Competition in Food Retail and Distribution Markets and Access for Agricultural Producers and Small and Midsized Food Processors

CourtAgricultural Marketing Service,Agriculture Department
Published date17 March 2022
Record Number2022-05669
Federal Register, Volume 87 Issue 52 (Thursday, March 17, 2022)
[Federal Register Volume 87, Number 52 (Thursday, March 17, 2022)]
                [Notices]
                [Pages 15194-15198]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2022-05669]
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                DEPARTMENT OF AGRICULTURE
                Agricultural Marketing Service
                [Doc. No. AMS-AMS-22-0026]
                Competition in Food Retail and Distribution Markets and Access
                for Agricultural Producers and Small and Midsized Food Processors
                AGENCY: Agricultural Marketing Service, USDA.
                ACTION: Notice; request for public comments.
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                SUMMARY: On July 9, 2021, President Biden issued an Executive Order on
                ``Promoting Competition in the American Economy,'' which creates a
                White House Competition Council and directs Federal agency actions to
                enhance fairness and competition across America's economy. The
                Executive Order directs the Secretary of Agriculture (the Secretary),
                among other things, to submit a report on the effect of retail
                concentration and retailers' practices on the conditions of competition
                in the food industries. This notice requests comments and information
                from the public to assist the U.S. Department of Agriculture (USDA) in
                preparing the report required by the Executive Order and advancing
                policy steps to promote competition in the food and agricultural
                markets.
                DATES: Comments must be received by May 16, 2022.
                ADDRESSES: All written comments in response to this notice should be
                posted online at www.regulations.gov. Comments received will be posted
                without change, including any personal information provided. All
                comments should reference the docket number AMS-AMS-22-0026, the date
                of submission, and the page number of this issue of the Federal
                Register. Comments may also be sent to Jaina Nian, Agricultural
                Marketing Service, USDA, Room 2055-S, STOP 0201, 1400 Independence
                Avenue SW, Washington, DC 20250-0201. Comments will be made available
                for public inspection at the above address during regular business
                hours or via the internet at www.regulations.gov.
                FOR FURTHER INFORMATION CONTACT: Jaina Nian, Agricultural Marketing
                Service, at (202) 378-2541; or by email at [email protected].
                SUPPLEMENTARY INFORMATION:
                I. Background
                 On July 9, 2021, President Biden issued Executive Order 14036,
                ``Promoting Competition in the American Economy'' (86 FR 36987)
                [[Page 15195]]
                (E.O. 14036). E.O. 14036 focuses on the need for robust and open
                competition in the American economy to secure broad and sustained
                economic prosperity, promote the welfare of workers, farmers, small
                businesses, startups, and consumers, and prevent the threat that
                excessive market concentration poses to basic economic liberties and
                democratic accountability. With respect to agriculture E.O. 14036
                notes:
                 Consolidation in the agricultural industry is making it too hard
                for small family farms to survive. Farmers are squeezed between
                concentrated market power in the agricultural input industries--
                seed, fertilizer, feed, and equipment suppliers--and concentrated
                market power in the channels for selling agricultural products. As a
                result, farmers' share of the value of their agricultural products
                has decreased, and poultry farmers, hog farmers, cattle ranchers,
                and other agricultural workers struggle to retain autonomy and to
                make sustainable returns.
                 In relevant part, E.O. 14036 directs the Secretary, among other
                things--
                to improve farmers' and smaller food processors' access to retail
                markets, not later than 300 days after the date of this order, in
                consultation with the Chair of the FTC, [to] submit a report to the
                Chair of the White House Competition Council, on the effect of
                retail concentration and retailers' practices on the conditions of
                competition in the food industries, including any practices that may
                violate the Federal Trade Commission Act, the Robinson-Patman Act
                (Pub. L. 74-692, 49 Stat. 1526, 15 U.S.C. 13 et seq.), or other
                relevant laws, and on grants, loans, and other support that may
                enhance access to retail markets by local and regional food
                enterprises.
                 This notice requests comments and information from the public to
                assist USDA in preparing and executing the report required by E.O.
                14036. To facilitate those comments and information on access to retail
                markets, we highlight certain questions and concerns that are relevant
                to our efforts.
                 Consolidation in food retail and related parts of the supply chain,
                such as distribution, present potential risks of unfair and
                anticompetitive practices throughout the food supply chain. Increases
                in concentration have been an important trend in food retail over the
                last few decades, as the share of single-store firms or local chains
                has declined from 55 percent in 1977 to 35 percent as of 2007, while
                the concentration ratio of the four largest food retailers hit 34
                percent in 2019.\1\ Food distribution is concentrated in certain
                markets as well, with two firms dominating upwards of 70 percent of the
                national broadline distribution market.\2\ Additionally, insufficient
                analytic attention has been paid to the connections between retail,
                distribution, and processing firms and the implications for competition
                in the food and agricultural supply chains.
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                 \1\ Retail Trends, Economic Research Service, USDA, available at
                https://www.ers.usda.gov/topics/food-markets-prices/retailing-wholesaling/retail-trends/ (last accessed March 2022); Lucia Foster,
                John Haltiwanger, Shawn Klimek, C.J. Krizan, and Scott Ohlmacher,
                (2016), ``The Evolution of National Retail Chains: How We Got
                Here,'' Handbook of the Economics of Retailing and Distribution,
                Emek Basker, ed. London, UK: Edward Elgar Publishing.
                 \2\ See Federal Trade Commission v. Sysco Corporation, U.S.
                Dist. Ct. (D.C.), Memorandum of Opiniont (2015), available at
                https://www.ftc.gov/system/files/documents/cases/150623syscomemo.pdf; see also, generally, ``Wholesaling,'' USDA
                Economic Research Service, available at https://www.ers.usda.gov/topics/food-markets-prices/retailing-wholesaling/wholesaling/ (last
                accessed March 2022).
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                 The rise in food retail and distribution concentration in recent
                decades potentially impacts agricultural producers and small, midsized
                and otherwise independent (SME) processors--as well as potentially
                ultimately impacting consumers. Concentration in food retail and
                distribution may magnify and contribute to consolidation among meat and
                poultry processing firms, among other food system market
                participants.\3\ Such firms themselves may consolidate to secure
                leverage against consolidated food retail firms, which in turn may make
                it more difficult for SME processors to access food retail markets.
                Concerns relating to exclusionary and predatory conduct in food retail
                and distribution thus may be particularly relevant to the viability of
                new and expanded meat and poultry processing facilities and other new
                food system market entrants, which are receiving over $1 billion of
                support under the White House Meat and Poultry Processing Supply Chain
                Action Plan.\4\
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                 \3\ Four large meat-packing companies dominate over 80 percent
                of the beef sales market and, yet, over the last five years,
                farmers' share of the price of beef has dropped by more than a
                quarter--from approximately 52 percent to 37 percent--while the
                price of beef for consumers has risen. Four large meat-packing
                companies dominate about 70 percent of the pork market, and four
                large poultry integrators make up 54 percent of the poultry market,
                although a pending merger would raise that further. Annual Report,
                Packers and Stockyards Division, USDA, available at https://www.ams.usda.gov/reports/psd-annual-reports (last accessed March
                2022).
                 On monopsony's effects up the supply chain, generally, see Barry
                Lynn, Cornered (New York: Wiley, 2010).
                 \4\ Meat and Poultry Supply Chain, USDA, available at https://www.usda.gov/meat (last accessed March 2022).
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                 USDA will use public comments received through this notice to
                inform our policymaking and advocacy to help increase fairness and
                competition in food retail and related segments of the American food
                and agricultural markets. We are particularly interested in the role
                that rules, regulations, and enforcement under the Packers and
                Stockyards Act of 1921 and the Robinson-Patman Act of 1936--both of
                which were designed to regulate discriminatory limits on market
                access--may play in enhancing market access for agricultural producers
                and SME processors to retail markets, and especially in preventing
                predatory pricing by incumbent market participants to exclude new
                market entrants and competitors.
                 We are also interested in comments addressing the role that grants,
                loans, and other programs and services may play to enhance access to
                retail markets by agricultural producers, SME food processors, and
                other local and regional food enterprises. The Department is
                particularly interested in the role that cooperative or community-owned
                grocery retail and food distribution networks have or may play in
                addressing market challenges and in better serving producer, worker,
                community, and consumer needs, for example in remote locations or
                underserved communities.
                 Commenters may further provide information relevant to promoting
                local and regional food systems, creating new market opportunities
                (including for value-added agriculture and value-added products),
                advancing efforts to transform the food system, meeting the needs of
                the agricultural workforce, supporting and promoting consumers'
                nutrition security, particularly for low-income populations, and
                supporting the needs of underserved and small to mid-sized producers
                and processors.
                II. Written Comments
                 USDA encourages commenters, when addressing the elements below, to
                clearly indicate the question their comments are responding to by
                repeating the text of the question before their response. This would
                assist USDA in more easily reviewing and summarizing the comments
                received in response to these specific comment areas. In addition, USDA
                welcomes commenters to refer, with appropriate explanation, to any
                views set forth in recently or previously submitted comments, such as
                those to E.O. 14017 ``America's Supply Chains'' (No. AMS-TM-21-0034)
                (86 FR 20652) or ``Investments and Opportunities for Meat and Poultry
                Processing Infrastructure'' (No. AMS-TM-21-0058) (86 FR 37728).
                 This request for information includes but is not limited to the
                following elements. The questions below are meant to stimulate
                comments, and
                [[Page 15196]]
                commenters should feel free to respond to those they feel most relevant
                to them, or as their time and interests permit. Comments may overlap or
                be organized as the commenter feels most appropriate. Please offer
                descriptive or quantitative information, as available and relevant.
                Competition and Impacts
                 (1) Are market concentration and power, and lack of competition,
                problems in food retail and distribution markets? If so, where and in
                what ways? What practices in the food retail and distribution markets
                are most concerning from a competition standpoint? Are there particular
                practices that exclude or disadvantage new market participants or
                potential market participants, unfairly transfer risk, or otherwise
                abuse market power or make it harder to compete? Please describe
                specific experiences and challenges, if possible.
                 (2) How do concentration and size in the food retail and
                distribution markets affect the ability of agricultural producers and
                new, SME food processors to access the retail marketplace? Are
                agricultural producers and SME food processors that serve local and
                regional markets affected differently? Are there regional and other
                demographic variations to any of the impacts? Please describe specific
                experiences and challenges, if possible.
                 (3) How does competition and concentration among distributors and
                other parts of the wholesale food market relate to food retail
                concentration and competition? How do distribution and wholesale food
                market competition and concentration affect access to markets for
                agricultural producers and SME food processors? Does buying power of
                some retailers at the wholesale level make it difficult for some
                producers or SME processors to access distribution within these
                channels?
                 (4) How are SME grocery retailers specifically affected by
                concentration and potentially anticompetitive practices in food retail
                markets? What about distributors that may serve them? Do any of those
                challenges affect agricultural producers and SME food processors?
                Please describe specific experiences and challenges, if possible.
                 (5) How are smaller food service businesses, schools, hospitals,
                and other institutional food buyers affected by concentration or
                potentially anticompetitive practices in food processing and
                distribution? What effects do concentration and potentially
                anticompetitive conduct have on food prices, quality and safety,
                distribution and availability of healthy foods that meet nutrition
                standards, or other needs specific to these buyers and food providers?
                 (6) How are workers, consumers, other small businesses,
                communities, and others along the food supply chain affected by
                concentration or potentially anticompetitive practices in food retail
                and distribution markets? What effects do concentration and potentially
                anticompetitive conduct have on food prices, quality and safety;
                distribution and accessibility to healthy foods, and food and nutrition
                security; and worker empowerment, equity for underserved producers, and
                environmental sustainability? Are challenges with food deserts
                aggravated by concentration or competition issues in the food and
                agricultural supply chains? Do impacts to any of these concerns vary by
                region, commodity, or by other demographics?
                Business Practices
                 (7) Please describe the role that exclusive dealing arrangements
                play in the food retail and distribution marketplaces. Do they
                facilitate, inhibit, or otherwise affect opportunities in the industry
                for SME processors? How do they affect the development of new products
                and the growth, diversity, or resilience of the industry? Do they
                facilitate, inhibit, or otherwise affect product quality and risk
                management? Do differences in commodity, product, or region affect the
                practices, risks, barriers, or outcomes? Are tribal businesses and
                enterprises and underserved communities affected differently? Does the
                size, scale, or market power generally of the companies involved in
                such an arrangement matter for how these arrangements affect
                competition?
                 (8) Please describe the role that slotting fees, category captains,
                and other preferential access or discounts play in retail food markets,
                including but not limited to meat and poultry. Are certain segments,
                such as organic or value-added products like grass-fed meats, affected
                differently? What affect do such behaviors have on access to the retail
                marketplace? How are preferential relationships in the marketplace
                manifested, and do those relationships limit new market entrants from
                accessing the marketplace? Do those relationships improve risk
                management or otherwise enhance market access in certain circumstances?
                Should any of these practices be limited or changed to support new
                market entrants, and if so, how?
                 (9) If you are a small or mid-sized producer, have you had to
                change any business or marketing practices in order to effectively
                navigate required slotting fees to gain market access? Have these
                changes negatively impacted the overall profits of the products you
                sell? Do you believe that slotting fees are adversely or unfairly
                deployed against small or mid-sized producers or otherwise affect
                market access and what is the basis for your belief?
                 (10) Please share any concerns relating to predatory pricing by
                incumbent food processors, threats of retaliation by incumbent food
                processors against retailers for offering new or different products, or
                other practices designed to exclude competitors from the marketplace.
                When and where have they occurred? Were antitrust enforcement tools
                able to address the challenges in a timely and effective manner? If
                not, why not?
                 (11) Please comment on implications, negative or positive, of
                mergers in the food retail or distribution sectors. Have certain
                mergers changed contracting or sales practices? Have certain mergers
                allowed the acquisition of rivals or technologies or companies that
                competitor firms rely on? Have mergers negatively or positively
                impacted workers? Have mergers delivered efficiencies?
                Information and Supply Chain Market Structures
                 (12) What roles do control and access to retail data play in
                competition and access for farmers and SME food processors? Are there
                significant imbalances in access to information among producers,
                packers, distributor, and retailers, and how do those imbalances affect
                choices and outcomes in the market? Describe the role that data sharing
                between food retail companies and larger food processors, such as
                packers, plays in the market environment, if any. How do any
                differences affect competition and market access, and should any of
                these be limited, and if so how?
                 (13) Describe the role that retailer ownership, including
                financing, of livestock and packing play in supply chain competition
                and access to retail for producers and SME processors? Are competition
                concerns, if any, similar in other agricultural commodity markets? Have
                these practices reduced or eliminated the need for, or competition
                among, certain suppliers to some retail firms? Are certain segments,
                such as organic or value-added products like grassfed meats, affected
                differently? Should ownership, financing, or other forms of vertical
                integration be promoted, limited, or otherwise changed, and, if so,
                how?
                 (14) Please discuss how transportation--including rail and
                [[Page 15197]]
                ocean shipping--and delivery systems may affect competition in food
                retail and distribution. Are certain ownership structures, business
                relationships, or business practices of particular concern? How do
                transportation costs, fees, or levels of service affect the
                competitiveness of downstream businesses? Has concentration in
                transportation industries led to negative service outcomes or other
                potentially unfair practices? Have contractual arrangements that
                penalize suppliers, including transportation companies, for not
                delivering in sufficient quantities or on other particular terms become
                more prevalent? Have they become problematic as market power has grown,
                or in certain circumstances?
                 (15) Describe the role that label claims and labeling standards
                play in access to retail markets for agricultural producers. Are public
                or private resources sufficiently available for smaller agricultural
                producers seeking to develop or use labels? Do labels standards,
                verification, and enforcement appropriately support access to markets
                for agricultural producers and SME processors? Are there any instances
                when a larger supplier used, including potentially misused, a label to
                gain market access or advantage over smaller producers or SME
                processors? Please share concerns and recommendations, if any.
                 (16) What role, if any, does financing or financial markets play
                any of the issues addressed above?
                 (17) Are there any other aspects of the regulatory environment that
                affect retail market competition and access to retail for producers and
                SME processors? Are there specific elements of these requirements that
                could be more effectively tailored? What types of resources would be
                helpful to assist SMEs with compliance?
                Policy Responses
                 (18) How can antitrust and market regulation and enforcement,
                including relating to mergers, unfair practices, and price
                discrimination, do more to address competition concerns in food retail
                and distribution markets? Should Federal and state antitrust enforcers
                place greater emphasis on adverse consequences of buyer power? Should
                greater attention be paid to information asymmetries and preferential
                access to data? How could USDA utilize its regulatory and enforcement
                authorities more effectively?
                 (19) How can predatory pricing by entrenched market participants be
                better identified and acted upon by relevant enforcement authorities?
                Can laws that prohibit discriminatory or preferential pricing, such as
                the Packers and Stockyards Act and the Robinson-Patman Act, play a
                greater role in preventing predatory pricing schemes, or otherwise
                promote greater food market access for agricultural producers and SME
                processors? Please explain.
                 (20) How could other USDA programs, services, and authorities be
                further deployed to enhance access to retail markets for agricultural
                producers and SME food processors? For example--
                 How might grants, loans, and other support from USDA
                enhance access to retail markets by local and regional food
                enterprises?
                 How might USDA marketing programs enhance access to retail
                markets for agricultural producers and SME food processors, including
                programs which facilitate access to a variety of markets, support
                value-added production and product diversification; increase
                diversification in distribution channels and market development, such
                as food hubs, non-profit and cooperative distribution models; and
                provide technical assistance to producers that helps access USDA
                programs and improve market readiness? \5\
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                 \5\ See, e.g., ``USDA Announces Supplemental American Rescue
                Plan Funding Available through the Local Agriculture Market Program,
                Including Funding to Expand Farm-to-Institution Opportunities,''
                USDA, March 1, 2022, available at https://www.usda.gov/media/press-releases/2022/03/01/usda-announces-supplemental-american-rescue-plan-funding-available.
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                 How might food and nutrition grant and loan programs
                better support competition in retail and better access for producers
                and SME processors? \6\
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                 \6\ See, e.g., Healthy Food Financing Initiative, available at
                https://www.investinginfood.com/what-we-do/ (last accessed March
                2022).
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                 How might government procurement processes further support
                agricultural producers and SME processors effectively access
                institutional customers, such as schools and hospitals? \7\
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                 \7\ See USDA Agricultural Marketing Service, ``Commodity
                Procurement,'' available at https://www.ams.usda.gov/commodity-procurement (last accessed March 2022).
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                 Are there ways to facilitate easier access to food safety
                compliance resources, and other ways to level the playing field for SME
                processors? \8\
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                 \8\ For more information, see ``Food Safety,'' Agricultural
                Marketing Service, available at https://www.ams.usda.gov/services/local-regional/food-sector/food-safety (last accessed March 2022).
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                 What additional information or transparency could USDA's
                Market News Service provide on retail, wholesale, or distribution
                markets, through the Livestock Mandatory Reporting Act of 1999 or
                otherwise? \9\ Are there information or educational tools, services, or
                access to data that could be helpful?
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                 \9\ See USDA Market News, ``Retail Reports,'' available at
                https://www.ams.usda.gov/market-news/retail (last accessed Feb.
                2022).
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                 What additional market analysis or advocacy could USDA do
                with respect to local and regional food systems, transportation, or
                otherwise that could support fair and competitive food retail and
                distribution markets? \10\
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                 \10\ See USDA Agricultural Marketing Service, ``Market Research
                and Analysis,'' available at https://www.ams.usda.gov/services/market-research (last accessed March 2022).
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                 How else can competition be enhanced in food retail,
                distribution, and related areas? Please discuss any other relevant
                matters USDA should consider.
                III. Requirements for Written Comments
                 The www.regulations.gov website allows users to provide comments by
                filling in a ``Type Comment'' field or by attaching a document using an
                ``Upload File'' field. USDA prefers that comments be provided in an
                attached document. USDA prefers submissions in Microsoft Word (.doc
                files) or Adobe Acrobat (.pdf files). If the submission is in an
                application format other than Microsoft Word or Adobe Acrobat, please
                indicate the name of the application in the ``Type Comment'' field.
                Please do not attach separate cover letters to electronic submissions;
                rather, include any information that might appear in a cover letter
                within the comments. Similarly, to the extent possible, please include
                any exhibits, annexes, or other attachments in the same file, so that
                the submission consists of one file instead of multiple files. Comments
                (both public comments and non-confidential versions of comments
                containing business confidential information) will be placed in the
                docket and open to public inspection. Comments may be viewed on
                www.regulations.gov by entering docket number AMS-AMS-22-0026 in the
                search field on the home page. All filers should name their files using
                the name of the person or entity submitting the comments. Anonymous
                comments are also accepted. Communications from agencies of the United
                States Government will not be made available for public inspection.
                Anyone submitting business confidential information should clearly
                identify the business confidential portion at the time of submission,
                file a statement justifying nondisclosure and referring to the specific
                legal authority claimed, and provide a non-confidential
                [[Page 15198]]
                version of the submission. The nonconfidential version of the
                submission will be placed in the public file on www.regulations.gov.
                For comments submitted electronically containing business confidential
                information, the file name of the business confidential version should
                begin with the characters ``BC.'' Any page containing business
                confidential information must be clearly marked ``BUSINESS
                CONFIDENTIAL'' on the top of that page. The non-confidential version
                must be clearly marked ``PUBLIC.'' The file name of the nonconfidential
                version should begin with the character ``P.'' The ``BC'' and ``P''
                should be followed by the name of the person or entity submitting the
                comments or rebuttal comments. If a public hearing is held in support
                of this supply chain assessment, a separate Federal Register notice
                will be published providing the date and information about the hearing.
                Melissa R. Bailey,
                Associate Administrator, Agricultural Marketing Service.
                [FR Doc. 2022-05669 Filed 3-16-22; 8:45 am]
                BILLING CODE P
                

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