“Efficiency” is a frequent justification for allowing corporations to consolidate vast swathes of the marketplace. But when it comes to food, huge grocery chains and ubiquitous dollar stores are limiting some rural and urban communities’ access to healthy food at the same time they bankrupt the farmers who produce it, members of a virtual panel said late last month.
Walmart, Amazon, and Kroger already control a huge amount of the nation’s grocery business. And if Cincinnati-based Kroger completes its acquisition of Albertson’s, the consolidation will be greater still.
“We’ve seen extreme concentration in the grocery sector,” Stacy Mitchell of the Institute for Self Reliance said. The institute advocates for local power in the face of increasing corporate dominance. “Just five giant retail chains now capture about half of all grocery sales and one company, Walmart, captures one out of every four dollars that Americans spend on groceries.”
The institute hosted the panel, in which Alvaro Bedoya, the newest member of the Federal Trade Commission participated. In an interview with the Capital Journal last year, Bedoya said that when Congress passed antitrust laws in the first half of the 20th century, the record shows that its main concern was fairness — particularly for rural communities — and not efficiency as some later claimed in successfully arguing to weaken enforcement of those laws.
To see for himself the effect of consolidation in the food sector, Bedoya in December traveled to Pine Ridge, S.D. to meet with a fourth-generation grocer. Bedoya expected the meeting to be in a drab office, but he was mistaken.
“We spent maybe two hours meeting with the incoming Oglala Lakota Tribal Council in the dairy aisle,” he said. “What they talked about was a crisis. Members of their community could not afford healthy groceries. They talked about 13-year-olds showing up at the emergency room with ulcers because at the end of the month all they could afford was the kind of stuff you find at a convenience store. They talked about how 50% of residents over 40 suffered from diabetes. This is the part of the country that has the lowest life expectancy in the Western Hemisphere outside of Haiti.”
Most Pine Ridge residents don’t have cars, making the hour-long drive to the nearest big-chain grocery impossible. Meanwhile, the local independent store can’t offer the same prices because it doesn’t have access to the same deals as the big chains do, Bedoya said.
“What the folks in that grocery aisle said is, ‘We love this store. We love shopping here, but we can’t afford it,” he said.
That lack of access also harms people in Ohio, said another participant, Rev. Dr. Donald Perryman of the Center of Hope Community Baptist Church in Toledo. It leads to what he called “false narratives” about members of struggling communities — that if they only ate better, they’d be in better health.
“To me, that did violence to a certain group of people,” he said. “It does nothing to address the source of their ill health.”
As grocery stores consolidated, they departed disadvantaged Toledo neighborhoods and dollar stores moved in, Perryman said. Harm followed.
“The Toledo Police Department provided crime statistics that indicated that dollar stores elevated crime in the neighborhoods we were serving,” he said, adding that the stores are understaffed and don’t have much in the way of healthy food.
Even so, the two big dollar store chains are able to leverage suppliers into providing special packaging at special prices, Mitchell said.
Michael Gay, owner and manager of Food Fresh in Claxton, Ga., said that’s in addition to being unable to get the same prices for non-perishable foods that the big-box chains get.
“Where we get hammered is in the middle of the store,” he said.
Gay said he buys produce and other perishables from small farmers, while Angela Huffman of Farm Action said that the big chains often do what they can to cut out small farmers.
“When grocery stores consolidate, everybody along the supply chain down to the farmer is really feeling the sting of that,” said Huffman, who is herself a Northwest Ohio farmer. “When dollar stores come in and displace independent grocers, farmers lose a local purchaser. They usually don’t buy produce and when they do, it isn’t from a local farmer.”
Huffman added that the big grocery chains are also wreaking havoc with family farms.
“When Albertsons acquired Safeway in 2015, Albertsons only kept contracts with its largest produce suppliers and it dropped contracts with most of the small Safeway suppliers,” she said. “In the case of Walmart, they didn’t want to go to a supplier for their dairy products at all. They wanted to control their dairy supply. So they dropped their dairy supplier, which was Dean Foods, and caused Dean Foods to have to cancel more than 100 contracts with dairy farmers across eight states. Within two years, Dean Foods was bankrupt.”
While jurist Robert Bork might have argued that easing antitrust regulation promotes efficiency, when it comes to food, there’s evidence to the contrary. A 2012 working paper by the FTC’s Bureau of Economics examined what happened to food prices after retailers merged. It found “that mergers in highly concentrated markets are most frequently associated with price increases, while mergers in less concentrated markets are most often associated with price decreases.”
In other words, it’s all good until too few players control too much of the marketplace.
Bedoya said there are provisions in existing antitrust law to keep some of that from happening. He explained that in the 1970s and 80s, some parts of the law were largely forgotten.
For example, under the 1936 Robinson-Patman Antidiscrimination Act, a food producer can’t simply package things differently and charge different prices for it — particularly if the effect is to drive smaller competitors from the field.
But another, largely forgotten part of the law also prohibits big chains from forcing big, special discounts or fees for itself. The provision arose from then-mega chain A&P forcing suppliers to pay kickbacks in the form of brokerage fees, the FTC commissioner said.
That part of the law was “a mainstay of FTC enforcement, but now it’s largely been forgotten,” Bedoya said. “I’m not in Congress. I can’t choose what the law is, it’s my job just to enforce it. But for me, I’m more focused on reviving all aspects of the law and not just focusing on the ones that have gotten the most attention.”
