For the last year, independent grocers have been on the frontlines of the COVID-19 pandemic, keeping their business operating for communities across the country. Independents ensured a safe environment for customers and employees by adopting measures such as plexiglass, barriers at checkout, social distancing indicators, and dedicated shopping hours for at risk customers. It’s been a tough time for our country, but independent retailers and wholesalers have been there since the beginning, keeping America fed during these uncertain times.
However, the last year has added another layer of difficulty for independent community grocers and their wholesalers, as power buyers have ramped up anti-competitive tactics, exercising their dominance in the marketplace. These dominant food retailers use their buying power to take greater control of the market, demanding special treatment from suppliers without economic justification. For decades, these discriminatory tactics have taken a toll on the marketplace and in turn, independent grocers have suffered. But during the pandemic, the problem has increased drastically. It doesn’t just impact retailers and wholesalers – it impacts their customers too.
NGA represents more than 1,700 independent grocery retailers, accounting for nearly 9,000 store fronts across the country, all playing a crucial role in their local economy. They each compete to offer low prices, higher food quality, better service, more accessible and convenient locations, a greater variety of products, and good jobs. But independent grocers have watched over the years as dominant chains ignore antitrust laws and abuse their buyer power to demand suppliers provide lower prices and more favorable supply terms, special package offerings and product availability, leaving independent grocers to pay the price.
NGA held a press conference earlier this year highlighting the findings from its white paper and called on Congress to investigate these tactics used by big box stores and e-commerce giants. The NGA white paper outlines why these tactics are unfair, how they’ve negatively impacted consumers, and how Congress can resolve these issues. Put simply, NGA is calling on Congress to update and enforce antitrust laws. Click here to read the white paper.
The COVID-19 pandemic led to supply chain disruption, increasing pressure on family-owned, community based, independent grocers. Independents were unable to secure many of the must-have products and face supplier prices up to 53 percent higher than what their larger competitors are selling the product for at retail. Dominant food retailers also hurt small and mid-sized farmers and ranchers, who are paid prices far below competitive levels.
Antitrust reform and enforcement gained momentum earlier this month when the Biden Administration announced an Antitrust Executive Order which aims to promote competition in the American economy. The parts of the Executive Order that focus on the food sector are important as a diverse, competitive food retail marketplace benefits independent community grocers. This order marked the first time in more than 20 years that the executive branch has acted to prohibit conduct that violates the Robinson-Patman Act, a law which protects consumers and entrepreneurs from dominate grocery chains – Bidens Executive Order directs FTC to enforce Robinson-Patman.
In the following weeks, NGA SVP of Government Relations and Counsel, Chris Jones, testified before the FTC, the first business meeting under new Chair, Lina Khan. Jones called on the Commission to use its authority under Robinson-Patman to address anticompetitive buyer power putting independents at a disadvantage. Jones then attended a White House briefing to discuss the administration’s actions – he commended them for the order and asked one of Biden’s Special Assistants tasked with this issue his views on grocery buyer power – he responded by saying it’s time for regulators to enforce all laws on the books, including Robinson-Patman.
Yesterday, Associated Wholesale Grocers (AWG) President and CEO David Smith testified before the Senate Judiciary Committee on Antitrust reform and enforcement. The hearing, entitled “Beefing Up Competition: Examining America’s Food Supply Chain,” will serve as a catalyst for bipartisan efforts to reform antitrust laws. During the hearing, he spoke about how independent grocers don’t compete on a level playing field with five retailers dominating roughly 60 percent of the marketplace.
Here is a quote from David’s testimony today:
“These dominant grocery retailers we call power buyers use their size and their positions as gatekeepers to American consumers to dictate terms and conditions to suppliers. This ranges from more favorable pricing, more favorable packaging, and access to exclusive products. Their size and market power alone enables them to secure advantages for themselves … and harm the smaller players in the food retail marketplace. And the pandemic has put this problem on full display. Everyday Americans who rely on community grocers have not been able to access the products they need to feed their families as the largest retailers demand priority access to high-demand products, like cleaning suppliers, paper products, and shelf-stable items.”
Click here to read David’s full testimony.
NGA is seeking the following resolutions:
- Investigations and Hearings. Through congressional investigations and hearings, Congress should shine a bright light on anticompetitive 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 and the impacts on independent grocers and producers, such as farmers and ranchers.
- 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.