They used the pandemic to raise prices drastically and crush competition

Consumers have been facing extremely high prices at supermarkets for several months.  Photo: Getty Images.

Consumers have been facing extremely high prices at supermarkets for several months. Photo: Getty Images. (Hispanolistic via Getty Images)

The Federal Trade Commission (FTC) has confirmed what economists and researchers have suspected for some time: corporate greed was another major catalyst for inflation, as America’s largest supermarkets caused supply chain disruptions Was. An opportunity to increase profits and crush smaller rivals during the pandemic.

A report released Thursday by the FTC, which names retail giants like Walmart, Amazon and Kroger, revealed that companies with larger market shares “quick and distorted“The negative impacts associated with the supply chain and prices have increased more than necessary to cover their additional costs and make excessive profits.”

Walmart warehouse entrance.  Photo: Getty ImagesWalmart warehouse entrance.  Photo: Getty Images

Walmart warehouse entrance. Photo: Getty Images (Alexander Farnsworth via Getty Images)

They took advantage of the opportunity to consolidate their dominance

The federal agency attributed these fierce competition strategies to consumers having to deal with higher food prices and shortages of basic products like toilet paper. “And their profits are still higher, Even though supply chain pressure has easedThe report says.

“As the pandemic has shown, large shocks to the supply chain can have cascading effects on consumers, including the prices paid for food,” said FTC Chairwoman Lena M. Khan. “The report found that major companies took advantage of this moment to move forward, At the expense of their competitors and the communities they serve.,

They put pressure on suppliers

Small businesses, especially grocery retailers, were also affected, facing difficulties in obtaining products from their suppliers. The report found that large companies put pressure on suppliers to gain access to scarce products, Enforcing strict delivery requirements and threatening them with large fines If they did not comply with their requests. This helped them “effectively gain a competitive advantage over their smaller rivals.”

The report comes as the regulatory agency ordered several companies to hand over “detailed information” in late 2021 to shed light on the reasons behind the supply chain problems and how anti-competitive business practices made the disruption worse.

“The findings show how supply chain disruptions can leave markets exposed to significant supply chain shocks, and that In turn, these shocks may allow larger companies to consolidate their dominanceThe FTC based its findings on public data on industry costs and revenues.

The consumer remains the weakest link in the chain of capitalism.  Photo: Getty Images. The consumer remains the weakest link in the chain of capitalism.  Photo: Getty Images.

The consumer remains the weakest link in the chain of capitalism. Photo: Getty Images. (Tom Werner via Getty Images)

unnecessarily high prices

Food and beverage retailers’ revenues exceeded total costs by 6% in 2021, significantly higher than its peak of 5.6% in 2015. In the first three quarters of 2023, retailers’ profits increased even further. With income that reached 7% of the total cost, the FTC reported. This income trend casts doubt on claims that rising prices at grocery stores are keeping pace with rising costs for retailers.

The distortion of product allocation during shortages by powerful retailers suggests to the FTC that the crisis may create an opportunity for some companies to strengthen their market power. The report said some of these symptoms may subside once supply chains return to normal, but the underlying problems will persist.

The National Grocers Association (NGA), which represents small independent food retailers, praised the study for confirming what independent retailers and their customers experience firsthand: major national chains or so-called ‘Power buyers’ ‘They are abusing their huge economic power. “This harms competition and American consumers,” NGA CEO Greg Ferrara said in a statement quoted by USA TODAY.

Kroger, Walmart and Amazon’s earnings

In the United States, there are approximately 25,000 traditional supermarket brands in various formats and approximately 15,000 additional retail grocery stores, which collectively employ approximately 2.6 million people.

The FTC took a dig at the earnings records of some of the biggest retailers, including Kroger, Walmart and Amazon. In his report he reminded that Kroger is the largest supermarket chain in the country and in 2022 he reported US$148 billion in sales and operating profit of over US$4 billion.

Walmart is the largest merchandise retailer and operates more than 5,000 different points of sale in the United States, where sales reach US$400 billion in 2022, operating profit US$21 billion.

Amazon is continuously establishing itself as the most powerful online retailer in the country. In 2022, it generated US$242,000 million from sales of products and other US$271 billion in service sales, with total operating income of US$12 billion.

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