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11/30/2021

FTC to Probe Grocery Industry Amid Supply Chain Crisis

Agency orders retailers, suppliers to turn over internal operational data
Gina Acosta
Editor-in-Chief
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The produce department at a Kroger Marketplace store in Texas.

The federal government has launched an unprecedented investigation into the operations of food retailers and suppliers amid the supply chain crisis.

The Federal Trade Commission is ordering nine large retailers, wholesalers and consumer good suppliers to provide "detailed information to help the FTC shed light on the causes behind ongoing supply chain disruptions and how these disruptions are causing serious and ongoing hardships for consumers and harming competition in the U.S. economy." The orders have been sent to Walmart, Amazon, Kroger, C&S Wholesale Grocers, Associated Wholesale Grocers, McLane Co., Procter & Gamble, Tyson Foods and Kraft Heinz. The companies will have 45 days from the date they received the order to respond.

“Supply chain disruptions are upending the provision and delivery of a wide array of goods, ranging from computer chips and medicines to meat and lumber. I am hopeful the FTC’s new 6(b) study will shed light on market conditions and business practices that may have worsened these disruptions or led to asymmetric effects,” said FTC Chair Lina M. Khan. “The FTC has a long history of pursuing market studies to deepen our understanding of economic conditions and business conduct, and we should continue to make nimble and timely use of these information-gathering tools and authorities.”

The FTC says it aims to examine whether supply chain disruptions are leading to specific bottlenecks, shortages, anticompetitive practices, or contributing to rising consumer prices.

The orders require the companies to detail the primary factors disrupting their ability to obtain, transport and distribute their products; the impact these disruptions are having in terms of delayed and canceled orders, increased costs and prices; the products, suppliers and inputs most affected; and the steps the companies are taking to alleviate disruptions; and how they allocate products among their stores when they are in short supply.

The FTC also is requiring the companies to provide internal documents regarding the supply chain disruptions, including strategies related to supply chains; pricing; marketing and promotions; costs, profit margins and sales volumes; selection of suppliers and brands; and market shares.

In addition, the agency is soliciting voluntary comments from retailers, consumer goods suppliers, wholesalers and consumers regarding their views on how supply chain issues are affecting competition in consumer goods markets. These comments provide an opportunity for market participants to surface additional issues and examples of how supply chain disruptions are affecting competition, according to the FTC.

On Tues., Nov. 30, the National Grocers Association (NGA), which represents the independent supermarket industry and its wholesalers, issued a statement on the FTC inquiry:

“This study is a key first step in promoting competition in the food supply chain and we were pleased to see the FTC move forward with a unanimous vote," said Chris Jones, NGA SVP of government relations and counsel. "It will shine a light on what our members already know: that dominant grocery power buyers are using their size to demand better terms, better prices, and better products from suppliers, leaving their competitors and American consumers to pay the bill. These actions leave independent grocers short-handed on key products their customers need and force small, independent grocers and their customers to bear a disproportionate burden of surging food price inflation during supply chain crunches.

“We look forward to helping the commission get to the truth so that it can soon rein in the destructive anticompetitive tactics that have been ignored by federal agencies for decades. The results of the study will have consequences for not only the grocery industry but the communities that so often rely on Main Street grocers for fresh produce, fair prices, and good jobs.”

Also on Tuesday, Food Lion President Meg Ham issued a statement after a Monday supply chain discussion with President Joe Biden. 

“The pandemic transformed almost every aspect of our business – from the way customers shop for groceries to how food is produced and transported to our shelves," Ham said. "While there have been targeted supply chain issues, the food supply chain remains robust and there is ample product available for customers on our shelves. We continue to work with our diverse and broad network of suppliers, source products from new partners and engage directly with additional local vendors. On a daily basis, we are working with our supply chain partners, ADUSA Supply Chain, to get product to our stores to help meet customers’ needs."

Biden met with Ham and the CEOs of major retailers and grocers to discuss the holiday shopping season. The president is scheduled to give "remarks on his administration's work to strengthen the nation's supply chains, lower everyday costs for families, and ensure that shelves are well-stocked this holiday season" on Dec. 1.

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