While households face higher food prices, businesses are collecting more profits. Biden has started working on this. He can and must go further.
Editor's note: A version of this article originally appeared previously on the Food & Water Action (our affiliated organization) website.
In this month's State of the Union address, President Joe Biden spoke about what most people in the United States are currently facing: going to the grocery store is more expensive than ever. reason? Corporate greed.
“Too many companies are raising prices to inflate profits, charging more and more for lower and lower prices,” he said.
We couldn't agree more. Days before his State of the Union address, he found that from 2020 to 2024, the cost of supporting a family of four increased by 2.5 times the rate of inflation.
Meanwhile, corporate profits grew five times faster than inflation from 2020 to 2022, with some hitting record highs. Additionally, a recent report from the Biden administration shows how large companies have benefited from worsening supply chain issues that have driven up prices during the pandemic.
This trend has been made possible by lax antitrust enforcement, which has allowed the growth of major companies. And as it grows, so does its power. Fortunately, we know how to approach this problem, and so does Biden.
How corporate consolidation leads to price increases
First, let's look at how corporate consolidation works in the American economy. A market is said to be “consolidated” when a few very large companies dominate an entire sector. They do this by acquiring other companies (acquisitions) or merging with other companies (mergers).
Consolidation gives these giant companies the ability to dictate what happens in the market, from prices to working conditions. As the President himself said, “Grocery stores in integrated markets charge higher prices because there's nowhere else to shop.” That's market power.
And companies are accumulating it throughout our food system. Several giant companies dominate markets such as dairy products, processed foods, seeds, and grocery stores.
Previous governments have been unable to stop this trend. Decades ago, the United States took integration seriously, but recent administrations have sided with businesses over families. They have been unable to stop the mergers and acquisitions and unfair practices that large corporations use to solidify their governance. As a result, food prices have soared while CEOs and shareholders have reaped unprecedented profits.
Consolidation brings big gains for some companies, but big losses for other companies.
Food system integration affects more than just prices. It also damages the entire local economy. For example, a large grocery store may adopt cost-cutting measures that make it impossible for smaller stores to compete. Small and medium-sized businesses shutter their doors. And since big-box stores are the only option in town, they can raise prices again. And that's exactly what they're doing.
Consolidation and increasing market power also give companies more leverage to pay lower wages, while top companies hoard profits for themselves. For example, Walmart, the nation's largest grocery chain, paid its CEO $25 million in 2023. That's 933 times the median employee wage, which is also below the poverty line for a family of four. At the same time, the grocery store giant saw its profits increase by $163 million from 2022 to 2023, bringing the total to more than $13.6 billion.
Furthermore, market power allows companies to escape harmful cost-cutting practices, such as poor fertilizer management in factory farms, which pollute communities with waste. Such actions have a direct negative impact on our climate, environment and public health.
Market power also helps companies avoid shady tactics such as charging the same price for fewer products. This “shrinkflation” is increasing the amount of money we spend on everyday necessities like food, soap, and toilet paper.
The bigger and more powerful a company is, the more it can evade accountability for its actions and influence policymakers by spending millions of dollars lobbying to move policies in their favor. You will be able to give
Biden is fundamentally fighting rising food prices.
We have an antitrust agency whose purpose is to suppress corporate consolidation. For example, the Federal Trade Commission (FTC) and the Department of Justice's Antitrust Division (DOJ) are supposed to evaluate proposed mergers and intervene if they pose a threat to the market. There are also antitrust laws, such as the Packers and Stockyards Act, which aim to ensure fair and competitive markets in the meat industry.
However, antitrust enforcement was lax until Biden took office. The president took this action to counter market power not seen in decades.
His 2021 executive order began tackling monopolies in all sectors of the economy, especially food and agriculture. It included 70 actions to promote competition, including directing the Department of Agriculture to enact regulations that would breathe new life into the Packers and Stockyards Act. Two of these rules have been finalized so far.
The executive order also urged the FTC and Department of Justice to revise their merger guidelines. These detail how these institutions assess the risks of a merger and decide whether to challenge a merger. (Food & Water Watch submitted comments with recommendations to strengthen guidelines against harmful mergers.)
And last December, the Biden administration set a record for merger challenges. The FTC and Justice Department have filed the most challenges since the U.S. began requiring antitrust reviews before mergers nearly 50 years ago.
Now, in March, the president announced a new strike force to combat “unfair and illegal corporate pricing.” These are exactly the kinds of actions we need to stand up to corporations and put American families first.
The Next Big Battle: The Grocery Megamerger from Hell
And more grocery store consolidation is on the horizon. In 2022, grocery giant Kroger announced plans to acquire competitor Albertsons. These two companies are the second and fourth largest grocery stores in the country, respectively.
The $24.6 billion deal would be a gold mine for the CEOs and owners of both companies, cementing Kroger's position near the top of the grocery chain.
But thanks to the work of groups like Food & Water Watch, Biden's FTC realized how harmful the merger would be. The company announced in February that it would file a lawsuit to block the acquisition, with a trial scheduled for August. This is a welcome step in stopping this disastrous mega-merger, and further similar steps are needed to curb the growth of market power.
Mr. Biden can and should finalize a third rule strengthening the Packers and Stockyards Act. He must also continue to oppose mergers in the agriculture and food sector, such as Kroger-Albertsons.
At the same time, Food & Water Watch will continue to work to expose the truth behind rising prices and all other failures in our food system. We expose corporate lies and excuses and shine a light on their tactics to profit at the expense of others. We are fighting for a fair food system necessary to ensure healthy, safe and affordable food for all.
We help businesses solve their problems and share the facts they need to fight for a livable future.
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