National Grocers Association (NGA) President and CEO Greg Ferrara testified last week in front of the full House Agriculture Committee on how supply chain challenges, including the labor shortage and anti-competitive tactics by power buyers in the grocery marketplace, are impacting independent grocers and the communities they serve.
“The greatest risk we face in the market is not the supply chain challenges under discussion today. Rather, the panic buying mindset is what poses the greatest risk to the availability of food and the ability of grocers to keep shelves fully stocked,” Ferrara testified. “As industry and government leaders, we must be responsible spokespeople for the food system and reassure the American public that there is plenty of food to go around.”
There are three central factors contributing most significantly to the current supply chain crunch, Ferrara told the committee: labor availability, transportation bottlenecks and uneven supply due to the rise of power buyers made possible by non-enforcement of antitrust laws such as the Robinson-Patman Act.
“The food industry continues to adapt to a shifting marketplace, but the bottom line is that we must have access to a stable workforce in order to adequately meet the demands of American consumers,” Ferrara said. “The trucking industry faces an acute shortage of truck drivers, a critical cog in the supply chain required to move product along to each step in the food production cycle. The federal government must take actions to increase transportation efficiency and capacity, while maintaining current regulatory flexibilities, such as the Hours of Service waivers, as we see no letup in demand.”
Additionally, Ferrara added, “The pandemic has exposed a growing problem in the food and agriculture sector: market concentration has led to uneven supply. The largest retail power buyers use their immense economic power to pressure suppliers into prioritizing their shipments over other retail customers while extracting concessions on wholesale pricing. As a result, independent grocers have lost access to both popular products and promotional pricing, putting them at a disadvantage when competing with their larger rivals.”
NGA, which represents the independent sector of the food distribution industry, has been aggressive in its criticism of predatory pricing by industry power players. Last month, the association, along with the National Community Pharmacists Association (NCPA), partnered with other independent business associations to form the Main Street Competition Coalition, which calls on federal regulators to crack down on anticompetitive tactics by large companies in various industry sectors. Coalition members claim these big competitors engage in predatory practices such as price, channel and supply discrimination that thwart competition and harm businesses from farmers to pharmacies, as well as their customers.
Specifically, the coalition members seek stronger enforcement of the Robinson-Patman Act, a federal law enacted in 1936 to prohibit price discrimination by suppliers against retailers. While current U.S. antitrust laws provide the tools needed to curb discriminatory practices by dominant companies, enforcement by antitrust agencies and courts has waned in recent decades, according to NGA.
“The problems that flow from economic discrimination have been laid bare during the COVID-19 pandemic. Throughout the crisis, dominant companies have received preferential treatment in supply shortage scenarios, meaning they get access to critical goods and services that smaller firms do not,” the Main Street Competition Coalition members explained in a letter to the Federal Trade Commission. “These shortages occur in the first place because concentration creates a lack of supply chain redundancy and resiliency. As the pandemic illustrated, capacity cannot easily increase in concentrated markets, so when one firm experiences a shock, everyone suffers. These problems too are unequally distributed across the economy and tend to impact lower income consumers to a much greater extent than higher income consumers.”