Independent Grocers Accuse Big-Boxes Of Edging Them Out

By Christopher Cole
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Law360 (March 17, 2021, 7:03 PM EDT) -- Big-box stores and e-commerce titans should be investigated for using their market sway to put the squeeze on suppliers during the COVID-19 pandemic and hurting small retailers and consumers, a group representing independent grocers says.

The National Grocers Association, which represents independent grocers, published a white paper on Tuesday that details the organization's findings concerning how major retailers have taken advantage of deep discounts and high-volume orders for staple products like paper and canned goods — to the detriment of small businesses that must pay higher prices or not stock the goods at all.

The NGA contends that the state of affairs in the food business — what it calls "illegal economic discrimination" — warrants congressional action and an antitrust probe by the Biden administration.

"A food retail marketplace controlled by a handful of firms flies in the face of America's free-market principles," NGA President and CEO Greg Ferrara said during a Tuesday call. "It discourages entrepreneurship, it limits investment in underserved communities and it harms consumers who rely on a vibrant and robust food supply chain."

"That's why it's time for Congress and the federal government to reassert the principles of antitrust law so that it can restore competition to an industry on which every single American relies," he added.

The NGA argues that unless Congress and regulators act, discrimination against small retailers will hurt independent businesses and consumers long after the pandemic is over. The trade group wants to see a multipronged approach focused on congressional oversight and legislation, among other things.

The group said that hearings on Capitol Hill could "shine a bright light on anticompetitive practices in the grocery sector," and that lawmakers could use their oversight and authorization powers to "hold antitrust enforcers accountable if they continue to fail to take steps to check retail buyer power and its harmful effects."

Although the group says that existing laws are enough to tackle discrimination among buyers and sellers, "if existing court decisions prove too high a bar to more vigorous enforcement, then Congress should step in to restore the original purposes of the antitrust laws," it said.

Further, the NGA wants the Federal Trade Commission, the U.S. Department of Justice and state attorneys general to "investigate the arrangements between grocery power buyers and suppliers to determine the extent to which dominant retailer bargaining leverage is imposing discriminatory prices, terms and supply on independent grocers."

Counsel for grocery business FMI - The Food Industry Association said in an email on Wednesday that it "believes strongly in competition, and in our role representing the food marketplace."

"Our antitrust laws are the rules under which our competitive system operates, and FMI supports compliance with those laws," said Stephanie Harris, FMI general counsel.

In a blog post this week, another FMI executive discussed rising food prices amid the pandemic, noting that prices for many goods had risen in 2020 but some consumer price increases are poised to level off. He credited resiliency in the industry's supply chain.

"At the 2021 USDA Agriculture Outlook in February, the agency released its forecast for food prices in 2021 and found that they will return to a more traditional rate of growth of between one and two percent," wrote Andy Harig, FMI's vice president of tax, trade, sustainability and policy development.

"Meat, particularly beef and pork, could even see some price rollbacks. Produce, dairy and cereals will also hold steady and hew closely to their historical averages," he wrote. "This doesn't mean there won't be some spikes and rough spots along the way — [Consumer Price Index] data for February 2021 is showing a 3.6% increase in overall food prices versus February 2020."

Harig said that increased demand and bad weather across the world are driving prices upward, but the trends show that "food prices are predicted to head in the right direction — namely a return to normal. This normalcy will mean an easier time for American consumers, particularly those left struggling by the pandemic."

But the NGA sees a more worrying trajectory, saying larger retailers' buying power means they can demand suppliers provide lower prices and more favorable supply terms, special package offerings and product availability, leaving independent grocers to "pay the price."

Independent grocers are unable to secure many "must-have" products and face supplier prices up to 53% higher than what their larger competitors are selling the product for at retail, the group claims.

"This isn't just bad for independent grocers; it's bad for their customers, who are often people of color and people living in rural areas who are forced to pay higher prices or travel farther distances to get the staples they need," the NGA said.

The report adds that "dominant" food retailers also harm small and midsize farmers and ranchers, who receive less than competitive prices for their farm output while also paying higher prices in the grocery store.

The NGA called on several agencies to act, saying the FTC should use its authority under 6(b) of the Federal Trade Commission Act to study competition and concentration in the grocery supply chain and the impacts on independent grocers and producers.

The Small Business Administration and the U.S. Department of Agriculture should likewise study the group's concerns outlined in the report, the NGA said.

--Editing by Steven Edelstone.

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