With inflation stubbornly persistent, US FTC accuses retailers of price-gouging

A shopper looking at receipts
A shopper looking at receipts | Photo courtesy of Denys Kurbatov/Shutterstock
8 Min

Sky-high grocery prices – brought about due to supply chain disruptions during the Covid-19 pandemic – are persisting, and retailers may be price-gouging, according to a 22 March U.S. Federal Trade Commission report.

The report, “Feeding America in a Time of Crisis: FTC Staff Report on The United States Grocery Supply Chain and the COVID-19 Pandemic,” calls out the largest retailers for raising prices and limiting competition.

The FTC report also echoes statements made by U.S. President Joe Biden during his recent State of the Union address in which he expressed concern about grocery prices and shrinkflation. A recent analysis by the White House Council of Economic Advisers found grocers have maintained the higher profit margins they began generating following the onset of the pandemic.

“Consumers are still facing the negative impact of the pandemics price hikes, as the [council’s] report finds that some in the grocery retail industry seem to have used rising costs as an opportunity to further raise prices to increase their profits, which remain elevated today,” the FTC report said.

The agency reviewed the business practices of Walmart, Amazon, and Kroger, along with wholesalers C&S Wholesale Grocers, McLane Company, and Associated Wholesale Grocers. It also reviewed information from Procter & Gamble, Tyson Foods, and Kraft Heinz, three of the country’s largest suppliers.

As the pandemic illustrated, a major shock to the supply chain can have cascading effects on consumers, including the prices they pay for groceries,” FTC Chair Lina M. Khan said in a press release. The FTCs report examining U.S. grocery supply chains finds that dominant firms used this moment to come out ahead at the expense of their competitors and the communities they serve.”

The supply chain disruptions during the pandemic provided insight into the overall competitive dynamics of the grocery industry. Limited competition can lead to bottlenecks that increase the impact of supply chain shocks on different businesses and consumers while inhibiting fair competition, the FTC said in the report.

“The potential for powerful retailers to distort product allocations during a shortage suggests that crises may create an opportunity for some firms to entrench market power,” it said.

A change in retailers’ on-time and in-full delivery (OTIF) policies during the early days of the Covid pandemic harmed competition in the grocery sector, the FTC found. A November 2022 McKinsey survey found that many large retailers increased the demands they place upon their suppliers, with more than half of consumer packaged goods companies reporting that retailers had ... 

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