    [Senate Hearing 118-556]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-556

    PROTECTING CONSUMERS' POCKETBOOKS: LOWERING FOOD PRICES AND COMBATTING
                   CORPORATE PRICE GOUGING AND CONSOLIDATION

    =======================================================================

                                    HEARING

                                   before the

                                SUBCOMMITTEE ON
                                ECONOMIC POLICY

                                     of the

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

     EXAMINING LOWERING FOOD PRICES AND COMBATTING CORPORATE PRICE GOUGING
                               AND CONSOLIDATION

                                   __________

                                  MAY 22, 2024

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https: //www.govinfo.gov/

                                       _______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    58-529 PDF                   WASHINGTON : 2025

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                           SHERROD BROWN, Ohio, Chair

    JACK REED, Rhode Island              TIM SCOTT, South Carolina
    ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
    JON TESTER, Montana                  MIKE ROUNDS, South Dakota
    MARK R. WARNER, Virginia             THOM TILLIS, North Carolina
    ELIZABETH WARREN, Massachusetts      JOHN KENNEDY, Louisiana
    CHRIS VAN HOLLEN, Maryland           BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                J.D. VANCE, Ohio
    RAPHAEL G. WARNOCK, Georgia          KATIE BOYD BRITT, Alabama
    JOHN FETTERMAN, Pennsylvania         KEVIN CRAMER, North Dakota
    LAPHONZA R. BUTLER, California       STEVE DAINES, Montana

                         Laura Swanson, Staff Director
                  Catherine Fuchs, Republican Policy Director
                          Cameron Ricker, Chief Clerk
                          Shelvin Simmons, IT Director
                           Pat Lally, Assistant Clerk

                                     ______

                        Subcommittee on Economic Policy

                     ELIZABETH WARREN, Massachusetts, Chair

                    JOHN KENNEDY, Louisiana, Ranking Member

    JACK REED, Rhode Island              MIKE ROUNDS, South Dakota
    ROBERT MENENDEZ, New Jersey          THOM TILLIS, North Carolina
    CHRIS VAN HOLLEN, Maryland           CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                STEVE DAINES, Montana
    JOHN FETTERMAN, Pennsylvania

                  Harleen Gambhir, Subcommittee Staff Director

              Wesley Davis, Republican Subcommittee Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------

                            WEDNESDAY, MAY 22, 2024

                                                                       Page

    Opening statement of Chair Warren................................     1

    Opening statements, comments, or prepared statements of:
        Senator Kennedy..............................................     3

                                   WITNESSES

    Lindsay Owens, Executive Director, Groundwork Collaborative......     5
        Prepared statement...........................................    28
    E.J. Antoni, Public Finance Economist, The Heritage Foundation...     7
        Prepared statement...........................................    33
        Responses to written questions of:
            Senator Kennedy..........................................    75
    Norbert J. Michel, Vice President and Director, Center for
      Monetary and Financial Alternatives, Cato Institute............     8
        Prepared statement...........................................    50
        Responses to written questions of:
            Senator Kennedy..........................................    76
    Joe Maxwell, Cofounder and Chief Strategy Officer, Farm Action...    10
        Prepared statement...........................................    58
    Alap Vora, Owner, Concord Market, New York City, Small Business
      Majority Network Member........................................    11
        Prepared statement...........................................    71

                                     (iii)

    PROTECTING CONSUMERS' POCKETBOOKS: LOWERING FOOD PRICES AND COMBATTING
                   CORPORATE PRICE GOUGING AND CONSOLIDATION

                                  ----------

                            WEDNESDAY, MAY 22, 2024

                                   U.S. Senate,
      Committee on Banking, Housing, and Urban Affairs,
                               Subcommittee on Economic Policy,
                                                        Washington, DC.
        The Committee met at 2:30 p.m., via Webex and in room 538,
    Dirksen Senate Office Building, Hon. Elizabeth Warren, Chair of
    the Subcommittee, presiding.

              OPENING STATEMENT OF CHAIR ELIZABETH WARREN

        Chair Warren. Good afternoon. This hearing will come to
    order. The American people are angry about rising costs. And
    they are right to be angry, especially in the grocery aisle.
        It is infuriating to go to the store week after week and
    see that a pound of chicken breasts that cost $5 last week was
    marked up to $6 this week or that that loaf of bread that was
    $2.99 last week now costs three-and-a-half bucks.
        It is even more frustrating to open a box of cereal and
    think, hmm, I could have sworn there were a whole lot more
    Cheerios and a lot less air in this box the last time I opened
    one up or to notice that a package of spaghetti that used to
    feed four or five people now appears only to be enough to feed
    three.
        High grocery prices and shrinkflation hurt seniors on fixed
    income, hurt college students struggling to get by, hurt
    working families all across this country, and that is why we
    are holding this hearing today.
        Grocery prices skyrocketed during the pandemic and in many
    cases, they have kept going up even though the pandemic is
    over. Supply chains have been restored. Food manufacturers'
    costs are going down. The millions of Americans who produce,
    package, and sell our food are now back at work.
        Food inflation has slowed over the past year but not nearly
    fast enough. In too many places, including in Boston, grocery
    prices continue to strain family budgets. So what exactly is
    going on? Why did grocery prices grow up so much, and why have
    they stayed so high?
        The answer is pretty obvious when you dig in on the
    numbers. Grocery prices are up because of good, old-fashioned
    corporate price gouging. And they can gouge consumers on prices
    because there is only a small number of companies controlling
    every level of the food chain.
        In plain English, giant grocery stores and massive food
    conglomerates are ripping people off. And they can get away
    with it because there is not enough competition to keep them in
    check. Four big companies, Walmart, Costco, Kroger, and Ahold,
    the corporate behemoths behind Hannaford, Giant, Food Lion, and
    Stop & Shop control over 70 percent of the grocery market in
    most major cities.
        Food producers are even more consolidated. A couple of big
    cereal manufacturers, Kellogg's and General Mills control
    nearly 60 percent of the market. A single company, Cal-Maine,
    controls about 20 percent of the egg market. Four corporations
    control 85 percent of the beef industry and 75 percent of the
    pork industry.
        Everything you see as you stroll down the grocery aisle,
    lettuce in Aisle 1, beer in Aisle 5, pretzels and potato chips
    in Aisle 9, ice cream in the frozen food aisle is dominated by
    a handful of Big Food producers.
        Now the pandemic gave these Big Food conglomerates an
    excuse to jack up prices on grocery staples beyond what was
    necessary to cover increases in their costs from inflation or
    from supply chain disruptions.
        And now we are past the market shock of the pandemic.
    Corporations' costs are coming down and their profits are
    rising. But because of the lack of competition, companies are
    keeping their prices high.
        Meanwhile conglomerates hit small farmers by charging sky
    high prices for fertilizer and seed and by locking farmers into
    unfair contracts that limit their ability to make a living off
    their own farms.
        As a result, Big Food is doing great. Kraft Heinz, which
    sells everything from Oreos to pasta sauce to coffee, increased
    its profits by 44 percent--oh, I read it wrong, increased its
    profits by 448 percent--it really is a staggering number--in
    2022.
        Cal-Maine, the largest egg producer in the United States,
    increased its profits by 718 percent. These are profit
    increases. And it is not simply supply and demand that is
    pushing up corporations' eye-popping profits. It is
    greedflation. Those big corporate profits accounted for more
    than half of the increase in food prices between 2020 and 2021.
    And that creates problems for families at the grocery store and
    then it reverberates throughout our Nation.
        For most of 2023, corporate profiteering accounted for more
    than half of all inflation economywide. The facts are clear.
    Massive corporate profits are a big reason why grocery prices
    have gone up and stayed up. But policymakers don't have to
    stand by and watch. We can actually do something about it. We
    can rein in these massive food companies and grocery stores and
    protect competition in order to lower prices.
        And new polling from Data for Progress shows that nearly 70
    percent of Americans, both Republicans and Democrats, support
    the U.S. Government doing more to regulate grocery stores and
    corporate food producers that raise prices to pad their
    profits.
        The Biden administration recognized early on and has taken
    major steps to fight Big Food greedflation and to help American
    families. Congress can help the Administration do even more.
        I appreciate our witnesses joining us here today to talk
    about how we can do that. I will now hand it over to Ranking
    Member Kennedy to deliver his opening statement.

               OPENING STATEMENT OF SENATOR JOHN KENNEDY

        Senator Kennedy. Thank you, Madam Chair. For the last 3
    years, the American people have been ravaged by inflation. That
    inflation, like all inflation, is manmade. That man's name is
    Joe Biden.
        Since President Biden has been President, the average
    electricity bill in America, the average, has gone up 27
    percent. Louisiana gasoline, I know every State is different,
    but Louisiana gasoline under President Biden is up 59 percent.
    Eggs are up 79 percent, bread 30 percent, coffee 30 percent,
    milk 15 percent under President Biden, ice cream, 26 percent.
    Housing in general is up 19 percent because of President
    Biden's inflation, clothing 12 percent, used cars and trucks 20
    percent, new cars 19 percent. Mortgage rates are up a
    staggering 160 percent.
        If you add it all up under President Biden, inflation in
    the last 3 years has been 20 percent in Louisiana and 19.2
    percent nationwide.
        Louisiana is not a wealthy State. The median household
    income in my State for a family of four is between $55,000 and
    $60,000 a year, mom, dad, two children. That's not a lot of
    money when you think about it. A working family, mom and dad
    both work. They both have to drive to work so they have car
    payments. They have a house note. They have to buy food.
    Sometimes they have to pay tuition for their children.
        As a result of President Biden's inflation, the average
    family in Louisiana is paying today an extra, an extra, $900 a
    month. That's almost $11,000 a year.
        Now I know that each of you makes more than $55,000 or
    $60,000 a year. But imagine that for a moment that you make
    $60,000 a year, and you are the provider for your family. And
    all of a sudden, you've got to find an extra $11,000 a year?
    Wow.
        You know, you max out your credit cards. You go through
    your savings. You spent all your stimi checks long ago.
    Inflation is gutting the American people like a fish. It has
    become a cancer on the American dream. And quite frankly,
    that's why President Biden is polling right up there with
    hemorrhoids.
        I mean, the American people can't sit down and explain to
    you the difference between disinflation and deflation. The
    American people, they don't read Aristotle every day. They just
    get up every day and go to work and obey the law and pay their
    taxes and try to do the right thing by their children and maybe
    save a little money for retirement.
        But they are really being hurt. Now why? Because President
    Biden has spent money like it was pondwater. It started with
    the American Rescue Plan, the Infrastructure Bill, the CHIPS
    Act, the Inflation Reduction Act. He has spent trillions and
    trillions and trillions of dollars, money that we had to
    borrow.
        Now unless you were playing frisbee in the quad during Econ
    101, you know whether you are Milton Friedman or John Maynard
    Keynes that when you spend this kind of money, you are going to
    have inflation.
        Dr. Jason Furman, who was a chief economic advisor to
    President Obama tried to tell President Biden, he said if you
    do this, you are going to have inflation. Former Harvard
    President Larry Summers said the same thing. You don't have to
    be Euclid to figure this out.
        We are all entitled to our opinions. That is the beauty of
    America. You know, you are not free if you can't say what you
    think, and you are not free if you can't express yourself.
        I do not believe that there is some nationwide conspiracy
    between and among small businesspeople, medium-sized
    businesspeople, large businesspeople who have conspired to
    raise these prices. I don't think most of these businesses
    wanted to have to raise these prices. They did have to, though,
    because their costs have gone up dramatically. And you don't
    have to look any further for the reason than 1600 Pennsylvania
    Avenue. And I think the evidence bears that out.
        I don't blame President Biden. I don't blame him for trying
    to get re-elected. I don't. OK? When I run again, I am going to
    try to get re-elected. I don't blame him for trying to blame
    inflation on somebody else. I get that. But the truth of the
    matter is he has blamed inflation on everything but murder
    hornets. And we still got time left. He may blame it on murder
    hornets.
        But the truth of the matter, it is his own economic
    policies, and his own economists tried to tell him this. And he
    wouldn't listen. And the American people are paying the
    consequences.
        They are going to have a say though this November. And
    everyone should vote, vote your conscience. If dead people can
    vote, you can too. Vote for the candidate of your choice. But I
    can tell you this. The only place you are going to find lower
    prices is in the voting booth. It's not going to change.
        Thank you, Madam Chair.
        Chair Warren. Thank you, Senator Kennedy. So now let's
    introduce our witnesses. First, I am pleased to introduce Dr.
    Lindsay Owens. Dr. Owens is the executive director of
    Groundwork Collaborative, a research organization focused on
    ensuring the economy works for all of us.
        She has advised multiple Members of Congress, including me,
    on economic policy. Thank you, Dr. Owens.
        Next, Dr. E.J. Antoni. Dr. Antoni is a research fellow in
    The Heritage Foundation's Grover M. Hermann Center for the
    Federal Budget. His research focuses on fiscal and monetary
    policy. Thank you for being here, Dr. Antoni.
        Dr. Norbert J. Michel, Dr. Michel is vice president and
    director of the Cato Institute's Center for Monetary and
    Financial Alternatives, where he specializes in issues
    pertaining to financial markets and monetary policy.
        Dr. Michel was most recently director for data analysis at
    The Heritage Foundation. Thank you, Dr. Michel for being with
    us.
        Joe Maxwell is the cofounder and chief strategy officer of
    Farm Action. He previously served as Missouri's lieutenant
    Governor and is a Missouri family farmer. Thank you for being
    with us today, Mr. Maxwell.
        And finally, we have one of those small businessowners that
    you were talking about, Senator Kennedy. Mr. Alap--am I saying
    it right?
        Mr. Vora. Alap.
        Chair Warren. Alap. Mr. Alap Vora is the owner of Concord
    Market, an independent grocery store in Brooklyn, New York. Mr.
    Vora opened Concord Market after graduating from George
    Washington University.
        His family has been opening and operating small businesses
    in New York City for nearly 50 years. Thank you for being with
    us today, Mr. Vora.
        So thank you to all of our witnesses. I am going to start
    out by turning to Dr. Owens for her opening statement. Dr.
    Owens, you are now recognized for 5 minutes.

      STATEMENT OF LINDSAY OWENS, EXECUTIVE DIRECTOR, GROUNDWORK
                             COLLABORATIVE

        Ms. Owens. Thank you. Chair Warren, Ranking Member Kennedy,
    Members of the Committee, thanks for inviting me to testify
    today. My name is Lindsay. I the executive director of the
    Groundwork Collaborative, a Washington, DC-based economic
    policy think tank.
        By a large margin, when Americans are asked which factors
    they look at to decide how the national economy is doing, they
    pick grocery prices. They do this for two reasons. First,
    nearly everyone buys groceries. Second, grocery prices are top
    of mind because they are particularly high right now. While
    prices overall have risen 19 percent in the last 3 years,
    grocery prices are up 25.
        Factors like climate change, international conflict, and
    disease in plant and animals have all contributed to food price
    increases.
        But grocery industry consolidation and the profiteering and
    price gouging it allows is another key driver. The grocery
    sector is very concentrated. Just four grocery retailers
    account for over a third of national grocery sales and Walmart,
    America's largest grocer, now singlehandedly captures nearly a
    quarter of all grocery dollars.
        This consolidation grants the remaining corporate giants
    the freedom to hike prices without fear of being undercut by
    the competition. In areas with fewer grocery stores, like rural
    areas and low-income ones, grocery price inflation runs above
    grocery inflation in places with more competition.
        Grocers and suppliers are also using new technologies to
    facilitate price hikes. Innovations in cloud computing, AI and
    surveillance targeting have enabled companies to collect reams
    of data on their competitors and their customers.
        They can use this data to collude on prices as we have seen
    with the meat packing data company Agri Stats. And as I lay out
    in my written testimony, my organization's review of public
    marketing materials by a new cottage industry of pricing data
    service providers shows that they are boasting about their
    ability to use data to help their clients hike prices higher,
    faster, and for longer. Those are quotes.
        Industry consolidation and technological advances have come
    together in the shadow of the pandemic, where inflation gave
    companies the cover they needed to execute their most mercenary
    and egregious pricing strategies.
        A recent report by the Federal Trade Commission found that
    some firms seem to have used rising costs as an opportunity to
    further hike prices to increase their profits, and that prices
    and profits remain elevated even as supply chain pressures have
    eased. These moves have contributed according to the CEA to a
    20 year high in grocery profit margins.
        Because of these shifts in the food and grocery sector,
    what used to be a fairly uneventful weekly trip to the grocery
    is now rife with tricks, traps, and outright land mines. A few
    recent examples.
        Walmart, America's largest grocer, recently settled a class
    action lawsuit alleging they have rigged the produce scales,
    inflating product weights for pork, seafood, and citrus.
        Food giant ConAgra has been caught swapping out oil for
    water in its popular Wishbone Italian salad dressing, a
    practice known as skimflation.
        Companies like grocery giant Albertsons are using AI and
    surveillance targeting to maximize price hikes and track
    closely their competitors' prices.
        Digital price tags are now becoming commonplace on the
    shelves at stores like Kroger, allowing grocers to raise prices
    more frequently and paving the way for the implementation of
    surge pricing in the future.
        Online grocers, more people are shopping online for their
    groceries, are using dark patterns and vast troves of data,
    including your own personal browsing and purchasing history, to
    determine the maximum price you are willing to pay for an item,
    a practice known as personalized pricing.
        So what can be done? The Biden-Harris administration has
    taken a number of steps, including challenging the Albertsons
    merger and suing Agri Stats. They have also helped families
    afford rising food costs by expanding nutrition assistance.
        But Congress has a role to play as well and should take up
    new legislation from Senator Casey to ban shrinkflation and
    broad-based anti-price gouging legislation like Senator
    Warren's Price Gouging Prevention Act of 2024 to ensure that
    firms are not profiting off of crises with excessive price
    hikes.
        The legislation can also stop price gouging further
    upstream, like collusion in the energy sector, which filters
    into higher food prices.
        High food costs are taking a toll on Americans,
    particularly low-income families. Food is a necessity not a
    luxury. And when grocery profiteering and price gouging are
    spiking food prices, Congress must act.
        American families can't afford to wait and see if the chair
    of the Federal Reserve manages to bring down prices. Dinner
    needs to be on the table tonight.
        Thank you. And I look forward to your questions.
        Chair Warren. Thank you, Dr. Owens.
        Dr. Antoni.

        STATEMENT OF E.J. ANTONI, PUBLIC FINANCE ECONOMIST, THE
                          HERITAGE FOUNDATION

        Mr. Antoni. Chair Warren, Ranking Member Kennedy, Members
    of the Subcommittee, thank you for the invitation to discuss
    with you today the cause of food price inflation and its impact
    on American families, particularly those in low-income
    households.
        I am a public finance economist and the Richard F. Aster
    fellow at The Heritage Foundation, where I research fiscal
    monetary policy with a particular focus on the Federal Reserve.
    I am also a senior fellow at the Committee to Unleash
    Prosperity.
        Since January of 2021, prices have risen across the
    American economy a cumulative 19.3 percent and food prices on
    average have risen 20.4 percent. These price increases have
    outpaced wage growth with the average American worker's weekly
    paycheck growing just 14.1 percent during this time but falling
    4.4 percent in inflation-adjusted terms.
        Despite that paycheck being about $150 larger, it buys
    about $50 less than it did in January 2021. That reduced
    purchasing power hits lower income families hardest in part
    because inflation changes consumer spending habits. As people
    switch to relatively inexpensive food to save money amidst ever
    rising prices, demand increases for those foodstuffs, which
    were disproportionately purchased by lower income families.
        That increased demand further drives up prices on top of
    the increase from inflation. Unprecedently large Federal
    deficits over the last 4 years financed by the Federal
    Reserve's purchase of Treasury securities increased the money
    supply by trillions of dollars, much faster than the increase
    in the real economy.
        That transferred wealth from the people to the Government
    and devalued the dollar at rates not seen in over 40 years.
    Consequently, it now takes more dollars to purchase the same
    products and services. This phenomenon is perhaps best
    explained if we remember that one of the functions of money is
    to serve as a measuring tool.
        If a yard stick were to shrink to just 30 inches, it would
    take 120 yards to cover the distance between end zones on a
    football field where it previously only took 100 yards. The
    field is not larger. The yard stick is smaller. This is
    precisely what we have observed over the last several years
    with inflation. Products and services are not worth more. The
    dollar is worth less. That fact is just as true for food as it
    is for everything else. Nevertheless people, particularly in
    the public sector, continue to create scapegoats for inflation,
    blaming anyone and anything except profligate Government
    spending.
        Businesses are a prime target in this regard with claims of
    corporate greed and so-called price gouging being rife in the
    current political environment. However, these claims are
    negated by empirical evidence.
        First, the idea that food price inflation is caused by
    corporate greed does not even pass the smell test. No one can
    explain why beginning in January 2021, corporations suddenly
    became greedier than at any point in the prior 40 years. But
    putting aside the faulty logic of such claims, the data simply
    do not support the assertion that corporate greed causes
    inflation.
        According to the Biden administration's own figures, prices
    paid by businesses and consumers alike have risen about 19
    percent since January of 2021. In fact, for nearly all that
    time, cumulative inflation for businesses was larger than
    cumulative inflation paid by consumers. In other words,
    businesses were effectively shielding consumers from cost
    increases. It has only been within the last several months that
    the total increase in consumer prices has caught up to the
    total increase paid by businesses.
        A close examination of corporate profits further dismantles
    the narrative that inflation is the result of corporate greed
    or so-called price gouging.
        In the last 3 years, corporate profits within the food
    industry have increased 13.9 percent on average but are down
    4.2 percent after adjusting for inflation. Therefore, corporate
    profits have only increased in the same sense that the average
    American's weekly paycheck has increased, which is to say in
    strictly nominal terms. What that paycheck can buy and what
    those corporate profits can buy has decreased since the
    beginning of 2021.
        The source of inflation is not businesses seeking higher
    profits or consumers seeking higher wages, things which are
    constant in the economy, rather the inflation, which American
    families have suffered under for the last several years, is the
    result of runaway Federal deficit spending, measured in the
    trillions of dollars and financed by the Federal Reserve's
    expansion of the money supply.
        Americans today are paying for those trillions of dollars
    in Government spending not only through explicit taxes like
    Federal income tax, but also through the hidden tax of
    inflation, including higher prices for food.
        Thank you kindly for your time, and I look forward to
    answering your questions.
        Chair Warren. Thank you, Dr. Antoni.
        Dr. Michel.

     STATEMENT OF NORBERT J. MICHEL, VICE PRESIDENT AND DIRECTOR,
     CENTER FOR MONETARY AND FINANCIAL ALTERNATIVES, CATO INSTITUTE

        Mr. Michel. Good afternoon, Chair Warren, Ranking Member
    Kennedy, and Members of the Committee. Thank you for the
    opportunity to testify today. My name is Robert Michel. I am
    vice president and director for the Center for Monetary and
    Financial Alternatives at the Cato Institute. The views that I
    express in this testimony, however, are my own and should not
    be construed as representing any official position of the Cato
    Institute.
        My testimony today argues that Congress should not have
    been surprised by abnormally high inflation in the wake of the
    COVID relief spending, and members should not waste their time
    searching for novel explanations of what happened.
        For most of the 20th Century and all of the 21st, modern
    fiscal policy has been predicated on stimulating aggregate
    demand with deficit financed Government spending. The idea has
    always been that this spending would put upward pressure on
    both prices and profits, thereby causing businesses to supply
    more goods and services to meet the increased demand, thereby
    reversing a slowdown. And it has always been understood that
    too much spending and/or severely constrained resources would
    result in inflation. And I think nobody serious thought on the
    economist side that inflation would be painless or easy to
    precisely control. And I want to make three additional points.
        First, the abnormal levels of inflation experienced in the
    wake of the COVID pandemic and the shutdowns were primarily
    caused by excessive fiscal policy accommodated by the Fed. With
    just one bill, Congress injected roughly three times more than
    the estimated amount needed to fill the economy's demand
    shortfall.
        In just the first quarter of 2021, per capita disposable
    personal income increased 13 percent, an artificial boost that
    was 10 times greater than average. And this injection occurred
    while many different segments of the economy still faced major
    supply constraints from COVID and the shutdowns.
        So it should surprise no one that inflation soon followed.
    People were given unusually large amounts of money to spend in
    markets that were still struggling to supply goods and
    services.
        My second point is that the month-to-month levels of
    inflation that the U.S. has experienced since June of 2022 have
    been well within the normal range for the entire post-World War
    II era. Between 1973 and 2019, the average monthly change for
    the CPI is .32 percent, and the change for food prices is
    virtually the same. Annualized, those rates are about 4
    percent. But as we know, following the COVID pandemic and the
    shutdowns, the U.S. experienced an unusually large spike in
    inflation. What most people forget though is that this increase
    came after a short bout of falling prices. The CPI actually
    declined in March, April, and May of 2020. Only then did
    inflation take off.
        And then from June of 2020 through June of 2022, the
    monthly change in the CPI was .57 percent, with nearly the same
    average change for food prices. These were annualized rates of
    more than 6 percent, rates not seen in the U.S. since the
    1970s.
        And because that spike was so high, even if inflation had
    quickly flattened out to rates of increase near zero for a full
    year, the annual rates of change would have remained above
    average for at least 1 year and in fact that's what happened.
    Those rates did stay elevated.
        But between July of 2022 and April of '24, the average
    month-to-month change for the overall CPI is just .27 percent.
    And that's below average for the post-World War II era.
        When considering the typical variation in the CPI, these
    rates are even well within the normal rates of change for the
    low inflation period that started in the U.S. in 1983. And if
    we look at only the most recent changes in food prices, we
    again see a normal trend. The most recent CPI release shows a
    change in food prices of zero for April of 2024.
        For the preceding 6 months, the rates were all within the
    typical range of food price increases during the entire post-
    World War II period and, again, considering the typical
    volatility, within the range seen for the entire post-1983
    period.
        Finally, causal explanations for inflation such as
    corporate greed, profiteering, price gouging, greedflation, and
    industry consolidation do not hold up for multiple reasons,
    with one of the most obvious problems being timing. We must
    believe, for example, that virtually all companies colluded and
    decided not to be greedy for decades, and then to be altruistic
    for several months, and then to be very greedy for nearly 2
    years, and then for the most recent 2 years to revert to being
    not so greedy. And that's why these explanations quickly fall
    apart for inflation.
        Thank you for your consideration. I am happy to answer any
    questions you may have.
        Chair Warren. Thank you, Dr. Michel.
        Mr. Maxwell.

    STATEMENT OF JOE MAXWELL, COFOUNDER AND CHIEF STRATEGY OFFICER,
                              FARM ACTION

        Mr. Maxwell. Five hundred and twelve thousand, a number I
    will always remember, the number of those of us who were
    raising hogs in America when I began farming. Today, there is
    less than 61,000. I have lived the negative impact that
    Government policies have had on competition.
        Chair Warren, Ranking Member Kennedy, Members of the
    Subcommittee, thank you for this opportunity to present my
    testimony on this critical issue consumers, farmers, and
    ranchers are facing.
        My testimony and submitted statement provide clear evidence
    of why Government must take action against the monopolistic
    corporations to combat corporate price gouging. By taking
    action retail grocery prices will be fair for America's
    consumers and farmers will thrive.
        Today, four corporations control 85 percent of beef
    processing, at least 67 percent pork processing, 60 percent
    poultry, 75 percent of the nitrogen fertilizer, two companies
    supply all of the potash for North America. Two seed companies
    account for 72 percent of corn and 66 percent of soybeans.
        In my submitted written statement, I referenced three
    cases, studies conducted by Farm Action demonstrating how
    dominant firms exercised opportunistic behavior to price gouge.
        In 2022, egg prices soared over 300 percent, pushing
    corporate profits up tenfold. For one corporation it went from
    $50 million gross margin to $500 million. The industry excused
    away price gouging blaming the avian flu and higher prices yet
    egg production drop less than 7 percent, and costs were up only
    19 percent.
        When no competitor increased production to curb the leading
    producers' excessive pricing, USDA noted the market had not
    responded as expected. A fire in a Kansas beef plant idled 6
    percent of processing capacity. Using the fire as an excuse the
    dominant firms were able to push down the price they paid
    farmers and ranchers and raised the price they charged grocers.
        The result was the largest recorded spread between what
    farmers were paid and what consumers had to pay. The beef
    industry had exercised opportunistic market behavior to extract
    excessive profits while killing 5,000 more head of cattle 3
    weeks following the fire than the 3 weeks prior to the fire.
        In the fall of 2021, fertilizer prices went up as much as
    210 percent excessively pushing company profits up. CF
    Industries reported a 530 percent margin increase while only
    reporting 120 percent cost increase. Nutrien reported as high
    as 680 percent margin increase and only a 51 percent increase
    in cost.
        Potash production capacity actually exceeded demand at the
    time, and one nitrogen producing company had curtailed
    production in 2020 because of excess supply. What was the basis
    for price gouging? Fertilizer companies base 50 percent of
    their pricing on how much farmers are paid for their
    commodities. Commodity prices had risen. They hiked the cost
    and shortage excuse to justify price gouging farmers out of
    their profits.
        In 2021 President Biden issued an Executive order on
    promoting competition in the American economy, pushing back
    against 40 years of Presidential precedents of letting
    corporations have their way in the market.
        DOJ and FTC have aggressively tackled consolidation with
    new acquisition and merger guidelines and legal actions. DOJ
    made history by invoking the Packers and Stockyard Act
    provisions to put an end to the payment scheme called the
    tournament system and 15 percent of the poultry market.
        USDA has made investments in local and regional processing
    to stimulate competition. Much is left to be done. Without
    directing Government procurement to secure USDA's investments
    in the markets, these investments will fail. Antitrust law
    enforcement is critical to putting a check on price gouging.
    The Chair's legislation, Senate Bill 3803, the Price Gouging
    Prevention Act provides FTC with the tools they need to address
    price gouging and opportunistic behavior.
        Most importantly USDA must issue and finalize rules that
    provide individual farmers and ranchers with the right to be
    protected by the Packers and Stockyards Act for an individual
    harm on their individual operation. Dominant food and
    agriculture firms are exhibiting opportunistic behavior that
    result in price gouging.
        We call on the Government to free itself from the undue
    influence of corporate special interest and own its role as
    safeguarding the market accountability and competitiveness in
    the food and agriculture markets, taking bold actions against
    monopolistic corporations will free the markets, giving
    consumers fair prices and farmers opportunities to thrive.
        Thank you very much for allowing me to be here.
        Chair Warren. And thank you, Mr. Maxwell. I appreciate it.
        Mr. Vora.

     STATEMENT OF ALAP VORA, OWNER, CONCORD MARKET, NEW YORK CITY,
                 SMALL BUSINESS MAJORITY NETWORK MEMBER

        Mr. Vora. Chair Warren, Ranking Member Kennedy, and Members
    of the Subcommittee, thank you for the opportunity to speak
    about the impact of anticompetitive behavior impacting
    America's grocery prices and food prices.
        My name is Alap Vora. My family owns Concord Market in
    Brooklyn, New York. Concord Market has been a family owned
    neighborhood grocer since 2009 and in the 15 years of business,
    we faced snowstorms, blackouts, protests, global pandemics and
    have found a way to stay open every single day for our
    community.
        Our late father, Ashok Victor Vora, who started our family
    business over 50 years ago, taught us the importance of being
    job creators and how to be an integral part of the communities
    that we serve, a personal approach that bigger box stores
    simply don't take.
        Today I will discuss how consolidation, unexpected price
    hikes, and practices like shrinkflation continue to place
    disproportionate impacts on small businessowners like us.
        In recent years, we have seen price increases vary 20 to 30
    percent on everyday products on our shelves, milk, eggs, soda,
    snack items. And there isn't much that we can do about it
    because of our limited purchasing powers as a small business.
        We suspect these fluctuations are the result of our
    distributors taking advantage of the slightest market changes
    to upcharge us and our peers. Despite the fact that supply
    chain challenges have mostly eased since the darkest days of
    COVID, companies have passed on price increases to grocers to
    us like us still have not eased prices.
        Customers and employees of Concord Market have witnessed
    shrinkflation first-hand, watching canned goods and other shelf
    staple items fluctuate in size and substance while driving
    business away for us. Some distributors claim that they had to
    increase prices due to supply challenges, but when shortages
    are resolved, the distributors keep charging the same high
    prices or even more.
        While small business struggle to make payroll, major
    companies posted record profits in 2023. In fiscal year 2023,
    U.S. Foods reported a 19 percent growth in adjusted earnings
    while case volume growth only increased by 7.3 percent for
    independent businesses.
        Similarly, food giant Sysco raked in 33 percent more in the
    fourth quarter of 2023 while only increasing the food service
    volume by 2.3 percent.
        The cost of doing business under these circumstances is
    excruciating in cities that are struggling, especially like New
    York City, where we have already been dealing with other cost
    considerations like third-party delivery fees, utility costs,
    waste removal fees increasing, credit card processing fees
    constantly going up, congestion pricing, which is starting next
    month, and more. These factors make it nearly impossible for us
    to try to compete as a small business.
        As a pillar in our community, we attempt to offset price
    increases by offering various benefits to our customers through
    awards programs, student discounts. We waive delivery fees for
    the elderly in our community.
        These types of transactions are not profitable,
    necessarily, for our business, but it is the right thing to do.
    We fear that if things continue as they are without
    intervention from leaders like you, small businesses like us
    will be unable to continue to serve the customers we care about
    the most, our neighbors.
        While we bear responsibility for the factors in our
    immediate control, we need support from lawmakers to navigate
    highly consolidated markets and promote competition for the
    smallest businesses. Congress must act alongside Federal
    enforcement agencies to ensure that the major players in our
    economy are held accountable for their actions that result in
    rising prices that put a squeeze on small businesses and our
    customers.
        Congress can do this in multiple ways, but I would
    highlight three starting points. First, pass the Shrinkflation
    Prevention Act of 2024 to direct the FTC to create and enact
    regulations to establish shrinkflation as an unfair and
    deceptive action.
        Second, provide necessary funding to the FTC to enforce the
    Robinson-Patman Act of 1938, which protects small businesses
    from being driven out of the marketplace via discriminatory
    pricing practices.
        Last, continue to work with local businesses like us and
    organizations like the small business majority to shed light on
    the discriminatory practices that prevent small businesses from
    being able to provide competitive, affordable prices for the
    families and businesses that we serve.
        Thank you again for the opportunity to speak today, and I
    look forward to answering any questions you may have.
        Chair Warren. Thank you very much, Mr. Vora. I appreciate
    your testimony. I appreciate the testimony from all of you
    today.
        So I am going to start the questions. Look, there are a lot
    of things that can affect the price of groceries, weather, war,
    energy costs. But let's start with the argument that is right
    here in front of us.
        We have two witnesses who are saying it's just plain old
    inflation. And the reason the grocery prices are up is because
    inflation is up across the board.
        Dr. Owens, is that what the data tell you?
        Ms. Owens. Yes. There are absolutely a lot of different
    causes of the inflation we see right now. But one of them is
    absolutely industry consolidation. Look, when grocers gobble up
    the competition, the remaining larger giants can raise prices
    more aggressively. They just can because they don't have to
    worry about being undercut by the competition.
        And the research really shows this over and over again.
    Grocery inflation in rural areas where shoppers have fewer
    choices is running 2 percent ahead of grocery inflation
    elsewhere. Lower income neighborhoods where grocery stores are
    more reluctant to locate, you see higher prices there too.
        And you also see that grocery mergers in less competitive
    areas result in higher price increases than grocery mergers in
    more competitive areas. So over and over again, consolidation
    really is at the root of the food price inflation we are seeing
    today.
        Chair Warren. OK. So what you are really saying is you
    actually contest this. You can disaggregate the data, and you
    can look where there is more competition. And when there is
    more competition, what did you find out? What happened to
    prices?
        Ms. Owens. Lower prices.
        Chair Warren. Lower prices. And when there is less
    competition, that is when there is more concentration, I take
    it what you are getting is higher prices----
        Ms. Owens. Absolutely.
        Chair Warren. ----at that point. So let's keep talking
    about the pieces here. Concentration didn't just happen in 1
    day, and yet what we see is--we really do see--I think it was
    Dr. Antoni who said, you know, you see prices kind of going
    along, and you see them flatten out for a little bit, and then
    you see a real spike. How does concentration fit in with that?
        Ms. Owens. Yeah, I mean, I think there is kind of this old
    saw developing like companies didn't just greedy overnight. And
    look, nobody thinks that corporations weren't out to make a
    buck in 2020. Of course, they were. And they're out to make a
    buck in 2021, 2022, 2023, and in 2024.
        Corporations have been getting bigger, too. Consolidation
    is not new. But you really need means, motive, and opportunity
    to commit the perfect crime, right? The profit motive is
    constant. The means are that market power, that pricing power
    that you get from consolidation. But what changed is the
    opportunity. The opportunity to use inflation as cover to go
    bigger on price hikes. And that's really what we are seeing in
    this period.
        Chair Warren. So, you know, it's interesting you would
    raise that because one of the things I have pulled out here is
    how the CEOs of some of these giant grocery companies are
    making exactly this point. They don't make it in their
    commercials, of course, but they make it when they do earnings
    call so that, for example, General Mills owns over 100 brands
    of grocery store staples, Cheerios, Betty Crocker cake mixes,
    Progresso canned soups.
        When a General Mills executive got on the phone with his
    investors, he bragged about their price increases, and he makes
    the point that their profits went up not because they simply
    passed along costs because of inflation or because demand was
    up. Nope. He said it out loud. Profits are up because General
    Mills was getting smart about how they look at pricing, how
    they figured out to boost their price, and in their case, their
    profit margin, up to 16\1/2\ percent. Something they hadn't
    seen before.
        Executives at Hershey's made the same kind of point on an
    earnings call. In effect, inflation has been very, very good to
    these CEOs because it has provided them a form of protective
    coloration here, and they can go ahead and raise prices during
    this time.
        Now some commentators have said, no, no, we should welcome
    concentration because concentration will permit these grocery
    chains, for example, to exert downward pressure on prices
    because they can negotiate for better deals. Is that what the
    data shows us, Dr. Owens?
        Ms. Owens. Yeah, I mean, I think the argument that
    apologists for monopolies will make is that if you get an
    economy of scale, you can really drive down the cost per unit.
    But the problem we are trying to address today isn't that the
    cost per unit is down. It's that the cost they are charging
    consumers is up, right? And that is function of a market with
    no competition, that can't check the excessive markups that we
    are seeing in the food sector.
        Chair Warren. OK. And let's just take this over to Big Ag,
    if we can for a minute, Mr. Maxwell. What about Big Ag? You
    talked about the concentration and the numbers you cited were
    truly breathtaking. But what has happened to pricing with Big
    Ag?
        Mr. Maxwell. Well, the same thing that has just been
    testified about is happening in Big Ag. Big Ag, not long ago,
    as we know the Big 6 input suppliers became the Big 3. I mean,
    we don't even talk about a concentration ratio of four. There
    is three.
        With that kind of market power and that kind of tacit
    collusion, if there is only three of you, you can figure out
    pricing structure. And then what happens is they put in place
    structures and take opportunity whenever there is supply
    increases or there is a supply disruption. They quickly seize
    that moment with opportunistic behavior to run up prices.
        The mainstream press says, oh, there is a supply hiccup
    somewhere. Everybody starts talking about it. The next thing
    you know we farmers, we are going to pay a lot more money when
    we go get our supplies.
        So they do the same thing. They are very opportunistic.
    There is too few of them to have true competition. The market
    dynamics no longer work. They don't work because one of the
    dynamics is competition. When there is no competition, you
    don't have the--as USDA said in the egg case, the market didn't
    respond as we expected. No, it is not going to respond as you
    expected unless you consider the corporate concentration level
    within that market and the power that brings to gouge farmers
    or consumers.
        Chair Warren. So really powerful point, Mr. Maxwell. You
    know, what we are really talking about is embracing markets,
    wanting to see the power of markets. But to get those markets
    to function, you have got to actually have competition. And
    when you have enormous concentration, you don't have that
    competition.
        And I think what you are telling us is what we are seeing
    in food pricing right now is not just at the grocery store
    level, it is all the way up and down the chain, that it starts
    with seed and fertilizer, makes it all the way through the
    process and that is what is pushing up prices in this very
    concentrated industry.
        Thank you.
        Senator Kennedy.
        Senator Kennedy. Thank you, Madam Chair. Interesting
    questions.
        Mr. Maxwell, you are a farmer, is that right?
        Mr. Maxwell. Yes, Senator.
        Senator Kennedy. You used to be a farmer, or you still are?
        Mr. Maxwell. Senator, I grew up on a farm. I am a fourth
    generation Missouri farmer. My brother does most of the
    farming. I do this activity more. I do have degrees in ag
    economics and a law degree. But I still actively farm. I've got
    over 100 ewes on the farm. We have a hogs production. We are
    kind of the diversified traditional family farm type operation.
    We lease out some of the land to the neighbor boy.
        Senator Kennedy. Well, America was born on a farm. So thank
    you for that.
        Mr. Maxwell. Thank you, Senator.
        Senator Kennedy. Dr. Owens, you talked about in order to
    commit a crime, you have to have means, motive, and
    opportunity. Is that right?
        Ms. Owens. Yes, sir.
        Senator Kennedy. And you have suggested that it is not an
    optimal situation to have--well, strike that. Let me just get
    after it here. What crime are you accusing the four major food
    companies of?
        Ms. Owens. Price gouging, sir.
        Senator Kennedy. OK. Do you think they are price fixing?
        Ms. Owens. In some cases, absolutely.
        Senator Kennedy. OK. Name the four companies that you are
    accusing of price fixing.
        Ms. Owens. In the grocery sector or more broadly?
        Senator Kennedy. The four you have been talking about.
        Ms. Owens. I mean, so I think----
        Senator Kennedy. Name me every company that you think is
    price fixing in violation of the antitrust laws.
        Ms. Owens. I mean, so the most recent example that I think
    is worth considering is Agri Stats.
        Senator Kennedy. But if you don't mind, we will come back
    and do the examples. Name me the companies that you are
    accusing of price fixing.
        Ms. Owens. The first one is Agri Stats, which the
    Department of Justice has sued for price fixing.
        Senator Kennedy. Who else?
        Ms. Owens. In the grocery sector, you know, we have got
    Walmart. We have got Kroger.
        Senator Kennedy. Walmart is price fixing?
        Ms. Owens. No, I haven't accused them of price fixing.
        What I----
        Senator Kennedy. You just did.
        Ms. Owens. No, what I said is that they are able to
    expand----
        Senator Kennedy. No, you just did.
        Ms. Owens. ----their markups.
        Senator Kennedy. Let me start over here. I want you--price
    fixing is a serious crime, Doc. You can go to jail for that.
    And I want to be sure I understand your testimony. Who are you
    accusing of price fixing?
        Ms. Owens. Yeah, look, what my testimony clearly states is
    that----
        Senator Kennedy. No. Tell me which companies you are
    accusing of price fixing. You said some were price fixing. And
    I want to know which ones.
        Ms. Owens. Yeah, I mean, look----
        Senator Kennedy. I may report them myself.
        Ms. Owens. I mean, the company that is absolutely under
    investigation by the DOJ is Agri Stats.
        Senator Kennedy. Which ones are price fixing?
        Ms. Owens. I think the Federal Trade Commission and the
    Department of Justice should take a close at the four major
    grocers. They should take a close look at the four major meat
    packers.
        Senator Kennedy. But tell me----
        Ms. Owens. There are currently----
        Senator Kennedy. ----just answer my question.
        Ms. Owens. ----there is pending litigation----
        Senator Kennedy. ----which companies are price fixing?
        Ms. Owens. Tyson is a great example.
        Senator Kennedy. Who?
        Ms. Owens. Tyson, the large meat packer.
        Senator Kennedy. OK. Who else?
        Ms. Owens. The big four meat packers are all currently up
    there.
        Senator Kennedy. That's one. Who else?
        Ms. Owens. Like I said, looking at the four major grocers
    makes sense in this setting.
        Senator Kennedy. Which four are price fixing?
        Ms. Owens. Walmart, Albertson's----
        Senator Kennedy. Walmart is price fixing?
        Ms. Owens. ----Kroger. I didn't say they were. I said take
    a look.
        Senator Kennedy. You just said they were. You can't come
    here and say--and imply they are price fixing and then say they
    are price fixing. That is a serious allegation. You can be sued
    for defamation.
        Ms. Owens. I said we should take a close look at the----
        Senator Kennedy. Let me go back. I want to make sure I
    understand your testimony. Are you telling me, right here
    today, that you are accusing Walmart of price fixing?
        Ms. Owens. I am not personally accusing Walmart of price
    fixing. I am suggesting that----
        Senator Kennedy. Who are you accusing of price fixing?
    That's a serious charge.
        Ms. Owens. Neither my written testimony nor my oral
    testimony makes explicit legal claims.
        Senator Kennedy. So you are not accusing anybody of price
    fixing?
        Ms. Owens. No, I have pointed out the Department of Justice
    is currently looking at price fixing by Agri Stats.
        Senator Kennedy. Who are you accusing of price fixing? Why
    won't you answer my question? Who are you accusing of price
    fixing?
        Ms. Owens. I am pretty sure I have answered your question.
        Senator Kennedy. No, you haven't. Just tell me the names of
    the companies, one by one. What is the first company that you
    are accusing of price fixing?
        Ms. Owens. I have mentioned Agri Stats is currently----
        Senator Kennedy. Agri what?
        Ms. Owens. Agri Stats.
        Senator Kennedy. All right. Who is number two?
        Ms. Owens. I said Tyson is currently under investigation
    for price fixing.
        Senator Kennedy. Who is number three?
        Ms. Owens. I have also said I think the Department of
    Justice and the FTC should take a close look at the----
        Senator Kennedy. Who is number three?
        Ms. Owens. ----major grocery retailers.
        Senator Kennedy. Who is number three? Is Walmart price
    fixing?
        Ms. Owens. I think that they should take a look at the
    situation.
        Senator Kennedy. Is Walmart price fixing?
        Ms. Owens. They should take a look at it.
        Senator Kennedy. Is Walmart price fixing?
        Ms. Owens. I can't currently answer that question. I said
    that the Department of Justice----
        Senator Kennedy. You won't answer that question.
        Ms. Owens. No, I said----
        Senator Kennedy. How about Albertsons? Is Albertsons price
    fixing?
        Ms. Owens. The Department of Justice and the Federal Trade
    Commission----
        Senator Kennedy. Is Albertsons price fixing?
        Ms. Owens. ----should take a close look at that.
        Senator Kennedy. Is Albertsons price fixing?
        Ms. Owens. Again, I think the Department of Justice should
    take a close look----
        Senator Kennedy. You don't want to say?
        Ms. Owens. I mean, look. I am not at the FTC. I am not at
    the DOJ.
        Senator Kennedy. Yes, ma'am. But you've accused these
    companies----
        Ms. Owens. It's not my job to----
        Senator Kennedy. ----of breaking the law. And I think you
    ought to have the courage to say in front of God and country
    what you believe. Now you either do or you don't?
        Ms. Owens. Look, I believe that when companies get larger
    and larger----
        Senator Kennedy. I understand what you believe. But I----
        Ms. Owens. ----it gets easier and easier----
        Senator Kennedy. ----understand you are waffling. You are
    waffling----
        Ms. Owens. ----to----
        Senator Kennedy. ----like a catfish. OK?
        Ms. Owens. It's easy to coordinate price hikes when they
    are large----
        Senator Kennedy. Dr. Antoni? Dr. Antoni? I think it has
    been well-established that if we discovered life on Mars
    tomorrow, Joe Biden would send it money. To what extent has his
    deficit spending contributed to inflation? And do you know of
    any of these companies--would you care to accuse someone of a
    crime here today?
        And if anybody else would, just let me know. If somebody is
    price fixing, I want to know. I will report them myself. And I
    am going to want to see your evidence. Otherwise, you subject
    yourself to defamation. But let me go back to my original
    question. What was it? Mars? Was it Mars or Jupiter? I forgot.
    Has the amount of money that President Biden has insisted on
    spending contributed to inflation? Duh. What is your answer to
    that?
        Mr. Antoni. Well, Senator, regarding the price fixing, I
    have no evidence because there is no evidence so I can't
    provide that to you.
        But to answer the hypothetical on Mars, absolutely that
    would add to inflation. And yes, the deficit spending under
    this President, but really under any President, it doesn't
    matter that it is Joe Biden in particular in the White House
    doing it, any person who did--if any person did what he did, it
    would have the exact same effect, which is this massive run up
    in prices because again, it is not that things are more
    valuable. It is that the dollar is worth less. So it takes more
    dollars to buy exactly what you used to.
        And if you look at--again, the Biden administration's own
    data, these aren't my figures. These are figures from the Biden
    administration. They show that prices paid by businesses and
    prices paid by consumers have gone up almost exactly the same,
    about 19 percent during his tenure.
        And so this idea that somehow the prices that consumers,
    that you, I, that all of the people that you represent are
    paying are somehow the cause of anything other than costs
    simply being passed on to them, the data simply don't support
    that.
        Senator Kennedy. OK. How about you, Doc?
        Mr. Michel. No evidence. No, I am not accusing anyone of
    price fixing.
        Senator Kennedy. Are you a lawyer by chance?
        Mr. Michel. I'm sorry?
        Senator Kennedy. Are you a lawyer by chance?
        Mr. Michel. No, I am not. I am just an economist.
        Senator Kennedy. OK. What happens if you accuse somebody of
    price fixing, and they didn't do it?
        Mr. Michel. I probably don't want to be that person.
        Senator Kennedy. You got good insurance?
        Mr. Michel. No, I am not. I am not doing that.
        Senator Kennedy. OK. Go ahead.
        Mr. Michel. As far as the fiscal stimulus stuff, you know,
    that is a standard economic model. And you can go back and
    look. Multiple people, Olivier Blanchard is one. Some of the
    upper bound estimates on how big the shortfall in demand was
    after COVID and the shutdowns, one of the largest upper bound
    estimates that I have seen is about $680 billion. Just the
    COVID package of $1.9 trillion, that is already almost three
    times the size of that.
        Senator Kennedy. I have gone way over time. Thank you,
    Madam Chair.
        Chair Warren. That is all right. Do you want to go now?
        Senator Warnock. Sure.
        Chair Warren. All right.
        Senator Warnock. Let the record reflect that the senator
    from Louisiana is far more loquacious than a Baptist preacher.
        Chair Warren. And that is a high standard. Senator Warnock.
        Senator Warnock. Thank you so much, Madam Chair. A USDA
    study found that grocery store consolidation has increased
    significantly over the last three decades. When grocers
    consolidate, farmers have fewer options to sell their goods.
    And as a result of this, they have less negotiating power when
    it comes to securing contracts. So their hands are tied.
        I have had many conversations with farmers all across
    Georgia. It is a tough business. The margins are very narrow.
    These kinds of things make a big difference.
        And so in order to cut down on their bottom line, grocers
    often require farmers to fulfill larger and larger contracts at
    lower and lower and lower prices. And so it becomes a volume
    business. Small and mid-size farmers get squeezed from both
    sides because they can't produce the quantity required at the
    prices demanded by these big retailers. In short, farmers are
    forced to either get big or get out.
        Mr. Maxwell, you are a farmer. What pressures are you and
    your fellow farmers feeling right now because of this reality?
        Mr. Maxwell. Senator, you described the reality of market
    opportunity. We would suggest that in most instances, the
    market is dead, but the farmers become price takers. They no
    longer have the ability to recover their production of cost and
    far too often because of concentration, they are relying upon
    Government subsidies in order to make a profit at the end of
    the year.
        When Government increases those subsidies like reference
    pricing, then those companies like I testified earlier to
    simply set a higher price to the farmer because they know the
    farmer is going to receive more funds. They just go after it
    because there is no competition. So that is the reality that we
    are living in. Squeezed from both ends and trying to wiggle in
    the middle just so there can be the next generation on our
    farm.
        Senator Warnock. And we are seeing it in even large
    producers. I am a lover of Vidalia onions, down in Vidalia,
    Georgia. But large producers of well-known products like
    Vidalia onions are feeling the pressure. And this certainly
    starts with market consolidation as part of the issue, right?
        Mr. Maxwell. Yes, Senator. We visited with some of your
    Vidalia onion farmers in Georgia. And they are feeling the
    pressure. As they have to expand because there is not a market
    opportunity to move the onions into a market at the volume that
    they are currently producing. And so their choice, as you
    described earlier, is either to get bigger or get out, leaving
    many of those farmers, multigeneration farmers, burdened with
    the cost of the production they have had in the past and no
    market to move their onions to.
        Senator Warnock. Will decreased competition impact all the
    way down the food chain in a different sense of the word all
    the way down to the consumer?
        Mr. Maxwell. The concentration impacts the prices, the
    input prices to farmers who are consumers and then ultimately
    those prices move on into the stream, forcing the retail
    consumer, grocery retail consumer, to see higher prices in the
    grocery store.
        The odd thing is we look in the middle, the folks making
    the most money are those concentrated processors, meat
    processors, the JBSs, the Tysons, the Cargills, the processors
    that the Chair mentioned earlier this afternoon and ultimately
    the consumer pays the price at the grocery store retail shelf.
        Senator Warnock. So analysis of the change--I will go to a
    different subject or a related subject, analysis from the
    reinvestment fund finds nearly 1 million Georgians live in a
    community with limited access to a grocery store, 15 percent
    increase over the prior decade. And USDA has found this greater
    consolidation in rural--it is greater in rural counties than in
    larger markets. While rural communities are responsible for
    producing the food that feeds our country, rural residents are
    often some of the most food insecure, ironically, among us. And
    we know that people of color in rural areas are more likely to
    face hunger because of a lack of food access. In 2021, Black
    Americans in rural communities were 2.2 times more likely to
    face hunger than White Americans.
        Dr. Owens, because of a consolidated grocery industry, many
    rural Americans must travel farther to get to the grocery
    store, often with fewer nutritious and healthy options. How
    would more competition in the grocery sector benefit rural
    communities?
        Ms. Owens. Yeah, absolutely. Grocery inflation in rural
    areas is running above grocery inflation in other areas. So
    more competition and more access to more and different grocers
    in rural areas would absolutely help families get better deals
    at the grocery store.
        Senator Warnock. Thank you so much. I am sure we could say
    a lot more on the subject. But in the final analysis, corporate
    consolidation in the grocery sector is driving up prices and
    leaving Americans, particularly those in rural communities with
    fewer options than before. Ensuring healthy options exist for
    all Georgians regardless of where they live needs to be a
    priority of Congress, and it is something that I continue to
    work on. Thank you so much.
        Chair Warren. Thank you, Senator. Thank you. These are
    really powerful points, especially the part about keep those
    Vidalia onions coming. We are counting on you. We are counting
    on you on this.
        So I just got a couple of questions. I want to follow up on
    where we started out. Dr. Antoni, if I understand you, I think
    you are saying that the reason we are seeing high grocery
    prices is all Joe Biden's fault because he led Congress in the
    direction, or at least led the Democrats in the direction of
    doing things like investing in infrastructure and child care
    and helping us get over the pandemic.
        Is that kind of a rough statement? You said the model tells
    you. More money must be the reason the grocery prices are up.
    Is that right?
        Mr. Antoni. Partly, Senator, absolutely. Although I
    wouldn't put all the blame----
        Chair Warren. Everybody concedes that we have got a lot of
    different points going on.
        Mr. Antoni. Mm-hmm.
        Chair Warren. But I think I heard you say that that is the
    reason grocery prices are up so high. Am I wrong? Did I
    misunderstand you?
        Mr. Antoni. It is not just the spending that the President
    insisted upon. It is the spending that this Congress passed.
        Chair Warren. Oh, I am willing to put Congress in there. So
    it is what we have done--for example, like building roads and
    bridges and childcare and so on. So I just want to be clear
    about this. Does that mean that the CEO of Hershey's, when the
    Hershey's executive goes on the earnings call that he was lying
    when he said that actually they were able to, I think, more
    than offset inflation and higher manufacturing and overhead
    costs. In other words, it is what I call price gouging. They
    didn't just pass along costs. They loaded a whole lot more on
    top of that and that's why Hershey's was producing great for
    its investors. Was he lying? Should he have just said, look, I
    am just passing along what that Democratic Congress and that
    Democratic President did?
        Mr. Antoni. Senator, the comments you are referring to are
    not simply passing along current cost increases, but also
    passing along previous cost increases.
        Chair Warren. No, that is not what he says. He says that
    our pricing more than offset inflation and higher manufacturing
    and overhead costs. And I am asking you, was he lying?
        Mr. Antoni. Again, Senator, this is not just price
    increases that are happening today but that happened yesterday
    as well. This is why, if you look at figure 14 in my written
    testimony, you can clearly see that the prices paid by
    businesses, like Hershey's, spiked before the prices by
    consumers.
        Chair Warren. He clearly states he is not passing along
    costs. He didn't say costs just from today or costs from last
    week or costs from last month. He said I want you investors to
    understand Hershey's is a place to invest. And why? Because we
    have figured out how to increase our prices and our profits
    above the rate of inflation. That is what he is saying.
        So I am just saying, you have told me that the reason that
    prices are high when I go to buy those candy bars is because of
    Joe Biden and a Democratic Congress. So is the guy lying?
        Mr. Antoni. Again, Senator, the Biden administration's own
    data is very clear here.
        Chair Warren. I am not asking you about the Biden
    administration. I am asking you, is that guy lying?
        Mr. Antoni. Senator, frankly, you are completely
    mischaracterizing his statement.
        Chair Warren. You know you have a legal obligation--I am
    mischaracterizing the Hershey executive statement?
        Mr. Antoni. Yes.
        Chair Warren. Are you telling me I am reading this wrong
    when he says, more than offset inflation and higher
    manufacturing costs and overhead costs? I think the words speak
    for themselves.
        The same thing for General Mills. The same thing for CEO
    after CEO. So let me ask you one other. You said you have no
    evidence of price fixing. Does that mean you are sure none
    there is none occurring?
        Mr. Antoni. No, Senator. That is not what I said.
        Chair Warren. No. That is why I am asking. You said you
    have no evidence of there being price fixing. Do you believe
    there is no price fixing going on?
        Mr. Antoni. I have no reason to believe there is because I
    see no evidence for it.
        Chair Warren. You have seen nothing in any of these data
    that suggests that maybe those companies are colluding just a
    tiny little bit?
        Mr. Antoni. If there was any evidence for it----
        Chair Warren. You would be shocked.
        Mr. Antoni. ----I would love to see it presented to the
    public.
        Chair Warren. Good. Let's talk about some evidence
    presented to the public. Mr. Maxwell, do you know about a
    recent price fixing case in Big Ag, which is part of our food
    chain here?
        Mr. Maxwell. Yes, Senator, there have been multiple cases
    of price fixing in Big Ag.
        Chair Warren. And have they been successful?
        Mr. Maxwell. They have been successful. There is one
    pending that we really are thankful that DOJ brought, and that
    is the one that has already been referenced, and that is Agri
    Stats. It is an organization that was created in an effort to
    allow the major dominant firms in pork, poultry, and turkey to
    actually tacitly collude in order to set maximum price for
    maximum profit based upon their words. And DOJ is taking that
    on.
        Chair Warren. OK. And as I understand it, we have had
    successful prosecutions in Big Ag of price fixing, right? And,
    Dr. Owens, I think you were trying to talk about price fixing.
    Do you want to just say a big more about that?
        Ms. Owens. Sure. I think there are a number of things going
    on here. First, there is price fixing, which is absolutely
    illegal. And we do have cases at the Department of Justice.
        There is also price gouging. And in many cases that is
    perfectly legal, right, which is why we need your legislation,
    the Price Gouging Prevention Act of 2024. And there is also
    just plain old skimming, you know, juicing margins a little
    bit, charging a little more than you need to, passing on your
    rising costs and then gilding the lily a bit.
        There are a lot of different features we see here. But the
    point is all of them are easier in concentrated markets. All of
    them are easier if you don't have to look over your shoulder
    and worry you are going to get undercut by the competition.
        Chair Warren. OK. And that's the heart of this. It's all
    about concentration and competition. Thank you. Senator Reed.
        Senator Reed. Thank you, Madam Chairman. Mr. Maxwell, you
    discussed in your testimony the egg market in 2022. Can you
    further explain what happened in the egg market in 2022? If
    producers were only raising prices to cover costs and with some
    cost inflation, why did companies like Cal-Maine, for example,
    report tenfold increase in gross profits?
        Mr. Maxwell. Thank you, Senator. And we also thank you for
    your leadership at that time with getting letters out and
    calling for investigations as consumers were facing what we
    believe is clearly evidence of price gouging and price fixing
    as backed up by the United States Department of Agriculture
    when they said the market is not responding as anticipated.
        What happened was we have presented evidence in our written
    statement that clearly shows that because they had the
    opportunity to use cost increases and the avian flu, they
    seized the moment to increase prices far above what the
    increased inflationary cost of production was and the loss of
    production on laying hens. There was 7 percent loss of
    production on laying hens so 7 percent. A little less because
    hens, for whatever reason in 2022, laid more eggs per hen than
    normal so a little less than seven.
        Costs went up according to Cal-Maine, 19 percent. But they
    busted through with their margins up to 680 percent tenfold
    margins in their gross margins. Consumers faced a 300 percent
    increase in the price of eggs in the year 2022. It was higher
    by the time it all unwound.
        What we saw was that these dominant firms clearly were
    working together, giving a nod to each other. They didn't have
    to worry about the other one coming in to compete like a Rose
    Acres against Cal-Maine because everybody was making more money
    than they ever had before. They had the opportunity, and they
    were all together going to take all they could in that
    opportunity. And that is what happened with the price spiking
    on eggs.
        Senator Reed. Well, it might not be antitrust, but in the
    words of Phil Areeda, who was a professor, I think both of us
    in antitrust, it is conscious parallelism that they were
    looking and, hmm, they were bumping it up. I will bump it up,
    and we will all be happy, so. That is something that I think we
    have to be aware of and prepared to respond to.
        Dr. Owens, one of the good news stories here is the fact
    that the House passed by an overwhelming majority tax
    legislation that includes the child tax credit. It is hung up
    in the Senate, but we hope we can move it. And how would
    expanding the child tax credit help families with the higher
    grocery prices?
        Ms. Owens. Yeah, absolutely. I mean, I think we need a two
    tier and two track approach here. The first is we have
    absolutely got to get prices down. And the second is while we
    are working to get prices down, we have got to give families
    some breathing room.
        And I think there are a few different ways to do that. One
    of them is expanding nutrition assistance, which the Biden
    administration does and has done. But the other is absolutely
    the child tax credit. That is a great option for getting more
    cash in families' pockets, giving them a little bit more space
    to absorb the rising costs of necessities like groceries.
        And, you know, we saw with the expanded child tax credit a
    couple of years back that not only did sort of poverty decline
    but, you know, food insecurity did as well substantially.
        Senator Reed. Thank you very much. And, Mr. Vora, you are
    an independent grocer, and you are vulnerable to supplier
    markups. Your negotiating power is not as formidable as the big
    chains. And how have the prices that you pay for food products
    changed since 2019?
        Mr. Vora. Well, Senator, the prices obviously since the
    pandemic have increased for various reasons. But we are seeing
    this happen not just in 2019 and 2020, we are seeing it all the
    way up until today.
        And for smaller operators like us, every time there is a
    price increase, it is not very logical from us from a consumer
    behavior standpoint to constantly raise our prices because our
    costs have gone up.
        So we very rarely raise prices even though our prices are
    raised way more frequently. And especially you would think it
    is in some segments of the supermarket, but it's actually all
    throughout. It is with dairy, produce, meats, shelf staple
    items. It is all across the board that we see price changes.
        Senator Reed. And is that a reflection of the situation
    that there are not competitors out there that are--you said are
    trapped into one or two sellers. And they are consistently hot
    pricing their products higher?
        Mr. Vora. I think it is a function of us being--you know,
    the product from manufacturing all the way to retail, touching
    multiple people until it gets to us. We don't have a direct
    relationship with the General Mills of the world. If we are
    buying Pepsi or Coca-Cola, we are dealing with other small
    businesses who are not owners. They have their own margins.
        So oftentimes, even within our circle of businesses and our
    network, whether you are a pizzeria, whether you are a small
    grocer, whether you are a deli, you can buy the exact same
    product on the same block. You may be subject to three
    different prices. That is just the pricing schemes that a lot
    of these manufacturers or distributors have. And that also puts
    a tremendous amount of pressure on us to be conscious of the
    prices that we are buying things at.
        And that's just an additional responsibility to an already
    difficult segment for us. And as often people always say that
    small business is the backbone of this country, even though it
    is appreciated, we do need more resources to help us kind of
    support what we are trying to accomplish in each community.
        Senator Reed. Thank you very much. Thank you, Madam
    Chairman.
        Chair Warren. Thank you, Senator Reed. So I want to take a
    few minutes to focus on different ways that big food
    corporations use their size to take advantage of consumers. One
    is price gouging, which we have been talking about. Another is
    price fixing. Another is shrinkflation. Food companies quietly
    making the products just a little smaller but keeping the
    prices the same.
        Gatorade bottles went from 32 ounces to 28 ounces. A bag of
    Doritos went from 9.75 ounces to 9.25 ounces. Consumers'
    purchases get smaller while corporate profits get bigger.
        The problem has gotten so bad that France will soon require
    stores to put shrinkflation warning labels on products made
    smaller if they don't have a corresponding price cut.
        Now Mr. Vora, you own and operate a neighborhood grocery
    store, how has shrinkflation affected your business?
        Mr. Vora. It has taken a--I think it hurts the credibility
    of small businesses as the front line of what consumers see and
    who they interact with. We hear from them directly. And it is a
    surprise for them every time they come in to shop. You know,
    usually you would think that going to a place full of food and
    beverages is a pleasant and enjoyable experience. But now
    people have to have their head on a swivel. Not just consumers,
    but also small business because there is oftentimes, we are not
    aware of it. The package size has changed without our notice.
    There is no bulletin board or email or general place for us to
    be able to receive this information. And that creates even more
    of a frustrating experience for consumers.
        Chair Warren. All right. And so that is part of the
    problem. You see the shrinkflation. How about whether or not
    manufacturers, people who are supplying the Dorito chips and
    everything else, do they treat smaller stores like yours
    differently from how they treat the big stores?
        Mr. Vora. Yes, Senator, I believe they do strictly based on
    the pricing structure. If you look at some of the larger big
    box retailers and what they sell their products for, whether it
    is a Costco or a Sam's Club or whatever, they are paying--you
    know, consumers that shop there are paying almost the same, if
    not sometimes less, than the prices that we pay to get that
    exact same item at the wholesale level.
        There is certainly something that could be done to have a
    better streamlined communication with small businesses allowing
    us to have direct access to the products at a more affordable
    rate. It is really eliminating that retail grocer, and I don't
    think that is a place that we need to be. It is going to impact
    a lot of communities.
        Chair Warren. So concentration in the food industry is
    creating more concentration in the food industry. That is this
    handful of manufacturers that deliver--when they price
    discriminate, they make it harder to create more competition in
    the food chain.
        That kind of price discrimination obviously hurts small
    businesses. It also hurts consumers, who then end up traveling
    further to get their groceries because the manufacturers and
    distributors won't give a fair price to the local grocery
    stores. And who benefits? Once again, it is the biggest grocery
    stores and food companies because this lets them smother
    competition from stores like you.
        This is the reason--I particularly wanted to focus on this
    because it is why I am glad that the FTC is investigating
    potential violations of the Robinson-Patman Act which prohibits
    unjustified price discrimination in these circumstances.
        So it looks like we have got a whole bunch of things that
    are helping drive up the cost of food. We have got
    shrinkflation, price discrimination, price fixing. And these
    just scratch the surface of bad corporate behavior here. We
    haven't even talked about the junk fees that companies like
    DoorDash and UberEats add onto deliveries, sometimes doubling
    or even tripling order prices without explanation.
        We haven't talked about surge pricing tools that fast food
    chains like Wendy's threaten to use as a new way to squeeze
    every last dollar out of American's wallets.
        Big corporations are looking for every chance to take
    advantage of consumers, motive, means, and opportunity that
    they have at this moment in time. And all of those efforts add
    up to higher prices for consumers.
        Now the Biden administration has been pushing back. We have
    heard from Mr. Maxwell talking about how suits brought against
    Big Ag is at least giving some hope that you may break up some
    of this behavior and give farmers like you an opportunity and
    consumers an opportunity to do better here.
        The FTC is working hard to block mergers, so we don't see
    increased competition. The Biden administration has gone after
    junk fees. So we are getting a lot of action out of the
    Administration.
        I would argue it is also time for Congress to step up. I
    have introduced the Price Gouging Prevention Act, which would
    ban grossly excessive price increases. I have partnered with
    Senator Casey on the Shrinkflation Prevention Act, which would
    give the FTC and the States the tools to stop shrinkflation.
        So let me ask you, Dr. Owens, would passing Senator Casey's
    and my bills make a big difference in lowering prices for
    families?
        Ms. Owens. Yes, I think these are both great options.
    Senator Casey's bill, to make sure that shrinkflation is
    classified as the deceptive practice it surely is. I think it
    would give consumers a lot of relief.
        Look, you know, you shouldn't sort of have to haul your
    recycling with you to the grocery store to make sure you are
    getting the same sized product that you got last week.
        But I think your price gouging legislation is important
    because it is more broad-based. And so not only can it take on
    excessive price hikes in the grocery sector, it can also reach
    further up the food chain, things like energy prices, that are
    filtering through to food prices. And so I think, you know,
    broad-based price gouging legislation, really tackling
    excessive prices throughout the food chain in addition to the
    grocery sector is a critical next step.
        Chair Warren. All right. Thank you very much. I appreciate
    all of you being here today. I think it is clear that we have
    some major corporations in America that are pretty openly
    taking advantage of American consumers. And, in fact, they are
    pretty much saying so openly on their earnings calls when they
    talk to their investors.
        I appreciate that the Biden administration is using all of
    the tools available to it to be able to push back and bring
    down grocery prices. And I think it is time for Congress to
    step up and do our part.
        With that, I thank you all for being here, and this hearing
    is adjourned.
        [Whereupon, at 3:54 p.m., the hearing was adjourned.]
        [Prepared statements and responses to written questions
    supplied for the record follow:]
                      PREPARED STATEMENT OF LINDSAY OWENS
                  Executive Director, Groundwork Collaborative
                                  May 22, 2024
    Causes of Grocery Price Increases
        Chair Warren, Ranking Member Kennedy, Members of the Committee,
    thank you for inviting me to testify today. My name is Lindsay Owens,
    and I'm the Executive Director of the Groundwork Collaborative, an
    economic policy think tank based in Washington, DC. I am grateful to
    the Committee for holding this hearing about how price gouging and
    consolidation are raising food prices.
        By a large margin, when Americans are asked which factors they look
    at to decide how the national economy is doing, the price of groceries
    rises to the top. \1\ The widespread concern about grocery prices
    reflects two basic facts. First, nearly every household--from the
    lowest income to the highest--regularly buys groceries. Second, grocery
    prices have risen faster than the rate of inflation since the onset of
    the COVID-19 pandemic. While prices overall have risen by 19 percent in
    the last 3 years, families are now paying 25 percent more for groceries
    than they were before the pandemic. \2\
    ---------------------------------------------------------------------------
         \1\ https://groundworkcollaborative.org/work/whats-driving-the-
    rise-in-grocery-prices-and-what-the-government-can-do-about-it/
         \2\ https://fred.stlouisfed.org/graph/?g=1eTFq
    ---------------------------------------------------------------------------
        There are a number of factors that have contributed to high food
    and grocery prices in recent years. Climate change, international
    conflicts, and disease in plants and animals, have all led to product
    shortages that have translated to higher food costs. \3\ Rising energy
    costs have also filtered through to higher food prices. But another
    factor that is driving up the price Americans are paying for groceries
    is industry consolidation and resultant profiteering. \4\ This
    profiteering is being facilitated by a confluence of three factors.
    ---------------------------------------------------------------------------
         \3\ https://www.gao.gov/products/gao-23-105846
         \4\ https://www.ftc.gov/system/files/ftc-gov/pdf/
    p162318supplychainreport2024.pdf
    ---------------------------------------------------------------------------
        First, the food and grocery sectors have become more concentrated.
    \5\ Over the last 25 years, grocery industry consolidation has resulted
    in a 30 percent decline in the number of grocery stores in the United
    States. \6\ Four grocery retailers account for over a third of national
    grocery sales and Walmart, America's largest grocer, now single
    handedly captures nearly a quarter of all grocery dollars. \7\ Further,
    just four food companies control more than 60 percent of sales in most
    grocery categories. \8\
    ---------------------------------------------------------------------------
         \5\ https://papers.ssrn.com/sol3/papers.cfm?abstract-id=2612047
         \6\ https://newrepublic.com/article/179220/ftc-ruinous-albertsons-
    kroger-merger#
         \7\ https://chainstoreage.com/walmart-led-grocery-dollar-share-
    2023-followed#:text
         \8\ https://www.theguardian.com/environment/ng-interactive/2021/
    jul/14/food-monopoly-meals-profits-data-investigation
    ---------------------------------------------------------------------------
        Consolidation grants the remaining corporate giants the freedom to
    hike prices without fear of being undercut by the competition and
    evidence from data analytics firms, academic research, and the Federal
    Trade Commission shows concentration in the grocery sector has inflated
    prices considerably. In rural areas where fewer grocery stores mean
    less competition, grocery inflation is running 2 percent ahead of
    grocery inflation in large cities. Lower-income neighborhoods, where
    grocers are more reluctant to locate, also see higher grocery price
    inflation. Prices also increase more after grocery mergers in less
    competitive markets than in more competitive ones.
        Second, grocers and producers are using new technologies to
    facilitate price hikes. Pricing used to be a process where companies
    made some rudimentary queries about their competitors and balanced what
    made them a profit against what could attract customers. Then they
    stuck that price on a sticker and let it be. Today it's a highly
    engineered science. Technological innovations such as cloud computing,
    artificial intelligence, and surveillance targeting have enabled
    companies to collect reams of data on their competitors and their
    customers. They can use this data to facilitate collusion and price
    fixing or simply to accelerate their ability to hike prices and
    maximize profits.
        Companies like Agri Stats collect troves of proprietary data from
    the highly concentrated meatpacking sector and use it to help the Big
    Four meatpackers drive down wages for their workers and the price they
    pay ranchers, while driving up meatpacking profits by advising packers
    on when to raise prices and by how much. The result is higher meat and
    poultry prices for consumers. \9\ Additionally, a cottage industry of
    pricing data service providers like Datasembly, Revionics, and
    DemandTec are using big data collection, predictive technologies, and
    artificial intelligence to track prices on products down to the
    individual store level to help their food producer and retail clients
    get ``faster, lasting implementation of price increases,'' ferret out
    when they are inadvertently keeping prices ``too low for too long,''
    ``more quickly react'' to competitors' pricing, and ensure their price
    hikes ``stick.'' \10\
    ---------------------------------------------------------------------------
         \9\ https://www.foodandpower.net/latest/doj-agristats-suit-oct-23
         \10\ https://datasembly.com/wp-content/uploads/2022/04/Taking-
    Price-CPGRetailerInfographic.pdf; https://datasembly.com/case-studies/
    real-time-competitive-data-for-the-win/; https://datasembly.com/wp-
    content/uploads/2022/04/Datasembly-Infographic-Aug2021.pdf
    ---------------------------------------------------------------------------
        And finally, market power and technological advances have come
    together in the shadow of the pandemic, when inflation gave companies
    the cover they needed to start rolling out mercenary pricing strategies
    they'd previously only dreamed of implementing. Any concerns CEOs may
    have had over damaging reputations and losing market share by executing
    their most egregious pricing tactics evaporated.
        A recent report by the Federal Trade Commission illustrates this
    point, finding that ``some firms seem to have used rising costs as an
    opportunity to further hike prices to increase their profits, and
    profits remain elevated even as supply chain pressures have eased.''
    \11\ They also found that ``larger retailers and wholesalers with
    considerable leverage over their suppliers were able to take more
    aggressive action to protect themselves than were their smaller
    rivals.'' As a result, a recent study from the Council of Economic
    Advisers found that grocery profit margins since the pandemic have
    reached their highest level in two decades. \12\
    ---------------------------------------------------------------------------
         \11\ https://www.ftc.gov/system/files/ftc-gov/pdf/
    p162318supplychainreport2024.pdf
         \12\ https://www.nytimes.com/2024/02/01/us/politics/biden-food-
    prices.html
    ---------------------------------------------------------------------------
        My own organization's research, which looks at the statements
    corporate executives make on earnings calls with their investors, has
    similarly found companies hiding behind the cover of inflation to
    overcharge customers. Andy Callahan, the President and CEO of snackfood
    company Hostess Brands boasted about the company's ``proven pricing
    power'' and ``best-in-class margin structure'' before conceding that
    ``customers haven't fully recognized they were absorb[ing] pricing''
    and that ``when all prices go up, it helps.'' \13\
    ---------------------------------------------------------------------------
         \13\ https://endcorporateprofiteering.org/latest-research/ehttps:/
    /www.fool.com/earnings/call-transcripts/2022/03/02/hostess-brands-inc-
    twnk-q4-2021-earnings-call-tran/?source=iedfolrf0000001
    ---------------------------------------------------------------------------
    Examples of Pricing Tactics
        Because of these changes, what used to be a fairly uneventful
    weekly trip to the grocery is now rife with tricks, traps, and outright
    landmines. Consider a few recent examples:

        Rigged scales. Walmart, America's largest grocer, recently
            settled a class action lawsuit alleging they have rigged their
            produce scales, inflating product weights for pork, seafood,
            and citrus, to ``deceivingly, misleadingly, and unjustly
            pilfer, to Walmart's financial benefits, its customers' hard-
            earned grocery dollars.'' \14\ Millions of Americans are
            potentially impacted by profiteering at Walmart, which captures
            more than 50 percent of grocery dollars in hundreds of markets
            and more than 70 percent in dozens of those. \15\
    ---------------------------------------------------------------------------
         \14\ https://www.washingtonpost.com/business/2024/04/08/walmart-
    settlement-meat-seafood-do-you-qualify/
         \15\ https://ilsr.org/articles/walmarts-monopolization-of-local-
    grocery-markets/

        Shrinkflation. Shrinkflation, or paying more for less, is
            another common trap customers run into at the grocery store.
            Unless you closely monitor changes in the price per ounce of
            many goods (or bring your recycling with you to the grocery
            store), you may increasingly find yourself bringing home items
            from chips, to orange juice, to toilet paper that are smaller
            than the ones you picked up on your last trip. Just last month,
            corporate executives from the international snack food
            conglomerate, Mondelez, announced on their quarterly investor
            call that they'd be shrinking multipacks of their popular Cliff
            bars from 6 to 5 and 12 to 10 bars, in addition to implementing
            further price hikes on other snack staples. \16\ According to a
            recent report from my organization, shrinkflation accounts for
            up to 10 percent of inflation in key product categories. \17\
    ---------------------------------------------------------------------------
         \16\ https://seekingalpha.com/article/4687816-mondelez-
    international-inc-mdlz-q1-2024-earnings-call-transcript
         \17\ https://groundworkcollaborative.org/work/big-profits-in-
    small-packages/

        Skimpflation. Skimpflation, shrinkflation's more deceptive
            cousin, is another common grocery trap where companies swap out
            higher quality ingredients for lower quality, cheaper ones.
            Food giant Conagra has been caught swapping out oil for water
            in their popular Wish-bone Italian salad dressing as well as in
            their Smart Balance margarines. Blue Bunny ice cream was
            recently found to have substituted whey and coconut oil for
            milk and cream. \18\ Alan Cole, a former senior economist for
            Senator Mike Lee on the Joint Economic Committee has argued
            Government inflation statistics may be masking total inflation
            because skimpflation is so pervasive and difficult to observe
            or measure. \19\
    ---------------------------------------------------------------------------
         \18\ https://www.npr.org/sections/money/2021/10/26/1048892388/
    meet-skimpflation-a-reason-inflation-is-worse-than-the-government-says-
    it-is
         \19\ https://www.mouseprint.org/2023/08/21/conagra-skimps-again-
    wish-bone-salad-dressing-watered-down/

         Instead of copping to cost-cutting, companies pass off these
            decisions as health conscious or even environmentally friendly.
            Shake `N Bake stopped providing plastic bags for shaking and
            claimed to be reducing plastic consumption while General Mills
            shrunk their family size cereal boxes and said they were doing
            it to fit more cereal boxes on each truck to reduce greenhouse
            gas emissions. \20\
    ---------------------------------------------------------------------------
         \20\ https://www.mouseprint.org

        Dynamic pricing, artificial intelligence, and surveillance
            technologies. Supermarkets and other retailers are increasingly
            turning to data analytics, the ``art and science behind pricing
            decisions,'' allowing merchants to rapidly change prices daily.
            More and more companies like grocery giant Albertsons are using
            artificial intelligence to target ``price optimization'' to
            maximize profits and hike prices sooner, higher, and for
            longer. \21\ Consulting firms like the Boston Consulting Group
            have have reported on the use of ``advanced geoanalytics'' to
            help retailers determine what they can get away with charging
            at each store location; artificial intelligence to help
            retailers maximize what they can charge for store-brands while
            still peeling customers away from name brands; and,
            surveillance technologies to help stores track the prices of
            key competitors. \22\ The ability to collect large amounts of
            data from competitors across a sector is also facilitating
            price fixing, as the Agri Stats case reveals.
    ---------------------------------------------------------------------------
         \21\ https://dlabs.ai/blog/how-ai-helps-retailers-with-price-
    optimization/#::text=
         \22\ https://www.bcg.com/publications/2024/overcoming-retail-
    complexity-with-ai-powered-pricing

         Digital price tags are becoming commonplace on shelves at stores
            like Kroger, allowing grocers to raise prices more frequently.
            These changes pave the way for surge pricing models like those
            used by ride sharing companies. While surge pricing may be a
            nuisance when you are trying to leave a crowded sporting event,
    ---------------------------------------------------------------------------
            it's another matter entirely when shopping for necessities.

        Personalized pricing. Since the pandemic, more Americans
            are shopping for groceries online where companies use dark
            patterns and vast troves of data, including your personal
            browsing and purchasing history, to determine the maximum price
            you are willing to pay for an item. Some grocers are now making
            a sizable share of their profits from selling grocery shoppers'
            data rather than selling groceries. According to a forthcoming
            investigation in The American Prospect, Kroger and Albertsons
            both have in-house retail media agencies that work with
            advertisers to sell your purchase history to the highest
            bidder. These rich databases are very lucrative for the
            grocers, and the companies purchasing this data aren't just
            interested in selling you groceries, but have an interest in
            what you will purchase from your home, on your phone, and
            online. Some analysts speculate that the combined data
            offerings of Kroger and Albertsons are the primary business
            case for their pending merger. Walmart just acquired smart TV
            maker Vizio (which news outlet Axios referred to as a ``media
            company masquerading as a manufacturer'') to sell ads for
            groceries to viewers using their streaming service.

        Collusion. Last month, the Federal Trade Commission found
            that Scott Sheffield, the former President and CEO of the large
            fracking company Pioneer Natural Resources, was colluding with
            foreign Governments in OPEC to drive up the costs of crude oil.
            \23\ According to the complaint, ``Mr. Sheffield's
            communications were designed to pad Pioneer's bottom line--as
            well as those of oil companies in OPEC and OPEC+ member
            States--at the expense of U.S. households and businesses.'' The
            complaint also identified that ``increases in crude oil prices
            are passed on to Americans through higher gasoline, diesel,
            heating oil, and jet fuel prices.''
    ---------------------------------------------------------------------------
         \23\ https://www.ftc.gov/news-events/news/press-releases/2024/05/
    ftc-order-bans-former-pioneer-ceo-exxon-board-seat-exxon-pioneer-deal

         Fuel costs are unsurprisingly a significant factor in the price of
            food. Oil is one of the primary inputs for tractors and farm
            equipment and higher oil costs means more expensive
            transportation costs for food to markets, which typically
            travel by land. All of these factors can raise the price of
            food for producers and consumers. Furthermore, natural gas is a
            major component in the production of fertilizer and the
            manufacturing of pesticides is highly energy intensive and
            sometimes uses petroleum as an ingredient. Therefore, when
            energy costs are up, food costs are too. While it would be too
            far to single out Pioneer for the entirety of rising energy
            costs, this case shows how collusion throughout the fuel
            economy beyond geopolitical shocks can raise prices for
            consumers.
    Common Misconceptions
        When faced with evidence that profiteering is exacerbating
    inflation, some academics and onlookers rush to the defense of
    corporate boardrooms. Media coverage of a recent report from the
    Federal Reserve Bank of San Francisco overstated the study's claims to
    suggest that price gouging wasn't a factor for consumers. \24\ Instead,
    the study simply shows that increases in markups in some industries are
    balanced by decreases in others. A recent study from the Council of
    Economic Advisers, which used a nearly identical methodology, found
    that grocery profit margins since the pandemic were at their highest
    level in two decades. \25\ If you need to buy groceries for your
    family, it is cold comfort to know that researchers think the price
    hikes you are forced to eat in the grocery sector are being balanced
    out, on average, by better deals on goods you don't purchase at all.
    \26\
    ---------------------------------------------------------------------------
         \24\ https://www.cnn.com/2024/05/15/business/inflation-biden-rate-
    fed/index.html#:text
         \25\ https://www.nytimes.com/2024/02/01/us/politics/biden-food-
    prices.html
         \26\ https://www.frbsf.org/research-and-insights/publications/
    economic-letter/2024/05/are-markups-driving-ups-and-downs-of-inflation/
    ---------------------------------------------------------------------------
        Critics also try to dismiss attention to corporate profiteering by
    noting that it cannot explain all of the burst of inflation since the
    COVID-19 pandemic began. But experts have not argued that corporate
    profiteering explains all of the food price increases. Pandemic-related
    supply chain disruptions, weather conditions, and disease have played a
    substantial role in food price increases in recent years. But so too
    has grocery consolidation and companies profiting off of economywide
    confusion to raise their prices beyond what was necessary from market
    fundamentals, pocketing the extra margin. Techniques like skimp- and
    shrinkflation, as well as new algorithmic and personalized pricing,
    make it even harder for consumers to gauge when they're being
    overcharged. Now, supply chains are effectively restored, but prices
    have stayed locked at levels that were only justifiable under
    conditions of a global health crisis. Companies that were quick to pass
    along their rising costs to consumers have been slower to pass along
    their savings.
        Some defenders of monopolies claim that larger firms enjoy
    unparalleled economies of scale to reduce their cost-per-unit. But the
    problem is not that it is too costly for firms to produce what they
    sell, it is that firms are raising prices dramatically beyond what it
    does cost to produce units and take home a sensible margin. This is
    only possible in uncompetitive and underregulated markets where there
    is no meaningful check on a dominant firm. More competition, not less,
    would reintroduce that check.
    Policy Recommendations
        The Biden-Harris administration has taken a number of steps to
    bring down food prices and curb profiteering in the food and grocery
    sector including challenging the Kroger Albertsons merger, suing Agri
    Stats, launching a Strike Force to combat unfair and illegal pricing,
    and shoring up supply chains. \27\ The Administration has also helped
    families afford rising food costs by expanding nutrition assistance
    (SNAP) to keep up with and even outpace rising food costs and provided
    funds to State governments to support local producers. \28\
    ---------------------------------------------------------------------------
         \27\ https://time.com/6977026/democrats-biden-executive-authority-
    grocery-prices/ & https://www.justice.gov/opa/pr/four-states-join-
    justice-departments-suit-against-agri-stats-organizing-andmanaging &
    https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/
    05/fact-sheet-president-biden-announces-new-actions-to-lower-costs-for-
    americans-by-fighting-corporate-rip-offs/#:text=
         \28\ https://groundworkcollaborative.org/work/whats-driving-the-
    rise-in-grocery-prices-and-what-the-government-can-do-about-it/
    ---------------------------------------------------------------------------
        Still, there is more this Administration can do to help ensure the
    grocery and food sectors are competitive including cracking down on
    exclusionary pay-for-play contracts like slotting fees that prevent new
    brands from accessing shelf space; enforcing the Robinson-Patman Act to
    ensure large firms aren't getting special deals; and, continuing to
    partner with USDA and DOJ to ensure that agricultural and grocery
    markets are competitive. \29\
    ---------------------------------------------------------------------------
         \29\ https://prospect.org/economy/big-business-games-the-supply-
    chain/
    ---------------------------------------------------------------------------
        But Congress has a role to play as well. Congress should take up
    new legislation from Senator Casey, the Shrinkflation Prevention Act,
    to prohibit shrinkflation by ensuring it is considered a deceptive
    practice under the FTC Act. Congress should also take up Senator
    Klobuchar's legislation, the Preventing Algorithmic Collusion Act,
    which would codify that price fixing via algorithm is illegal, as the
    Federal Trade Commission has already stipulated, and would be a welcome
    step in preventing abuses by firms like Agri Stats.
        Finally, Congress should take up broad based anti-price gouging
    legislation, like Senator Warren's Price Gouging Prevention Act of
    2024, to ensure that firms are not profiting off of crises with
    excessive price hikes. This legislation would not only combat price
    gouging in the grocery sector but also address price gouging upstream
    that raises food prices, as we've seen in the energy sector.
        High food costs are taking a toll on Americans, particularly low-
    income ones. Food is a necessity, not a luxury, and when grocery
    profiteering and price gouging are spiking food prices, Congress must
    act. American families can't afford to wait and see if the Chair of the
    Federal Reserve manages to bring down prices: Dinner needs to be on the
    table tonight.
                       PREPARED STATEMENT OF E.J. ANTONI
               Public Finance Economist, The Heritage Foundation
                                  May 22, 2024

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                    PREPARED STATEMENT OF NORBERT J. MICHEL
        Vice President and Director, Center for Monetary and Financial
                          Alternatives, Cato Institute
                                  May 22, 2024
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                       PREPARED STATEMENT OF JOE MAXWELL
               Cofounder and Chief Strategy Officer, Farm Action
                                  May 22, 2024

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                        PREPARED STATEMENT OF ALAP VORA
     Owner, Concord Market, New York City, Small Business Majority Network
                                     Member
                                  May 22, 2024
        Dear Chair Warren, Ranking Member Kennedy, and Members of the
    Subcommittee on Economic Policy of the Senate Committee on Banking,
    Housing, and Urban Affairs: Thank you for the opportunity to speak
    about the impact of consolidation, price discrimination, and anti-
    competitive behavior impacting America's food prices. My name is Alap
    Vora, and I am the owner of Concord Market located in Brooklyn, New
    York City. \1\ For the last 50 years, my family has been opening and
    running different types of small businesses across New York City. Some
    people have a clear idea about what their business will be, but my
    family always preferred to look at the specific needs of the community
    and fill gaps in the market where we saw them. Concord Market is a
    family owned neighborhood grocer that opened in 2009 and has been open
    every day since. We pride ourselves on being job creators and an
    integral part of the community.
    ---------------------------------------------------------------------------
         \1\ Concord Market is proudly represented by Small Business
    Majority. Small Business Majority is a national small business
    organization that empowers America's diverse entrepreneurs to build a
    thriving and equitable economy. We engage our network of more than
    85,000 small businesses and 1,500 business and community organizations
    to deliver resources to entrepreneurs and advocate for public policy
    solutions that promote inclusive small business growth. Our work is
    bolstered by extensive research and deep connections with the small
    business community that enable us to educate stakeholders about key
    issues impacting America's entrepreneurs, with a special focus on the
    smallest businesses and those facing systemic inequities.
    ---------------------------------------------------------------------------
        Our personal approach to running and operating a business has
    created the foundation of our success. Our community-driven approach to
    serving our neighborhood has always served as a backbone to our
    sustainability--something that the bigger box stores simply cannot
    offer.
    The Impact of Consolidation and Overwhelming Market Power on Small
            Businesses
        For small grocery stores like Concord Market our ability to operate
    a reliable and consistent business is at stake as we face fluctuating,
    opaque pricing structures from distributors. The pressure to serve our
    community members as a small grocer while remaining profitable is at an
    all-time high, especially as the desire to shop locally remains high in
    our city. Today, I will discuss how unexpected price hikes, deceptive
    and unclear fees from large distributing companies, and shrinkflation
    continue to place disproportionate impacts on the small shop owner like
    me. While our economy is certainly improving from where it was amid the
    COVID-19 pandemic, prices are still on the rise. Post-COVID, all eyes
    are on small businesses, and while this attention is certainly helpful,
    policymakers must match the celebration of Main Street with policy
    efforts that support our growth--especially when it comes to providing
    oversight to consolidated industries impacting America's food prices
    across the board. While we cannot control the impacts of shrinkflation
    or price gouging on our business, we have come to shoulder the blame
    for the prices that our customers see each time they shop with us.
        My goal for Concord Market is longevity, and over time we have
    taken pride in the business' ability to remain consistent and reliable.
    In its 15 years of business, Concord Market has never missed a day of
    service--it has stayed open through holidays, snowstorms, blackouts,
    hurricanes, and now pandemics. Unfortunately, for us and many other
    business owners in my shoes, it is growing more and more difficult to
    compete with big grocery stores that offer regular sales, bulk
    discounts, food delivery services and lower prices for the same items
    on my shelves, in turn driving customers away. Some of our customers
    would rather rent a car for a day to go to larger competitors like
    Costco, Trader Joe's, and others because of the pressures that impact
    our pricing structure and ultimately our bottom line.
        As a small business, we constantly must assess the profits we're
    able to make on certain goods or services. Given my limited bandwidth
    as a business owner managing multiple aspects of the store at any given
    moment, there is little ability for us to cross-check each vendor to
    understand why the cost of a specific good increased since the last
    time we purchased.
    Examples of Monopolistic Behavior Impacting Concord Market
        Every shop owner hopes to provide the best selection of goods for
    its customers, but that remains difficult when distributors are
    charging more from their small business partners than they are charging
    individual consumers at Costco or other wholesaler clubs. It has become
    clearer to the business community that the biggest distributors and
    manufacturers aren't required to be transparent, competitive or
    cooperative with small vendors. In addition, evidence of shrinkflation
    by major food companies continue to shock and concern consumers across
    the Nation. According to a recent report by the Food Institute, 73
    percent of U.S. consumers rank shrinkflation (or package downsizing) as
    a top concern, while 52 percent of consumers suspected they may be a
    victim of shrinkflation when purchasing snack foods, a key offering of
    Concord Market. \2\ Major food companies are not even attempting to
    hide this practice--for example, Frito-Lay confirmed that they have
    recently reduced the weight of Doritos from 9.75 to 9.25 oz. Other
    brands like Gatorade have admitted to using a more expensive bottle
    design with no extra product to make up for the extra cost. \3\ The end
    result is less product for the same price and less shoppers in grocery
    stores large and small.
    ---------------------------------------------------------------------------
         \2\ ``Report: `Shrinkflation' Top of Mind for Consumers'', The
    Food Institute. April 24, 2023. https://foodinstitute.com/focus/report-
    shrinkflation-top-of-mind-for-consumers/
         \3\ ``Your Favorite Snacks Are Getting Smaller Thanks to
    `Shrinkflation' '', Food & Wine. March 14, 2022. https://
    www.foodandwine.com/news/food-shrinkflation-doritos-gatorade
    ---------------------------------------------------------------------------
        While we actively engage with local support entities to help us
    navigate these challenges, our efforts are hindered by the various
    competing priorities of business ownership. For example, our engagement
    with the Department of Consumer Affairs across the city has yielded
    little result. While local agencies (such as the Health Department,
    Fire Department, and Consumer Affairs) examine small business owner
    activity under a microscope, there is an apparent lack of oversight
    into the supply chain processes that feed into our business model.
        Despite our best efforts to push back on our distributors and
    mitigate these challenges before they impact our customers, the reality
    is that while small businesses struggled to keep their doors open
    during a pandemic, recession, and volatile economic conditions,
    distributors were free to profit off so-called ``supply chain
    challenges'' by increasing their prices by 5 percent across the board
    when their actual cost of purchasing or manufacturing remained stable.
    Concord Market has seen supply prices increase and vary by 20-30
    percent for everyday products like 2-liter sodas. Major food
    corporations have proudly stated an increase in profits and shareholder
    earnings while everyday Americans and business owners like us pay the
    price. For example, a recent earnings statement from U.S. Foods boasts
    a record 19 percent growth in adjusted earnings before interest and tax
    deductions (EBITDA) representing over $1.58 billion in growth in FY23
    alone while case volume growth increased by 7.3 percent for independent
    businesses and mere 5.6 percent percent for all other customers. \4\
    Sysco, another well-known food giant, brought in over 33 percent as
    reflected in FY23 EBITDA in the fourth quarter alone while only
    increasing the foodservice volume by 2.3 percent. \5\
    ---------------------------------------------------------------------------
         \4\ ``U.S. Foods Reports Fourth Quarter and Fiscal Year 2023
    Earnings''. U.S. Foods, February 15, 2024, https://ir.usfoods.com/
    investors/stock-information-news/press-release-details/2024/US-Foods-
    Reports-Fourth-Quarter-and-Fiscal-Year-2023-Earnings/default.aspx.
         \5\ ``Sysco Reports Record Fourth Quarter and Full Year 2023
    Sales, Operating Income and Cash Flow''. Sysco Investors. August 1,
    2023. https://investors.sysco.com/annual-reports-and-sec-filings/news-
    releases/2023/08-01-2023-130627627
    ---------------------------------------------------------------------------
        The data (both quantitative and anecdotal) are clear, even if there
    are regulations and laws in place to keep distributor price gouging
    from happening, they clearly aren't being enforced. In practice, we
    have learned this to be true through engaging with other business
    owners in my community to compare what we each pay for the same item--
    sometimes we find there are price increases as much as 50 percent--100
    percent based on who is buying the product. When we started comparing
    invoices from multiple locations, we saw that each of us paid different
    prices for the same item over a short period of time.
        When it comes to shrinkflation, Concord Market customers and
    employees have witnessed canned goods and other shelf-stable items
    fluctuate in size and substance, demonstrating that higher item costs
    sometimes come with reduced product sizes. Some distributors claim they
    have had to increase prices because there was a shortage of a certain
    input, but even when the shortages are resolved, the distributors keep
    charging the same high price or more.
        As a business owner, it feels like our distributors are taking
    advantage of any slight market changes to upcharge, and that's hurting
    small grocers like me that may be two or three layers removed from
    their manufacturer. Today, companies that passed on price increases to
    grocers like us and consumers like ours have not eased food prices
    despite supply chain challenges easing. \6\ For example, we were forced
    to raise our deli prices because the costs of the goods and the labor
    needed to serve our location have increased while the size of our
    orders stayed the same. Due to this, we realized over 30 percent in
    losses on our catering program and could no longer afford to fill large
    orders with such small margins.
    ---------------------------------------------------------------------------
         \6\ ``FTC Releases Report on Grocery Supply Chain Disruptions''.
    Federal Trade Commission. March 21, 2024. https://www.ftc.gov/news-
    events/news/press-releases/2024/03/ftc-releases-report-grocery-supply-
    chain-disruptions
    ---------------------------------------------------------------------------
        Outside of price hikes and shrinkflation, small grocers are
    oftentimes left with no choice but to buy more product than they need.
    When restocking drink cases in our store, we are forced to purchase
    upwards of 40-50 units of a product to get a particular good on our
    shelf, causing our wholesale bill to skyrocket all while leaving us
    with limited storage space, too many perishables and overstock that we
    cannot return.
        While we bear responsibility for the factors in our immediate
    control, we need support from leaders like you to navigate highly
    consolidated markets. Small business owners are the backbone of their
    communities, and our sole focus is serving those communities. We cannot
    be expected to track, monitor, and combat anticompetitive behavior on
    our own--our focus must be and always will be on our business and our
    customers. Moving forward, small businesses and small grocers like
    Concord Market call on Congress to help us navigate these pressures to
    continue to provide jobs and community for our neighbors. While a
    simple price increase on a grocery item or two may not seem devastating
    to a household budget for many of you in this room, for the average
    American this behavior has created great tension between the small
    grocer community and their valued customers' ability to support the
    industry.
    Conclusion--Congress Must Act To Lower Prices Across America's Food
            Supply and Distribution System To Support Small Market
            Participants
        The cost of doing business in cities like New York has skyrocketed.
    From new ``congestion pricing'' for tourism season, astronomical
    delivery app fees up to 30 percent, utility cost increases, waste
    removal service increases, and credit card fees.7 These factors, when
    compounded with the anti-competitive practices from the biggest,
    richest distributors, it remains nearly impossible for us to try to be
    competitive in the grocery industry as a small business. We attempt to
    offset price increases and inflation by offering various benefits to
    shopping at our store including regular shopper rewards, student
    discounts, waived deliver fees and sponsored events to support our
    elderly neighbors.
    ---------------------------------------------------------------------------
         \7\ Concord Market has seen credit card fees increase from 1.5
    percent to 4 percent over the last 10 years. As stated in this
    testimony, New York City law prohibits businesses from passing these
    fees on to consumers.
    ---------------------------------------------------------------------------
        As a pillar of our community, doing the right thing for our
    customers is what we live by. Often, when our staff makes deliveries
    for elderly neighbors in our free deliver program, they spend time with
    the customer, and help them out in any way they can such as changing a
    lightbulb or providing social stimulation during drop-offs. These types
    of transactions are not profitable for business, but it's the right
    thing to do for our community. While important to us all, our community
    benefit programs will only get us so far when pitted up against
    external factors out of my control like rising food prices,
    shrinkflation, unfair distributing models and a pressure to keep pace
    with box stores that offer what we sell at a much lower price--just
    because they can.
        The small business community faces no shortage of challenges
    standing in our way to success, and unnecessary and preventable
    shrinkflation, price gouging, and consolidated market power from large
    distributors should be the least of our problems. In addition to
    mitigating stark and sudden cost increases, small businesses are
    dealing with other costs that we are forced to pass onward to our
    consumers or face directly. Swipe fees, which are illegal to pass on to
    the consumer in the State of New York, fueling, stocking, labeling, and
    processing charges on deliveries, are just a few examples of other cost
    burdens we bear resulting from consolidated industries that make up our
    supply chain. Though we are nearly four years removed from the COVID-19
    pandemic, businesses are still struggling to keep pace.
        Congress must act alongside Federal enforcement agencies to ensure
    that the major players in our economy are held accountable for their
    actions that result in rising prices and put a squeeze on both small
    businesses and their customers. Congress can do this in multiple ways,
    but I will highlight three starting points here:

      1.  Work with your colleagues to pass the Shrinkflation Prevention
            Act of 2024. This critical legislation would direct the Federal
            Trade Commission (FTC) to create and enact regulations to
            establish shrinkflation as an unfair and deceptive action. The
            bill would also enable FTC to pursue civil actions against
            corporations engaged in shrinkflation and encourages and
            authorizes State Attorneys General to bring civil action
            against those corporations.

      2.  To ensure small businesses can compete on a level playing field,
            we urge Congress to provide funding necessary to the FTC to
            enforce the Robinson-Patman Act of 1938, also known as the
            Anti-Price Discrimination Act, which protects small businesses
            from being driven out of the marketplace via discriminatory
            pricing, promotional allowances and advertising afforded to
            large, franchised companies.

      3.  Continue to work with businesses like mine, and organizations
            like Small Business Majority, to shed light on the
            discriminatory practices that plague our small grocer
            communities from being able to provide competitive, affordable
            prices for the families and businesses that they too serve.

        Thank you again for the opportunity to speak with you today, and I
    look forward to answering any questions you may have.
           RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
                            FROM E.J. ANTONI

    Q.1. Regulations--Is it true that food prices respond to energy
    prices, specifically crude oil prices and its use in
    agriculture commodity production?

    A.1. Energy is a significant input in food production. Not only
    are energy sources used to do work, but they can also be used
    to produce other inputs, like fertilizer. \1\ Consequently,
    higher energy prices will increase food prices as production
    costs are passed to consumers. Since about 44 percent of direct
    energy consumption by the American agricultural sector is
    diesel fuel, crude oil prices have a significant impact on
    agricultural production and costs. \2\ A reduction in oil
    prices, therefore, would reduce not only diesel prices but
    agricultural prices too, leading to lower food costs for
    Americans, increased profitability for American farmers, and a
    greater quantity of exports of American farm products.
    ---------------------------------------------------------------------------
         \1\ https://www.imf.org/en/Blogs/Articles/2022/12/09/global-food-
    prices-to-remain-elevated-amid-war-costlyenergy-la-nina
         \2\ https://www.ers.usda.gov/data-products/chart-gallery/gallery/
    chartdetail/?chartId=87964#:text=

    Q.2. If the Biden administration overregulates the energy
    sector or overregulates the industrial sector, thereby making
    energy use and industrial processes more expensive, doesn't
    ---------------------------------------------------------------------------
    that ultimately raise the cost of food for American families?

    A.2. Yes, overregulation of the energy or industrial sectors
    will impose inefficiencies and added costs, ultimately leading
    to higher food prices for American families. Unfortunately, it
    can be difficult to measure these added costs using official
    Government metrics because they tend to be excluded from price
    indexes. The additional costs from regulation are assumed to
    have a corresponding increase in quality and are therefore
    removed via a hedonic adjustment. The consumer is still paying
    more, but that does not show up in the consumer price index and
    similar tools. However, when regulation indirectly causes a
    price to rise, such as when the regulation increases an input
    cost that then increases the cost of a finished product, the
    increased cost to consumers of the finished product is more
    likely to be captured by official Government metrics on
    consumer prices. Overregulation by the Biden administration has
    significantly reduced energy production, \3\ which has led to
    higher food prices that are in addition to the higher prices
    from the dollar's lost purchasing power via the monetary
    phenomenon of inflation.
    ---------------------------------------------------------------------------
         \3\ https://committeetounleashprosperity.com/wp-content/uploads/
    2024/05/War-on-Energy-Layout.pdf

    Q.3. Consumer Spending--Given that average weekly paychecks
    have increased by roughly 14 percent in the last 3 years, why
    are consumers still feeling financially squeezed at the grocery
    ---------------------------------------------------------------------------
    store?

    A.3. From the beginning of the economic expansion in 2009
    through January 2021, average consumer prices rose steadily at
    an annualized rate of 1.8 percent. Shortly after January 2021,
    that average rate of increase accelerated, and the average
    prices paid by consumers are now over 19 percent higher than
    they were in January 2021. Typical grocery store prices have
    increased at even faster rates over this period. Because prices
    have risen so much faster than wages, the quantity of products
    and services which people can buy with their paychecks has
    decreased even as the size of the paychecks has increased. For
    the typical American family, with two parents working and each
    with average weekly earnings, the family's weekly income has
    risen roughly $150 from January 2021 to April 2024, but that
    weekly income buys about $50 less. The total difference between
    those two changes is the family's loss from inflation, and it
    exceeds their loss from personal Federal income tax.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
                         FROM NORBERT J. MICHEL

    Q.1. Business Decisions--If a company decides to charge a price
    for a good they believe is above the average market price for
    that good, do you believe that is a sound financial decision
    for the company to make?

    A.1. There are too many subjective variables that would go into
    such a decision for me, or anyone outside of the company's
    management, to know whether such a decision would be a sound
    financial decision. Raising a product's price always runs the
    risk of losing too many customers and market share to sustain
    profitability, but that risk is why managers are paid to make
    such decisions--they have the best information to make such
    decisions.

    Q.2. Is it true that food is often more expensive because of
    issues like supply chain disruptions, inflation, and higher
    production costs and not because corporations are attempting to
    expand their profit margins?

    A.2. I can attest that, during the last few years, many food
    items have been more expensive than usual because of supply
    chain disruptions, many of which were related to the COVID-19
    pandemic and Government shutdowns, as well as other natural
    disruptions. I cannot attest to whether companies did or did
    not raise prices to expand their profit margins--some may have
    done so. I can, however, attest that if some companies did
    raise their prices for such reasons, it does not explain
    inflation--the only way it could do so is if virtually all
    companies did so at the same time, in a concerted effort, with
    all the goods they sell.

    Q.3. Price Gouging--What are some of the negative implications
    of falsely associating high prices with corporate greed?

    A.3. One negative implication is that policymakers will attempt
    to ``solve'' inflation with policies that are counterproductive
    because they do not address the underlying causes of inflation.
    These policies might, for example, make goods and services more
    expensive and/or more scarce, thus leaving consumers even worse
    off than prior to the policy intervention.