FTC launches inquiry into grocery supply-chain disruptions

The Federal Trade Commission (FTC) has ordered nine large grocery retailers, distributors and manufacturers to provide detailed information to help the agency address national supply-chain disruptions that have led to empty shelves and higher prices for consumers.

In announcing the inquiry yesterday, the FTC said it’s sending special orders to Walmart, Amazon, The Kroger Co., C&S Wholesale Grocers, Associated Wholesale Grocers, McLane Co., Procter & Gamble Co., Tyson Foods and The Kraft Heinz Co.. Besides identifying potential causes behind supply shortages, the study aims to find out more about their impact on the U.S. economy, including whether disruptions are driving specific bottlenecks, shortfalls, anticompetitive practices or consumer price hikes.

"Supply chain disruptions are upending the provision and delivery of a wide array of goods." — Lina Khan, Federal Trade Commission chair (Photo courtesy of FTC)

The orders — specific to retailers, wholesalers and manufacturers — are being issued under Section 6(b) of the FTC Act, which authorizes the commission to conduct wide-ranging studies without a specific law enforcement purpose. The commission voted 4-0 to approve issuance of the special orders.

“Supply chain disruptions are upending the provision and delivery of a wide array of goods, ranging from computer chips and medicines to meat and lumber. I am hopeful the FTC’s new 6(b) study will shed light on market conditions and business practices that may have worsened these disruptions or led to asymmetric effects,” FTC Chair Lina Khan said in a statement. “The FTC has a long history of pursuing market studies to deepen our understanding of economic conditions and business conduct, and we should continue to make nimble and timely use of these information-gathering tools and authorities.”

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Companies have 45 days from the date they receive the orders to respond, according to the FTC. The orders require the companies to detail key factors affecting their ability to obtain, transport and distribute their products; the impact of the disruptions in terms of delayed and canceled orders, increased costs and prices; the products, suppliers and inputs most affected; the steps they’re taking to mitigate disruptions; and how they allocate products among stores when supplies are short.

"This study is a key first step in promoting competition in the food supply chain." — Chris Jones, National Grocers Association (Photo courtesy of NGA)

The FTC said it’s also requiring the companies to provide internal documents on supply chain disruptions, including strategies related to supply chains; pricing; marketing and promotions; costs, profit margins and sales volumes; selection of suppliers and brands; and market shares. The commission, too, is requesting voluntary comments from retailers, distributors and manufacturers on how supply chain issues are affecting competition in consumer goods markets.

Related:NGA speaks out on supply chain challenges before House Agriculture Committee

On Tuesday, the National Grocers Association (NGA), which represents the independent supermarket sector, welcomed the FTC’s inquiry, noting that the study will flag supply-related competitive imbalances in the grocery industry.

“This study is a key first step in promoting competition in the food supply chain, and we were pleased to see the FTC move forward with a unanimous vote,” stated Chris Jones, senior vice president of government relations and counsel at NGA. “It will shine a light on what our members already know: that dominant grocery power buyers are using their size to demand better terms, better prices and better products from suppliers, leaving their competitors and American consumers to pay the bill. These actions leave independent grocers short-handed on key products their customers need and force small, independent grocers and their customers to bear a disproportionate burden of surging food price inflation during supply chain crunches.”

The NGA urged the FTC to undertake a supply chain study in a white paper in March as well as in a statement presented at an open FTC hearing in July. And in October, NGA teamed up with other independent business associations to form the Main Street Competition Coalition, which calls on federal regulators to crack down on anticompetitive tactics by large companies in various industry sectors, from farming to pharmacies. And at an open meeting earlier this month, independent grocery stores owners testified to the commission on the impact of unfair tactics by power buyers.

“We look forward to helping the commission get to the truth so that it can soon rein in the destructive anticompetitive tactics that have been ignored by federal agencies for decades,” Jones added. “The results of the study will have consequences for not only the grocery industry but the communities that so often rely on Main Street grocers for fresh produce, fair prices and good jobs.”