FTC and DOJ Collaborating to Tackle Food Inflation through Measures against Anti-Competition Practices
Food prices have been on the rise, with food price inflation increasing by 21 percent since January 2021. In response to this concerning trend, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have joined forces to combat anti-competitive conduct and mergers within the U.S. food supply chain. This collaboration aims to address the concentration of power within the food industry and ensure fair competition.
Over the past few decades, there has been a significant consolidation within the food supply chain. From food distributors to food processors, pesticide manufacturers, and supermarkets, a handful of corporations now control critical aspects of the U.S. food supply chain. This concentration of power has led to concerns about supply chain fragility and reduced competition.
The FTC Commissioner Rachel Slaughter emphasizes the importance of addressing these issues in cooperation with other federal agencies and state entities. During a recent DOJ-FTC summit, officials discussed various cases, enforcement issues, and investigations related to competition issues in the food industry. There are concerns that the high prices seen in grocery stores may not solely reflect higher costs but also higher profits for retailers.
The Open Markets Institute (OMI) has highlighted the role of corporate consolidation in creating challenges within the food supply chain. OMI representative Clarie Kelloway explains that a small number of corporations control key aspects of the supply chain, from seeds and fertilizers to processing and grocery shelves. This consolidation increases fragility within the supply chain by concentrating production in fewer hands and places.
Antitrust policy reforms in the 1970s have contributed to the dwindling number of players in the food production industry. Currently, four corporations are estimated to control about 60 percent of the U.S. market for alcohol, bread, coffee, cookies, and pork. Moreover, these top four companies also own around 80 percent of the market for baby food, beef processing, pasta, and soda. This concentration of power has raised concerns about fair competition and its impact on consumer prices.
The FTC recently published a report stating that corporate profits have been the main driver of higher grocery prices, hinting at a concentrated grocery sector. Some firms have taken advantage of rising costs to increase prices and boost their profits, even as supply chain pressures have eased. Larger retailers and wholesalers with significant leverage over their suppliers have been able to take more aggressive action to protect themselves.
However, economists argue that food prices were relatively stable before the pandemic. The surge in food manufacturing costs since January 2021 has outpaced overall food inflation, indicating that other factors may be influencing price increases. It is worth noting that higher food prices are not unique to the United States, as the United Nations’ food agency has reported a rebound in global food prices, particularly in dairy, meat, and vegetable oil products.
The Biden administration has made addressing competition in the private sector a priority. A new joint “strike force” led by the FTC and DOJ has been established to target unfair and illegal corporate pricing practices across various sectors, including food and grocery. President Biden aims to hold corporations accountable for illegal behavior that keeps prices high.
FTC Chair Lina Khan has been actively scrutinizing mergers throughout the U.S. economy since taking office. In an interview with Jon Stewart on “The Daily Show,” she highlighted the dangers of concentrating power in a small number of companies and emphasized the importance of antitrust and anti-monopoly laws in safeguarding against economic concentration. Ms. Khan recently announced that the FTC and DOJ’s antitrust division are cracking down on hotels engaged in price fixing through algorithms.
The collaboration between the FTC and DOJ represents a significant step in addressing anti-competitive practices within the U.S. food supply chain. By tackling corporate consolidation and ensuring fair competition, these agencies aim to protect consumers from inflated food prices. However, it remains to be seen how effective these measures will be in curbing food inflation and promoting a more competitive marketplace.
