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A Legislative Proposal Threatens to Raise Grocery Bills: Unpacking the Implications

In a notable move last week, a group of senators and House members, including prominent figures like Senators Elizabeth Warren and Bernie Sanders, along with Representative Alexandria Ocasio-Cortez, reached out to the Federal Trade Commission (FTC). Their appeal? To encourage the antitrust agency to dust off the Robinson-Patman Act—an anti-price discrimination statute from 1937—and apply its provisions to promote “fair competition” within the food industry. At first glance, the intent seems noble, aimed at leveling the playing field between the giant retail chains and the smaller, independent grocery stores that struggle to negotiate favorable terms with suppliers. However, this push to enforce an old law might inadvertently make your weekly grocery shopping more expensive.

The heart of the matter lies in a recent FTC report, which the legislators referenced to highlight the issue of elevated prices and profits among a handful of grocery chains during and post-pandemic. They suggest that these companies exploited supply chain disruptions to boost their prices unfairly. Yet, the report itself is cautious, clarifying that it doesn’t conclusively indicate antitrust violations or a broad pattern of anticompetitive behavior within the industry. So, could reviving the Robinson-Patman Act truly be the solution to high grocery prices, or might it exacerbate the problem?

Understanding the Robinson-Patman Act is key to grasping the potential consequences of its enforcement. Enacted when the landscape of grocery retail was vastly different, the law aimed to protect smaller businesses from the competitive pressures of larger chains, which could secure exclusive discounts and better trading terms due to their size and market dominance. However, the law focuses on protecting businesses rather than promoting competition or consumer interests. The potential for lawsuits under this act could discourage suppliers and retailers from negotiating deals that ultimately lower prices for consumers.

Moreover, while the act’s enforcement might seem to offer smaller retailers a chance to secure supplies at lower costs, it doesn’t necessarily promise reduced prices across the board. Economic analyses suggest that price differentiation encourages retailers to compete more fiercely, adopting efficient practices or offering promotions that benefit consumers. The majority of Americans, who shop at large retail chains, could find themselves facing higher prices due to increased costs associated with compliance or evasion of the Robinson-Patman Act’s stipulations.

This isn’t just theoretical. The bipartisan Antitrust Modernization Commission in 2007 acknowledged that the rise of larger grocery chains, with their economies of scale, has benefited consumers through lower prices. The commission observed that suppliers often circumvented the act’s provisions by tweaking products slightly to justify price differences, diverting resources that could otherwise improve consumer offerings. Given these considerations, the commission recommended repealing the act, a stance that antitrust enforcement agencies have largely adopted since the 1990s due to its anti-consumer implications.

Ironically, the very small businesses the Robinson-Patman Act seeks to protect could suffer the most from its enforcement. Historical data shows that during periods of active enforcement, many small and medium-sized enterprises bore the brunt of complaints and litigation costs, disproportionately affecting their operations relative to larger firms.

The drive to reinvigorate the Robinson-Patman Act enforcement comes at a time when American consumers and businesses alike grapple with inflation and regulatory burdens. While the intent behind this legislative push may stem from a desire to ensure fair competition and protect consumers, the likely outcome—higher grocery bills for the average American—suggests a need for a more nuanced approach. Addressing the root causes of inflation, such as reckless government spending and regulatory overreach, alongside fostering a competitive market environment, might offer a more effective solution to keeping our grocery bills in check.