Food deserts are an entrenched problem across the country, including in Virginia. The cause is clear: price discrimination by big grocery chains is forcing independent grocers to close their doors. In the Richmond Times Dispatch, Senior Researcher Kennedy Smith argues for a solution to level the grocery playing field: the FTC must revive enforcement of a price discrimination law that is already on the books.
Read the article below.
_______________________________________________________________________________
Food deserts are a persistent and growing problem in both rural and urban Virginia. Nearly 1 in 5 Virginians live in a community with low access to a grocery store, significantly higher than the national average. This lack of access to fresh food is a monumental hardship that strips Virginians of their dignity, their long-term health, and their communities’ vitality.
The entrenched problem of food deserts in Virginia has a clear cause. Independent grocers around the state, often the kinds of businesses that have served their customers for decades, have closed their doors. They were typically the only source of fresh food for their towns or neighborhoods but were pushed out when a dollar store moved in down the street or a Walmart opened the next town over.
Independent grocers are failing, not because they can’t compete with the bigger chains on service. It’s because those chain retailers have been allowed by lax antitrust enforcers to bully their suppliers into exclusive deals. Those suppliers, squeezed by powerful retailers, then try to make up their lost profits by overcharging independent grocers for the same goods.
This tactic is called price discrimination, and there’s a federal antitrust law on the books designed to stop it — the Robinson-Patman Act. From the 1930s through the 1970s, vigorous enforcement of the ban on price discrimination created a fair and open retail industry. Major supermarket chains existed and yet, smaller, independent stores also thrived, accounting for more than half of all retail sales nationwide. Those smaller stores sustained the communities in which they were based, large and small, urban and rural.
But by the 1980s, the Robinson-Patman Act had fallen victim to a broader rollback of antitrust enforcement that had swept over the federal government. The law hasn’t been enforced in earnest in more than 40 years. In that time, independent retailers saw their market share plummet, falling from 51% of retail sales in 1977 to just 28% in 2017 (according to census data), hollowing out communities across the country.
Without the ban on price discrimination, massive retail chains like Walmart and Kroger set off a domino effect of consolidation among grocers, wholesalers and consumer goods companies all trying to get bigger to keep from getting squeezed.
Unchecked price discrimination gave rise to monopoly power across the food industry.
The harms price discrimination can inflict go well beyond food deserts. The moment pandemic-era supply chain disruptions gave monopoly retailers and their suppliers the cover they needed to hike prices and pad their profits, they took it. Profits for big grocery chains and food manufacturers have been inflated ever since. Rampant price discrimination snuffed out many of the independent stores that could have provided the competition needed to put a check on high prices.
For those that remain, like the Farm Fresh store that anchors the Shockoe Bottom neighborhood in Richmond, the same price discrimination handcuffs their ability to fairly compete and tamp down the big chains’ prices. Farm Fresh and the other
Virginia stores owned by Neighborhood Grocery Holdings — Crozet Market in Crozet and Market Street Market in Charlottesville — often can’t get the same deals that the Walmarts and Krogers of the retail world demand from their suppliers. That’s true even though the stores often have access to a major wholesaler that can buy by the truckload, the same as the big chain stores.
Farm Fresh competes on prices, quality and service wherever it can, says co-owner Raphael Strumlauf, but he stresses there are items that he can’t get or offer at competitive prices because the big retailers are getting away with tilting the playing field. Strumlauf says of the Robinson-Patman Act: “Simply put, if the law was enforced, we could offer lower prices.”
Reinvigorating enforcement of the law appears close. Enforcers at the Federal Trade Commission have voiced their support for kickstarting price discrimination actions. Both Republican and Democratic members of Congress have expressed concern about how letting these kinds of anticompetitive tactics go unchecked is harming local grocers and other Main Street businesses.
But more needs to be done. Independent grocers deserve a fair playing field. The power of Walmart and the dollar store chains to bully their suppliers is widely known and extensively documented. So is the effect on independent retailers and the way that pressure can catalyze food deserts. If stores like Farm Fresh are going to continue selling fresh food to neighbors — and make prices low for shoppers — the FTC needs to revive the Robinson-Patman Act. There’s no time to waste.