FTC launches inquiry into supply chain disruptions

(Federal Trade Commission )

Seeking to determine if dominant retailers have used business practices that may have worsened supply chain disruptions, the Federal Trade Commission is undertaking a fact-finding study that will put the focus on the biggest food industry players.

The Federal Trade Commission is ordering nine large retailers, wholesalers, and consumer good suppliers to provide detailed information that will help the FTC shed light on the causes behind ongoing supply chain disruptions and how these disruptions are causing serious and ongoing hardships for consumers and harming competition in the U.S. economy.

The FTC said it is issuing the orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose. The orders are being sent to Walmart Inc., Amazon.com, Inc., Kroger Co., C&S Wholesale Grocers, Inc., Associated Wholesale Grocers, Inc., McLane Co, Inc. Procter & Gamble Co., Tyson Foods, Inc., and Kraft Heinz Co. The companies will have 45 days from the date they received the order to respond, according to the FTC.
“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,” Chair Lina M. Khan said in a news release. “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.”

Chris Jones, senior vice president of government relations and counsel for the National Grocers Association, said in a statement called the FTC move a "key first step" in promoting competition in the food supply chain.

"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," Jones said in the statement. "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."

Jones said that the NGA looks 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."

"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," he said in the statement.


Study goals

In addition to better understanding the reasons behind the disruptions, the FTC said study will examine whether supply chain disruptions are leading to specific bottlenecks, shortages, anticompetitive practices, or contributing to rising consumer prices.

The FTC said the orders require the companies to detail the primary factors disrupting their ability to obtain, transport and distribute their products; the impact these disruptions are having in terms of delayed and canceled orders, increased costs and prices; the products, suppliers and inputs most affected; and the steps the companies are taking to alleviate disruptions; and how they allocate products among their stores when they are in short supply.

The FTC said it also is requiring the companies to provide internal documents regarding the 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.

In addition, the agency is soliciting voluntary comments from retailers, consumer goods suppliers, wholesalers, and consumers regarding their views on how supply chain issues are affecting competition in consumer goods markets. These comments provide an opportunity for market participants to surface additional issues and examples of how supply chain disruptions are affecting competition.

The Commission vote to approve issuing the Special Orders was 4-0.
 

 

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