollars Americans spend on groceries. Meanwhile, independent grocers are unable to secure many of the must-have products and face supplier prices up to 53% higher than what their larger competitors are selling the product for at retail.
The report speaks directly to private brand
“For example, in January 2021, an NGA member reported that its wholesale price for a popular packaged food product was over 19 percent higher than the retail price for the equivalent sized product at a local Walmart. Similarly, the independent grocer’s wholesale price for a branded cake mix was 53 percent higher than the Walmart retail price. And the wholesale price for a staple branded cracker, on a per ounce basis, for the independent retailer was nearly 20 percent higher than the retail price at Dollar General. Other NGA members have reported paying higher wholesale prices than the retail prices available at large chains for many of their top private label products, including salsa, ketchup, mustard, barbeque sauce, peanut butter, canned fruit, soup, broth, vegetable oil, granulated sugar, flour, and coffee, and numerous members reported paying higher wholesale prices than the retail price for other popular branded products. This economic discrimination is driven by the demands of the power buyers. Rather than provide the same price to all of their customers, suppliers are forced to extend discounts and other advantageous terms to the dominant retailers and make up for their losses by charging higher prices to other buyers.”
And goes on to say
“As a result, dominant retailers effectively dictate supply decisions to grocery suppliers. This has become particularly acute in private label. For example, private label manufacturers are forced to prioritize runs ordered by their biggest buyers, limiting capacity for products sought by independents. They have also narrowed their available products in order to serve demand from power buyers, reducing product diversity and consumer choice. Invariably, products sought by independent grocers are the ones eliminated. Some private label manufacturers have largely dedicated their capacity to dominant national chain grocers, foregoing independents’ business almost entirely. Not only does this harm independent grocers and their customers directly, through loss of these popular products especially for cost-conscious consumers, it also reduces independents’ bargaining leverage with branded suppliers by eliminating alternative sources of product supply to which independents might switch. As a result, independent grocers are even less able to push back on discriminatory treatment imposed by retail power buyers.”
The NGA proposes:
- Investigations and Hearings. Through congressional investigations and hearings, Congress should shine a bright light on anti-competitive practices in the grocery sector—with a particular focus on the discriminatory impacts on rural and urban consumers, producers, and businesses.
- Congressional Oversight. Congress should use its inherent oversight and authorization powers to hold antitrust enforcers accountable if they continue to fail to take steps to check retail buyer power and its harmful effects.
- Legislation. The antitrust laws provide the tools enforcers need to curb discriminatory practices by dominant retail chains. However, if existing court decisions prove too high a bar to more vigorous enforcement, then Congress should step in to restore the original purposes of the antitrust laws.
- Enforcement and Agency Action. The FTC, DOJ, and state attorneys general should investigate the arrangements between grocery power buyers and suppliers to determine the extent to which dominant retailer bargaining leverage is imposing discriminatory prices, terms, and supply on independent grocers.
- The FTC should immediately use its authority under 6(b) of the Federal Trade Commission Act to study competition and concentration in the grocery supply chain, including private label, and the impacts on independent grocers and producers, such as farmers and ranchers. This should include an inquiry into whether retail buyer power is driving concentration throughout the supply chain.
- In these and other inquiries, antitrust enforcement should look beyond price effects to consider other dimensions of competition, including impacts on quality, service, and convenience.
- Other federal agencies, including the Small Business Administration and the Department of Agriculture, can also address these issues by studying the benefits of small business to competition and the role of independent grocers and farmers and ranchers in ensuring broad access to healthy foods.