Following a year-long study, the U.S. Department of Agriculture (USDA) issued a report on the market dynamics within the meat and retail industries that affirms the National Grocers Association’s (NGA) position.
NGA has long held that retail industry consolidation and price discrimination contribute to higher consumer prices, fewer retail storefronts and limited market opportunities for farmers and ranchers.
“The report is the most comprehensive governmental study to provide an in-depth view into the modern inner workings of a complicated and opaque market structure of the grocery industry. The report clearly demonstrates how the current system is often warped to benefit dominant players at the expense of smaller industry competitors, consumers, farmers and ranchers,” said Chris Jones, NGA’s chief government affairs officer.
The study goes into detail with examples on how complicated schemes of rebates, fees and other arrangements in the meat industry are construed to benefit the largest industry players. For example, in the report, a food consultant reported that a midsized packer found that its required trade spend to a national chain grocer of $120 million was double that of other chains.
“Dominant retailers prefer fee schemes, such as marketing, slotting, rebates and on-time-in-full fees, which allow them to evade price discrimination laws at the expense of everyone else,” Jones said.
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The USDA’s meat report also describes how the existing system makes it harder for smaller retailers to buy from local suppliers due to dominant retailers driving consolidation in meatpacking and distribution. As a result, small farmers and ranchers find it harder to sell directly to stores, with one grocery industry member noting how current distribution deals leave no margin for sourcing locally.
The dynamics outlined in the USDA’s meat report are a small sample of how independent grocers, consumers, farmers and ranchers are undermined by the unchecked actions of dominant national chain retailers.
“A dysfunctional market structure exists across far more product categories in grocery stores than just meat and protein,” Jones said.
“While this report is alarming, it provides a better roadmap for the FTC and antitrust enforcers to help American consumers by pinpointing conduct that potentially violates the Robinson-Patman Act (RPA), a law that is supposed to prohibit the examples of price discrimination outlined in the report.
“Unfortunately, the RPA hasn’t been enforced in nearly 40 years and the resulting market concentration and food desert growth speak for themselves. The FTC needs to enforce the law, and Congress needs to strengthen it by passing new standards that prohibit dominant players in the grocery industry from engaging in discriminatory practices,” Jones said.
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