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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsPandemic-Era Corporate Bullying: Big Retail threatened to punish suppliers unless they got first dibs on food/home goods
According to the FTC, powerful retailers used on-time, in-full policies to pressure their suppliers to favor them over rivals during the pandemic supply chain crunch.
Its a big deal when Americas top monopoly cop, the Federal Trade Commission, spends its finite time and resources studying an industry. The agency was created a century ago precisely to figure out which markets were working and which werent, but for decades the agency did very little of that kind of inquiry. Under Joe Biden, the FTCs leadership has rekindled that core function, and last week the agency published the results of its examination of one of the decades most vexing problems: the fracturing of the grocery supply chain, and the subsequent and ongoing price hikes seen during and since the COVID-19 pandemic.
The FTCs supply chain study, two years in the making, was succinct but clear: Documents and data from some of Americas largest grocery retailers, producers, and wholesalers showed that in those first months after the onset of the pandemic, dominant mega-retailers had flexed their muscle as the countrys largest buyers of food, shampoo, toilet paper, and every other consumer good to demand their suppliers fill their shelves first, likely at the expense of smaller stores around the country. The formula the FTC laid out in its findings suggested as straightforward a display of power as one can find in industry. The onset of the pandemic sparked chaos throughout the supply chain, disrupting manufacturing, shipping, and every other step along the path from factory to market. According to the FTC, powerful retailers used on-time, in-full policies to pressure their suppliers to favor them over rivals.
The pressure worked to ensure those monopoly retailers had preferential access to products in short supply, because suppliers feared the financial penalties those retailers could and would inflict on them if they didnt deliver the goods. The FTC specifically named Walmarts requirement that 98 percent of its orders be delivered on time and in full to avoid significant cash penalties. The findings werent exactly shocking. Walmarts policy had been reported elsewhere, and there are dozens of examples of small stores and shops that have been unable to access the same goods, at the same prices, as their much larger rivals. Some of that access discrimination can be attributed to the same pandemic-era muscle-flexing the FTC found in the report, like Home Depot president Tim Decker bragging in 2021 that his company had gained market share during the pandemic because its size and buying power often put it at the front of the queue when its suppliers ran short on goods.
But though the FTC focused on the pandemic in particular, the economy is filled with examples of supply discrimination outside of that historic disruption. Small toy stores, for example, have been shut out by toy makers like Mattel, unable to afford the mandatory minimum number of toys theyre required to buy. Small brewers have struggled to access cans at a competitive price after Ball, the countrys largest aluminum can maker, raised both the price of cans and the minimum amount it required small brewers to purchase, according to the Brewers Association. Its a chain-reaction epidemic, where power buyers demand preferential treatment, and big manufacturers are willing to grant it to ensure access to those powerful chain stores. Meanwhile, local shops and makers are often left out. The FTCs report didnt focus on recommendations, but in a public meeting announcing the findings of the investigation, agency chair Lina Khan said that if any of the conduct identified in the report violated the antitrust laws, including the long-dormant Robinson-Patman Act, the agency would take action.
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