FTC chair says agency is taking aim at inflation caused by bad business behavior • Wisconsin Examiner

As consumers continue to face higher prices for groceries and other goods, the Federal Trade Commission is looking at whether some of those price hikes are driven by profiteering.

The agency is “using all of our tools to make sure that no American is paying more because of illegal business practices, be it at the grocery store, be it at the pump, be it at the pharmacy, on food and groceries in particular,” FTC Chair Lina Khan told reporters Thursday during a visit to Wisconsin.

Khan was in the Badger State for stops that included a round table discussion about a recent nursing home sale and a chat with reporters at the Madison office of Democratic Rep. Mark Pocan.

That conversation included a quick rundown of issues at the forefront of the FTC’s agenda. The agency enforces federal antitrust and consumer protection laws, “which are really about making sure that our markets are fair and honest and competitive, so that people can get a fair shake,” Khan said.

State price-gouging laws are intended to address momentary surges in the price of goods that take advantage of circumstances such as natural disasters. But the FTC focuses on “a broader set of corporate practices that we think may be unlawfully hiking up prices,” Khan said. 

Marcia Kasieta, business director of the Badger Prairie Needs Network, a nonprofit serving Dane County, said that the group’s food pantry has been pinched by soaring demand and soaring costs.

“This year my pantry is providing food assistance to 7,000 individuals a month,” Kasieta said — up from 2,200 a month just two years ago.

“Our purchasing budget has more than doubled in the last two years,” she said. “At today’s prices, with demand for food assistance continuing to climb, our budget next year will be eight times more than it was before the pandemic, and three times more than just two years ago.”

Khan said the FTC is looking at inflation in consumer prices from several angles.

One example is price discrimination. “Sometimes we hear from independent grocers they’re not able to get the same terms as the big retailers,” Khan said.

Some small retailers have reported that the prices wholesalers are charging them for an item exceeds the shelf price at a big chain store. “So, there seems to be potentially some discrimination going on there, maybe in unlawful ways,” she said.

The FTC has also opened a market inquiry to look at reports of “surveillance pricing — when companies may be able to charge each person a different price based on what they know about you,” she said.

For example, she suggested the possibility that based on consumer data that retailers collect from shoppers, a family whose child has a peanut allergy could be charged a higher price for a nut-free granola bar.

The FTC has ordered eight companies to submit information about their use of consumers’ personal information in setting prices. 

Business consolidation is another trend leading to higher prices, Khan said — whether by directly limiting competition, or by secretly and illegally colluding so that supposedly competing firms don’t undercut each other’s prices.

“We’ve seen some really serious allegations around this in housing, where some lawsuits have been brought, noting that different landlords have all been using the same algorithm to set their rents and they may effectively be engaging in price fixing,” Khan said.

In the food and agriculture sector, “more and more markets are controlled by fewer and fewer players,” she said. “We hear from a lot of farmers that they’ve seen their incomes go down even as consumers are paying more. That would suggest that it’s the entities in the middle that are taking a bigger and bigger cut.”

While prices spiked in the pandemic as supply chains were disrupted, prices have not come down on some products even as the costs to produce them have fallen again, Khan said. “So there’s a question — is it that the companies have the ability to keep prices inflated because there isn’t enough competition in the market?”

Because of concern it would reduce competition, the FTC is challenging the pending merger of supermarket giants Kroger and Albertson’s in federal court.

Khan said she couldn’t comment on details of the case because it remains in litigation, but Pocan observed Kroger and three other supermarket giants “control 70% of the grocery market in the United States.

It’s the FTC’s aim, Khan said, “to make sure that markets are not becoming further consolidated through mergers and acquisitions in ways that will further deprive people of choices that would result in lower prices.”

Before visiting Pocan’s office, Khan was in Baraboo Thursday morning for a community discussion about the recent sale of a county-owned nursing home to a for-profit company. The session was organized by a community group opposed to the sale.

Khan told reporters that while the transaction was in the purview of the Wisconsin Department of Health Services, which is reviewing the matter, and not the FTC, it raises issues about private equity that are on the FTC’s agenda.

“We are more generally concerned about the growing role of private equity, in particular, in parts of health care [and] nursing homes,” Khan said. “There has been some troubling research showing that mortality rates have actually increased after nursing homes have been bought by private equity.”