WASHINGTON (FNS) -- Two House members have appealed to Attorney General Janet Reno to conduct an antitrust investigation into pricing policies of the four biggest cereal manufacturers.
"We are paying caviar prices for corn flakes quality," Rep. Charles Schumer, D-N.Y., said during a Capitol Hill press conference. "The big question is, why? The answer is simple: huge profits, ridiculous advertising budgets and a market in which consumers are left without a voice."
Schumer, along with Rep. Sam Gejdenson, D-Conn., charged that General Mills, Minneapolis; Kellogg Co., Battle Creek, Mich.; Quaker Oats, Chicago, and Post Co., White Plains, N.Y., appear to collaborate in setting prices since the same-sized box of cereal by the different manufacturers often costs the same. The four manufacturers control 85% of the market.
A report prepared by Gejdenson and Schumer concluded that the price of cereal has increased 90% since 1983 and that 55% of the price of a box of cereal pays for marketing and profits.
Schumer and Gejdenson also criticized retailers who, they said, display brand cereal on prime shelf space, while relegating private-label or generic brands to ankle-level shelving or the end of the aisle.
Grocery Manufacturers of America, Washington disputed the congressmen's charges.
Jeffrey Nedelman, vice president of communications and strategic planning for GMA, said in a statement that from 1989 to 1993 the average coupon-adjusted ready-to-eat cereal prices paid by consumers fell relative to the Consumer Price Index. During that time, ready-to-eat cereal prices net of coupons increased 6.6%, while the food-at-home CPI for all items rose 16.5%.
Nedelman also pointed to a recent U.S. District Court ruling in response to a lawsuit filed by the Attorney General of New York against cereal manufacturers for alleged anticompetitive pricing policies.
Judge Kimba Wood ruled on Feb. 22 that "the combination of ready-to-eat cereals' heterogeneity and the multiple forms competition takes renders anticompetitive coordinated effects difficult and unlikely."