FTC to Launch Inquiry Into Higher Grocery Prices and Surveillance Pricing

FTC to Launch Inquiry into Higher Grocery Prices

by Lucille Barilla @ Retail Wire

FTC Chair Lina M. Khan highlighted the FTC’s recent work to stop corporate lawbreaking that raises prices for Americans, including uncovering evidence of corporate conduct that may raise the price of gas, grocery prices, working to lower the cost of many asthma inhalers to just $35 out-of-pocket, and making it easier for Americans to cancel online subscriptions they don’t want. Chair Khan announced that she will ask the Commission to launch an inquiry into grocery prices in order to probe the tactics that big grocery chains use to hike prices and extract profits from everyday Americans at the checkout counter.

This has shades of what happened 2008ish. Automotive shut down and as a result of their shutdowns, many of their suppliers did similar. Nobody was keeping any inventory for a start-up (very minimal). So when it opened up again, we were scrambling for inventory. Semiconductors manufacturing did the same shutdown and start up routine. You grow the wafters and send them over to a packaging facility for cutting, population, and layering. Not a short lead time but still at about 8 weeks. Oh, they kept up with us. However and due to demand, they put in place a 20% price increase. This happened in other industries as well. It stuck too and until the next contract negotiation. I guess companies learned from 2008 since it worked then and is working now in 2023/24.

Supermarket News shared Khan’s commentary:

“Too often, people feel like too much of their paycheck is going toward covering the basics, like meat, bread, or eggs. But it still isn’t clear that Americans are fully getting the competitive, affordable prices they deserve. Grocery prices skyrocketed during the pandemic due largely to the higher costs and supply chain disruptions. But we also know that in the years since, costs have fallen, and supply chains have improved. Many items, though, are still too costly, and many large grocery chains are still raking in enormous profits.”

The USDA reported that “average annual food-at-home prices were 5.0 percent higher in 2023 than in 2022. Price growth slowed in 2023 compared with 2022 when food-at-home prices rose by 11.4 percent. For a typical dollar spent in 2022 by U.S. consumers on domestically produced food, including grocery store and eating-out purchases, 34.1 cents went to food service establishments such as restaurants and other eating-out places.”

These fluctuating prices hurt consumer’s bottom line, leading to a comment in May 2024 by Senator Elizabeth Warren. She said at a senate hearing, “Grocery prices skyrocketed during the pandemic, and in many cases, they’ve kept going up, even though the pandemic is over,” reported CNBC. “Grocery prices are up because of good old-fashioned corporate price gouging. And they can gouge consumers on prices because only a few companies control every level of the food chain.”

FTC Makes Moves To Stop ‘Surveillance Pricing’

by Dennis Limmer @ RetailWire

The Federal Trade Commission (FTC) is investigating “surveillance pricing,” where companies use artificial intelligence to set different prices for the same item based on individual customer data. This practice could lead to varying prices for the same product depending on a customer’s characteristics and behavior.

According to CNBC, the FTC has questioned eight companies — Mastercard, JPMorgan Chase, Accenture, McKinsey, Task, Revionics, Bloomreach, and Pros. The questions centered around their use of AI and customer data in pricing. FTC Chair Lina Khan expressed concerns that such practices could exploit personal data to set higher prices and undermine privacy. The investigation aims to reveal how these practices affect consumer pricing.

Per Lee Hepner, senior legal counsel for the American Economic Liberties Project, and reported by  Governing, instead of determining prices based on supply and demand, surveillance pricing examines factors like your credit card and bank balances, or “whether it’s late at night and you’re looking for an Uber home,” to assess your ability and willingness to pay. I would also add where you live. If you can only shop at the one store in your neighborhood, the pricing may be different a few miles away. This may be an element is less affluent areas.

This is a more sophisticated method of pricing control as if can get right down to the individual and what their credit rating is, balances, etc. More recently, it has been more about smaller packaging, supply variance and blamings the pandemic, etc.

Companies also learned from 2008 and many applied the price increases in 2022-2023. One example, how much did it cost to buy N95 face masks pre-pandemic and during the pandemic? Material in a facemask is insignificant except when demand increases. It does not cost more to make. The demand and shortage allows a seller to demand a higher price.

Notes: FTC Chair Lina Khan Calls for Investigation of High Grocery Prices, National Law Journal, August 2024