Like many of you, I’m feeling the pinch of inflation at the grocery store these days. I basically understand why I see higher prices for certain items – fuel costs, weather and other logistical disruptions, and personnel issues – and I try as best I can to change my buying habits in order to to be able to stretch my dollars. Hopefully prices will moderate soon thanks to lower inflation, but I’ve learned that there are less apparent practices in the grocery industry that influence prices and our shopping habits.
Fortunately, as part of a broader investigation into supply chain disruptions during the pandemic, the federal government is currently investigating these established but hidden industry practices that impact product choice and may harm consumers. . The investigation is led by the Federal Trade Commission (FTC), an independent agency charged with protecting consumers and promoting competition in the industry.
In late 2021, the FTC ordered several companies involved in the grocery supply chain, including Amazon, Kroger, Tyson Foods and Walmart, to answer questions and provide documents detailing trade promotion practices. The FTC’s investigation began following an outcry from the National Grocers Association and a coalition of independent grocers, farmers, restaurants and others over anti-competitive tactics by dominant market players. ‘industry.
The National Center for Science in the Public Interest (CSPI) also joined the chorus in calling for a federal investigation. In a February 2021 letter to the FTC, CSPI claimed that certain industry practices not only impact competition and consumer choices, but also undermine consumer health.
The CSPI highlighted the following practices as having a “profound impact on the food environment and, therefore, on market fairness and public health”:
- Cooperative marketing agreements – in which manufacturers pay retailers substantial fees for product placement and allotted space, promotional activities and authorized price promotions – seem harmless if taken at face value. However, as the CSPI notes, these agreements can limit space for competitors and create high entry costs for small manufacturers and fruit and vegetable growers.
- Category captain agreements — in which retailers cede decisions about product placement, promotion, and pricing to the dominant manufacturer in a food or beverage category — typically result in the retailers providing the player dominating insider information about other manufacturers’ pricing, sales, and promotional plans. The CSPI notes that these arrangements “virtually guarantee that critical retail decisions favor the captain’s brands over their rivals or potential rivals, raising serious antitrust concerns.”
Placing certain foods in prominent places increases visibility, accessibility and sales. Check out the huge selection of unhealthy items the next time you checkout. Retailers could support the health of their customers by placing more healthy items rather than pushing candy and soda. Unfortunately, the actors who control placement and promotion through the arrangements described by the CSPI are those who manufacture and distribute sweet and salty processed foods, refined grain products, and sugary drinks – in short, junk food.
Notably, these practices are not limited to physical grocery stores and have made their way to online food retail platforms, according to CSPI. Combined with sophisticated tracking and analysis of individual buying and shopping habits, premium placement on landing pages, banner ads and email promotions, they can be powerful tools for manufacturers in the making food purchasing decisions.
The pandemic has exposed systemic failures on multiple fronts, and food retail is the latest industry under the microscope. While the FTC’s review will focus on pandemic supply chain disruptions, longstanding grocery store trade promotion practices that could proliferate in online food retailing will also the subject of careful scrutiny. As part of the inquiry’s public comment process, the retail giants, through their trade association, said these long-standing practices – which they say have been “an effective way to sell products for decades” and which, according to the FTC, could “produce significant efficiencies”. ” – have no causal link to supply chain disruptions or the inflationary environment.
Whether or not the FTC takes enforcement action against industry players, Americans deserve a more transparent look at business practices that create barriers to entry for fruit and vegetable producers and crowd out healthier food choices. . We certainly don’t need industry to tip the scales against our ability to make healthier decisions.
Editor’s note: Craig Wilson, JD, MPA, is the director of health policy at the Arkansas Center for Health Improvement, an independent, nonpartisan health policy center in Little Rock. The opinions expressed are those of the author.