Larger retailers used their dominance to push suppliers and squeeze competitors during pandemic, FTC report shows

Larger retailers used the pandemic to 'come
out ahead.' (Photo by S. Lee, Unsplash)

American grocery prices remain usually high, and many smaller-scale grocers still struggle to recover from pandemic setbacks. A new Federal Trade Commission report sheds some light on how larger retailers used their power to push suppliers to deliver to them first, which caused more struggles for smaller competitors and may be partially to blame for why grocery costs have remained high even as overall inflation has cooled.

"Federal regulators said large grocery chains used their size and scale to keep shelves stocked during the pandemic, edging out smaller rivals when most stores struggled with product shortages and distribution bottlenecks," reports Liz Young of The Wall Street Journal. Many larger retailers put "stricter delivery requirements into place and fined vendors that didn't comply. . . The demands led many suppliers to route more goods toward those retailers to avoid the fines."

FTC Chair Lina Khan told the Journal, "Dominant firms used this moment to come out ahead at the expense of their competitors and the communities they serve." Young reports, "The agency said revenue growth at grocers outpaced the cost increases many of them faced from suppliers, suggesting that higher profits 'warrant further inquiry by the commission and policymakers.'"

While supply bottlenecks thwarted smaller grocers during the pandemic, "Some of the largest U.S. retailers, including Walmart, Home Depot, Costco and Target, chartered their own cargo ships in 2021 to import goods and get around the chokepoints," Young writes. "Small grocers say the pandemic exacerbated their longtime struggles to compete with bigger retailers." Robert Buche, chief executive of South Dakota grocery chain G.F. Buche, told Young, "Covid just made it more obvious what's been happening for years with us independents."