By Andrew Moran
As food prices continue to edge higher, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) plan to collaborate moving forward to combat anti-competitive conduct and mergers throughout the U.S. food supply chain.
According to FTC Commissioner Rachel Slaughter, the two federal departments will tackle the food inflation issue in cooperation with other federal agencies and state entities.
In the last few decades, there has been a concentration “up and down the food supply chain,” involving food distributors, food processors, pesticide manufacturers, and supermarkets.
“The food supply chain discussion reflects an important and light conversation throughout competition policy,” Ms. Slaughter said in her opening remarks at a DOJ-FTC summit on April 8.
During the event, officials highlighted the wide array of cases, enforcement issues, and investigations addressing competition issues.
“There are real questions as to whether the high prices of the grocery store not simply by mirroring higher costs, but rather reflect higher profits for those retailers,” she added.
Food Inflation
In a January 2022 report to the House Judiciary Committee, an Open Markets Institute (OMI) representative asserted that corporate consolidation has played a vital role in the many challenges facing America’s food supply chains.
“Just a handful of corporations control critical junctures in the U.S. food supply chain, from seeds and fertilizers to processing to grocery shelves,” said Clarie Kelloway, the manager of the Fair Food and Farming Systems at OMI. “This concentration of capacity and control increases supply chain fragility by putting more production in fewer hands and fewer places.”
The number of players in the food production industry has dwindled as reforms to antitrust policy in the 1970s facilitated more businesses to scoop up their competitors.
Years later, four corporations are estimated to control approximately 60 percent of the U.S. market for alcohol, bread, coffee, cookies, and pork. Additionally, the top four companies own about 80 percent of the market for baby food, beef processing, pasta, and soda.
The FTC recently published a report that averred corporate profits have been the main driver of higher grocery prices, alluding to a concentrated grocery sector.
“Some firms seem to have used rising costs as an opportunity to further hike prices to increase their profits, and profits remain elevated even as supply chain pressures have eased,“ FTC researchers stated. ”Larger retailers and wholesalers with considerable leverage over their suppliers were able to take more aggressive action to protect themselves.”
However, a chorus of economists purports that food prices have been relatively stable until the pandemic. In addition, food manufacturing costs inside the producer price index have surged at a cumulative pace of 24 percent since January 2021, outpacing that of overall food inflation, which has ballooned 21 percent in the same span.
Higher food prices are not a trend found only in the United States.
The United Nations’ food agency, the Food and Agriculture Organization, released updates to its food price index. The latest data show that world food prices rebounded in March from a three-year low, fueled by increases in dairy, meat, and vegetable oil products.
After peaking in April 2023, the index has been trending downward. However, like other inflationary metrics, the gauge is potentially reaccelerating.
Fighting Corporate America
Focusing on competition in the private sector has been a key plank of the current administration, with President Joe Biden and top U.S. officials decrying the practice of so-called greed-flation.
Last month, the White House announced a new joint “strike force” led by the FTC and DOJ to target “unfair and illegal” corporate pricing. Regulator officials aimed to fight “illegal corporate behavior” in a wide range of sectors, including food and grocery.
“President Biden is committed to making sure corporations are held accountable when they try to rip off Americans, including when they break the law while keeping prices high,” the White House said in a March 5 statement.
Since arriving at the FTC, chair Lina Khan has been clamping down on mergers throughout the U.S. economy. In a pre-recorded message at the meeting, Ms. Khan noted that these mergers “reverse to substantially lessen competition or create a monopoly in really protecting our goods.”
Ms. Khan recently garnered national attention after sitting down for an interview with Jon Stewart for “The Daily Show” as she touched upon several subjects, including artificial intelligence.
“I think it just shows one of the dangers of what happens when you concentrate so much power and so much decision-making in a small number of companies,” Ms. Khan stated.
“Going back all the way to the founding, there was a recognition that in the same way that you need the Constitution to create checks and balances in our political sphere, you also needed the antitrust and anti-monopoly laws to safeguard against concentration of economic power. Because you don’t want an autocrat of trade in the same way that you don’t want a monarch.”
Ms. Khan recently announced that the FTC and the DOJ’s antitrust division are cracking down on hotels engaged in price fixing through algorithms.
