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Alleged “Price Gouging” Becoming a Political Issue

08/20/2024

Food price inflation that has in recent months steadily declined is now a rallying cry by politicians leading up to the November Election.  Data released on August 14th by the Bureau of Labor Statistics showed a 2.9 percent annual increase in inflation for July 2024.  Food at home was up 1.1 percent year-over-year although the category of “meat, fish and poultry” was collectively up 3.0 percent.  In contrast, food away from home was up 2.8 percent from July 2023 with QSRs leading at 4.3 percent compared to full-service restaurants at 3.8 percent.

 

It appears that the Federal Trade Commission and the Department of Justice have collaborated in making a case for the alleged overpricing of food. The activist FTC Chair, Ms. Lina Khan, maintains that high-food prices at supermarkets are (or were) a source of consumer complaints. In contrast a review of quarterly reports posted by the major food retailers demonstrates net margins ranging from 1 to 3 percent, obviously inconsistent with upward manipulation of prices.

 

 

Unfortunately, fluctuation in egg prices with a recent substantial rise has focused unwanted scrutiny on our industry.  Politicians and federal regulators seem to forget the weeks of  $0.70 to $1.00 wholesale prices with producers underwater for months on end.

 

The ad hoc FTC and DOJ group are considering legislation relating to alleged price-gouging although it would appear from federal economic data that the inflation horse has long since bolted from the stable.

 

Chairperson Khan stated, “We have to use the full extent of our reviews to stop any corporate law-breaking that inflates costs for American families.”  She added, “This is essential work that will help ensure that Americans can be free from economic coercion and indignities in the marketplace.”

 

Currently, the FTC opposes the merger of the Kroger Company and Albertsons Corporation on the grounds that it would diminish competition and ultimately raise prices. This is despite the assertion by Kroger that they intend reducing prices albeit over the short term. Recent history has shown that mergers, especially when competition is reduced through oligopoly can result in higher prices and inconvenience especially in rural areas and in food deserts.

 

The decision by Kroger and other food retailers to install electronic shelf-pricing as a convenience factor suggests an intent to introduce surge pricing. Even if this is not the motivator the initiative represents extremely bad optics and timing.  With existing electronic scanning at checkout using barcoding, surge pricing is probably a de facto tactic during peak shopping periods, especially over weekends.