Lone Candle
Champion of Truth
“Trump talked repeatedly about runaway grocery prices during the campaign, pledging that if elected, paying over $4 for a carton of eggs would be a thing of the past. “When I win, I will immediately bring prices down, starting on Day 1,” he pledged. But after
“The FTC’s stated motivation for challenging the merger was to avoid “higher prices for groceries and other essential household items for millions of Americans.””
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“Kroger and Albertsons would still only account for 9 percent of overall grocery sales, as C. Jarrett Dieterle has noted in Reason, belying the FTC’s concerns that the merger would grant them significant market power. The FTC’s overly narrow definition of the grocery market is the actual cause of concern: The Commission’s definition includes traditional supermarkets and “hypermarkets” like Walmart and Target, but excludes Amazon and Costco, the second and third largest grocery retailers, respectively.
Considering Kroger’s and Albertsons’ single-digit shares of the properly defined market, and competition from other grocers not recognized by the FTC, the merger was more likely to save Albertsons from insolvency, not afford them enough market power to increase prices. Kroger and Albertsons projected the merger would create $500 million in cost savings—at least some of which would be passed onto consumers. The pair also planned to invest $1.3 billion to improve customer service, according to Nate Scherer, a policy analyst with the American Consumer Institute, a nonprofit research institute dedicated to the promotion of consumer welfare.”
https://reason.com/2024/12/12/kroger-albertsons-merger-halted-by-the-federal-trade-commission/
“European countries take a much more precautionary approach to additives in their food, Benesh says. “If there are doubts about whether a chemical is safe or if there’s no data to back up safety, the EU is much more likely to put a restriction on that chemical or just not allow it into the food supply at all.”
In the US, we’re more likely to see action at the state level. California banned four chemicals in 2023: brominated vegetable oil, Red Dye No. 3, propylparaben, and potassium bromate. This year, lawmakers in about a dozen states have introduced legislation banning those same chemicals and, in some states, additional chemicals as well. But federal oversight has been limited, constrained by priorities, authority, and by a lack of resources.”
https://www.vox.com/explain-it-to-me/381121/food-candy-ingredients-coloring-dye-fda
“Kroger is the fourth-largest grocery store chain in America—behind Walmart, Amazon, and Costco—and Albertsons is the fifth-largest. Once merged, the combined company would rise to third on the list. On the surface, this may seem to provide some support for the FTC’s position, but American shoppers would be wise to read the fine print.
In truth, if the deal were to proceed, a merged version of Kroger and Albertsons would still only make up 9 percent of overall grocery sales. To put this in further perspective, consider that Walmart—the nation’s largest grocery provider—would continue to operate more stores (including its Sam’s Club outlets) than a Kroger-Albertson combo and maintain grocery revenue that is more than twice that of the merged company.”
https://reason.com/2024/08/17/harris-joins-the-ftcs-food-fight-against-kroger-albertsons-merger/
https://www.politico.com/news/2024/02/26/ftc-krogers-albertsons-grocery-merger-00143287
“a Kroger-Albertsons merger would not create a monopoly in the grocery market. According to a recent report by Retail Info Systems, Walmart remains the nation’s largest grocer, controlling 17 percent of the grocery market. The second and third largest grocers are Amazon and Costco. Kroger and Albertsons are only a distant fourth and sixth with market shares of 4.4 percent and 2.2 percent, respectively.
Grocery stores have experienced a declining market share, while superstores and online competitors have grown. For example, like many traditional grocers, Kroger’s market share has declined in recent years while Walmart’s has increased. Even if Kroger and Albertsons were to merge, it’s not clear that their combined market share wouldn’t continue to decline. The merger would simply enable Albertsons and Kroger to bulk up and compete with larger competitors, like Walmart.
In addition, Kroger’s decision to sell stores in overlapping markets where Albertsons operates means the merger would not increase concentration in any market. This has traditionally been enough for the FTC.
The national grocery market is also becoming more competitive, not less. No longer limited to brick-and-mortar supermarkets and independent grocery stores, the grocery market now includes a growing assortment of e-commerce stores, like Amazon, discount grocers like Aldi and Lidl, and delivery providers like FreshDirect and Instacart. These newer market entrants have fundamentally altered grocery shopping.
The merger will heighten competition among larger competitors, which will drive down prices for consumers. While a merger would not make Kroger and Albertsons the dominant industry players, it would allow them to compete more effectively with others, putting pressure on all major retailers to keep prices low as they fight to preserve their customer base. In fact, Kroger and Albertsons have indicated that the merger will generate $500 million in new cost savings for them that they plan to use to cut consumer prices. In addition, they plan to expand their lineup of affordable store brand products and spend $1.3 billion on improving customer service at Albertsons stores.”
https://reason.com/2023/11/24/ftc-fights-grocery-store-merger-that-may-bring-down-prices/
“Grocery store chains don’t have some anti-Chicago bias. If the people in charge of the city made those neighborhoods safe and economical places to do business, groceries would be as plentiful as they are anywhere else in America. Reducing Chicago’s high crime rate would surely help, though that’s admittedly a long-term project. But there is something city officials could do almost overnight: Reduce Chicago’s commercial property tax rates, which are some of the highest in the country, or the city’s high sales taxes that incentivize consumers (the ones who can, anyway) to do their shopping outside the city.
At best, a government-run grocery store is merely addressing the symptoms, not the underlying problems plaguing Chicago—and it seems unlikely to improve the symptoms, for that matter.”
https://reason.com/2023/10/23/government-run-grocery-store-is-predictably-losing-money/
“Food companies say their price increases merely reflect how much their costs have gone up due to “inflationary pressures,” like higher labor costs, transportation delays, and capacity issues, or the higher price of grains and animal feed. Yet inflation in 2022 outpaced the rise in wages in most industries, and the prices of many agricultural commodities have come down.
The eyebrow-raising spikes at the grocery store can only partly be blamed on manufacturers’ higher costs. The inflation narrative offers the perfect jumping-off point for companies to raise prices, and major food manufacturers are taking advantage of the moment to boost their profits.
The proof? Look at just how rich companies have gotten since the start of the pandemic.”
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““Corporate profits have hit their highest level ever, and corporate profit margins — how much they’re making on each unit that they’re selling — have hit the highest level in 70 years,” said Chris Becker, senior economist at the Groundwork Collaborative, a progressive economic advocacy organization.”
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“Why are corporate profits so high at a time when regular people feel increasingly strapped? Because a small number of players have gobbled up most of the food chain. Cargill and just three other agribusiness companies control about 70 percent of the world’s agriculture market, according to Oxfam. Brands like PepsiCo, Nestle, Mondelez, and Conagra produce and market the vast majority of the offerings found in US grocery stores.
“We look at the supermarket shelf, and we might be buying tea, cereal, whatever it might be, and we think, ‘Oh, I’ve got a real offer of choice here on the product I want to buy,’” Ahmed, of Oxfam, told Vox. “Frankly, it’s an illusion of choice, because so many of those products are actually owned by the same company.”
Grocery retailers, too, have become increasingly consolidated.”
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“Evan Wasner, a University of Massachusetts-Amherst economist who authored a recent paper on companies’ price-setting power with economist Isabella Weber, said that companies tend to raise prices when they think they won’t see a huge backlash — like when everyone else is hiking prices, too. “In a sense, economy-wide cost increases act as a kind of coordinating mechanism which allows firms competing with one another for market share to safely raise prices together,” said Wasner.”
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“Market dominance makes the supply chain more brittle, too, because it means there are just a few vulnerable points for failure. Last year’s baby formula shortage is an example of how dangerous the results can be. Just two US companies control about 80 percent of the market, which meant that when one manufacturing plant shut down, the entire nation struggled to buy baby formula.
Becker blames the vulnerable state of supply chains in part on market deregulation over the last several decades, which has enabled companies to cut corners. In the 1980s, the growing popularity of “just-in-time” inventory systems, where companies order just the amount of inventory needed right now without a buffer, allowed companies to become more efficient. That has meant lower prices for consumers, usually, and higher profits for companies — until a crisis hits, and suddenly there are shortages and supply bottlenecks.”
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“Transcripts of corporations’ recent earnings calls illuminate that they’re well aware of their power right now. Groundwork has been collecting highlights from corporate earnings calls on its website. “They’re saying a lot about cost increases and supply shocks, but they’re also saying it doesn’t matter,” said Becker. “We do have these higher costs that we’re paying, but we have so much pricing power, we’re so capable of passing all these prices on to consumers, that it doesn’t matter.””
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“Becker echoed that the current economic orthodoxy on how to fix inflation — to rein in Americans’ ability to spend money by attempting to raise unemployment levels — should be questioned.
“I would say that we have this really toxic narrative out there that the only way we can get inflation under control is to throw a bunch of people out of work,” said Becker. “Larry Summers recently claimed that we would need 10 percent unemployment [for one year], which is about 11 million jobs lost, to get inflation under control.”
“We’re going to try to solve a cost-of-living crisis by making people poor or losing their jobs? I think that’s crazy,” he continued.
What will break the cycle of not just inflation, but of consumers having to pay ever-higher prices for essential goods while the world’s food producers become richer? Experts offered several potential solutions. One is stronger antitrust laws and improved enforcement of preventing and breaking up monopolies. Anti-price gouging laws are another tool in the arsenal. Oxfam, for one, has been a vocal advocate of a windfall profits tax on food corporations. “It’s a tax on those corporations which are raising prices substantially in excess of costs,” Ahmed explained. The fact that it would raise tax revenue is great. But “fundamentally, it reins in companies’ monopoly power and disincentives corporate greed.” Other countries already have similar measures in place. Spain expects to raise about $6.39 billion from its windfall tax on energy companies and banks.
“Corporations are really making profits on the backs of consumers and households,” said Becker. “Let’s tax those windfall profits — and let’s do something with that money.
“There’s nothing that really stops corporations right now from just doing whatever they want.””
“The worst bout of inflation in four decades has battered consumers for months, but it has been even worse for businesses. When the Consumer Price Index peaked at 9.1 percent annual growth in June, the Producer Price Index, which shows the change in selling prices received by domestic producers for their output, hit a 48-year high of 22 percent.
Despite what Sen. Elizabeth Warren (D–Mass.) and others have suggested, grocery stores and similar corporations don’t appear to be hiking prices to gouge Americans already beset by high inflation. If anything, businesses that buy from producers and sell to consumers seem to be shielding the rest of us.”
“Sen. Marco Rubio (R–Fla.) led a bipartisan group of lawmakers—all of them from Florida—in submitting a petition to U.S. Trade Representative Katherine Tai seeking “an investigation” into what the lawmakers call “the flood of imported seasonal and perishable agricultural products from Mexico.” They ask Tai to invoke Section 301 of the Trade Act of 1974 to impose “trade remedies” that will protect American growers from the scourge of…low-priced produce.
While they don’t come out and say it directly, it’s obvious from the letter that Rubio and his colleagues are seeking tariffs on Mexican produce. Section 301 is the same mechanism the Trump administration used to impose wide-ranging tariffs on goods imported from China. It’s a law that grants the executive branch broad, unilateral power over trade.
Rubio and the other lawmakers say the Mexican government is subsidizing its domestic agricultural infrastructure as part of a scheme to undercut the prices charged by U.S. growers. “Mexico poses a direct threat to Florida’s seasonal and perishable agricultural industry,” they conclude.”
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“Anyone who has taken a basic economics class should be able to explain what’s happening there. A high level of supply tends to push prices downward. Whether grown in Mexico or Florida, it makes sense that cucumber prices would be at their lowest when there are a lot of cucumbers in the market.
But that’s not how Rubio and his colleagues see it. Instead, the petition describes this minor pricing difference as “a clear attempt to displace Florida cucumbers from the U.S. market.”
Take a moment to enjoy the fact that some of the most powerful men and women in the U.S. government are freaking out over the idea that American consumers might get to save a few cents on their next cucumber purchase. Then amuse yourself with the optics of American agricultural special interests—which are, of course, pulling Rubio’s strings here—complaining about subsidies, as if “direct government aid” doesn’t account for nearly 40 percent of American farmers’ annual income.
“These Florida politicians are following a time-honored tradition of trying to help their local constituents at the expense of Americans in other states, who benefit from low-priced fruits and vegetables regardless of where they are grown,” says Bryan Riley, director of the free trade initiative at the National Taxpayers Union Foundation. “