Aug 18 JDN 2460541
There has been unusually high inflation the past few years, mostly attributable to the COVID pandemic and its aftermath. But groceries in particular seem to have gotten especially more expensive. We’ve all felt it: Eggs, milk, and toilet paper especially soared to extreme prices and then, even when they came back down, never came down all the way.
Why would this be?
Did it involve supply chain disruptions? Sure. Was it related to the war in Ukraine? Probably.
But it clearly wasn’t just those things—because, as the FTC recently found, grocery stores have been colluding and price-gouging. Large grocery chains like Walmart and Kroger have a lot of market power, and they used that power to raise prices considerably faster than was necessary to keep up with their increased costs; as a result, they made record profits. Their costs did genuinely increase, but they increased their prices even more, and ended up being better off.
The big chains were also better able to protect their own supply chains than smaller companies, and so the effects of the pandemic further entrenched the market power of a handful of corporations. Some of them also imposed strict delivery requirements on their suppliers, pressuring them to prioritize the big companies over the small ones.
This kind of thing is what happens when we let oligopolies take control. When only a few companies control the market, prices go up, quality goes down, and inequality gets worse.
For far too long, institutions like the FTC have failed to challenge the ever tighter concentration of our markets in the hands of a small number of huge corporations.
And it’s not just grocery stores.
Our media is dominated by five corporations: Disney, WarnerMedia, NBCUniversal, Sony, and Paramount.
Our cell phone service is 99% controlled by three corporations: T-Mobile, Verizon, and AT&T.
Our music industry is dominated by three corporations: Sony, Universal, and Warner.
Two-thirds of US airline traffic are in four airlines: American, Delta, Southwest, and United.
Nearly 40% of US commercial banking assets are controlled by just three banks: JPMorgan Chase, Bank of America, and Citigroup.
Do I even need to mention the incredible market share Google has in search—over 90%—or Facebook has in social media—over 50%?
And most of these lists used to be longer. Disney recently acquired 21st Century Fox. Viacom recently merged with CBS and then became Paramount. Universal recently acquired EMI. Our markets aren’t simply alarmingly concentrated; they have also been getting more concentrated over time.
Institutions like the FTC are supposed to be protecting us from oligopolies, by ensuring that corporations can’t merge and acquire each other once they reach a certain market share. But decades of underfunding and laissez-faire ideology have weakened these institutions. So many mergers that obviously shouldn’t have been allowed were allowed, because no regulatory agency had the will and the strength to stop them.
The good news is that this is finally beginning to change: The FTC has recently (finally!) sued Google for maintaining a monopoly on Internet search. And among grocery stores in particular, the FTC is challenging Kroger’s acquisition of Albertson’s—though it remains unclear whether that challenge will succeed.
Hopefully this is a sign that the FTC has found its teeth again, and will continue to prosecute anti-trust cases against oligopolies. A lot of that may depend on who ends up in the White House this November.
Human Economics 