The Federal Trade Commission on Thursday recommended that policymakers further examine grocery store profits, which have remained elevated since the pandemic, as well as the promotions consumer goods manufacturers are offering to retailers.
The FTC also filed a lawsuit to block Kroger from acquiring smaller grocery store rival Albertsons, citing concerns that the deal would raise prices for millions of Americans.
The FTC launched the study in 2021, when it ordered Walmart, Kroger, Procter & Gamble, grocery wholesalers and other companies to turn over details related to a supply chain crisis during the pandemic that drove up prices for household staples Double-digit rise.
FTC Chairman Lena Khan said during a public call to discuss the report that big box stores and chains have been given limited resources, putting small independent grocers at a disadvantage. She added that this harms communities that rely on these smaller retailers and may also strengthen the market dominance of larger companies.
“If we ultimately find that these types of practices violate any antitrust laws, including [Robinson-] Patman takes action and I’m very interested in making sure we act quickly,” she said, without providing details.
The Robinson-Patman Act of 1936 is an American antitrust law designed to prevent large franchises and chains from price discrimination against small businesses.
Representatives of several small grocery operators said on a conference call that they have faced shortages of toilet paper, cleaning products and pet supplies during the pandemic as manufacturers prioritize their largest customers.
“This is a true test of survival for many of our customers,” said Brian Patterson, chief buyer for Piggly Wiggly Alabama Distributing Co.
Chains such as Walmart and Kroger have staked their claim to gaining share of the U.S. grocery market. Kroger’s most recent quarterly report said sales share has continued to improve over the past five quarters. Walmart said it gained market share in “nearly every category” thanks to lower prices.
According to Coresight Research, Walmart and Kroger did increase their share from 2018 to 2022, but not by much.
The FTC said it would forward the report to lawmakers, where members of both parties have shown “widespread interest.”
U.S. President Joe Biden is targeting grocery chains this year.
“Today’s Federal Trade Commission report shows that grocery retailers increased profits during the pandemic and maintained or increased those profits even as their own costs fell,” the White House said in an email to Reuters on Thursday.
In Thursday’s report, the FTC found that annual profit measures for food and beverage retailers “increased significantly and remain at reasonably high levels.” Grocery retailers’ revenue will account for 6% of total costs in 2021 and 7% of total costs in the first nine months of 2023, up from a peak of 5.6% in 2015, the committee said.
“This casts doubt on the assertion that grocery store price increases are simply in lockstep with increases in retailers’ own costs,” the FTC said, adding that the increase in profit levels “warrants further investigation by policymakers and the Commission,” which said Its mission is to protect the public from unfair business practices.
The FTC also said trade promotions, in which consumer product companies pay retailers to place favorable products in stores and on e-commerce websites, “may warrant further study.”
The FTC found that the reduction in spending hurt traditional grocers as they adopted “high-low” pricing strategies and ran more frequent promotions.
Research shows retailers such as Walmart that offer “everyday low prices” with fewer promotions benefit.
Walmart did not immediately respond to a request for comment.
The FTC added that the report did not allege it was illegal.
“We’re shedding light on what we’re seeing in the market, which has broader relevance to policymakers beyond law enforcement.”
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