Every week, I go onto Walmart’s website and order a bunch of groceries to be delivered to my house and then feel a little bit guilty.
Walmart is a multi-billion dollar corporation with headquarters more than 1,000 miles from my home; the money I spend there goes to shareholders and executives who live far away, instead of to my local grocery store, Key Food, an 86-year-old co-op of independently owned stores based near my home in New York. By shopping at Walmart, I am likely contributing to the demise of the independently-owned grocery store, which is disappearing across the country.
But the prices make the choice easy. On a recent day, the 42-oz tub of Quaker Oats I get each week was $9.99 at Key Foods and $5.68 at Walmart; a 500 ml bottle of California Olive Ranch olive oil was $14.49 at Key Foods and $8.37 at Walmart; Rao’s homemade tomato sauce was $9.99, while I could have gotten the exact same item on Walmart for $6.88. On these three items alone, I saved $14 by shopping at Walmart.
These prices are one reason that Walmart captures one in four grocery dollars in America, but there’s an argument to be made that Walmart and other big chains including Dollar General, which is expanding at a rapid clip across the country, come by those prices unfairly because of their market power.
There’s a law on the books—1936’s Robinson-Patman Act—that essentially says suppliers in any industry can’t give lower prices and special deals to big chain stores if it costs the same to serve them as other stores. The law also says retailers can’t try and bully suppliers into giving those discounts.
But because Walmart and dollar stores are so huge, representing a big part of a supplier’s business, they’re able to extract deals and low prices from suppliers, according to Small Business Rising and the Main Street Competition Coalition, two groups of independent business owners making their case in Congressional hearings and television ads. The pandemic highlighted just how unfairly Walmart can wield its power, the small businesses are telling regulators, because it was able to demand that suppliers stock its shelves when competitors weren’t able to get the same products for weeks or months. It’s not just groceries; independent pharmacies, book stores, auto parts stores, and other types of retailers are also struggling on an uneven playing field, they say.
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Walmart’s leverage may seem like a good deal for consumers like me. In an era of runaway inflation, who doesn’t want the lowest prices they can get? But during the pandemic, it meant consumers living in lower-income areas far from big box stores weren’t able to get the groceries they needed. And the rise of Walmart contributes to the demise of those independent stores, the grocers say. Since suppliers lose money by giving such low prices to stores like Walmart, they increase the prices they charge to other stores, a phenomenon economists have called the “waterbed effect.” The higher-priced stores struggle, lose customers and go out of business. Then the big box stores, their dominance established and their competitors wiped out, raise prices, the grocers say.
“Walmart’s consolidation of the grocery market has led to people paying higher prices across the board,” says Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance (ILSR), an advocacy group challenging consolidation of corporations. At Walmart, for instance, an NPR investigation found that Walmart prices went up around 23% between August 2019 and December 2022; some of the steepest hikes included Quaker Old-Fashioned Oats, which climbed 73% between August 2019 and December 2022; and Bounty paper towels, which increased 67%, says Mitchell. Consolidation in the economy has increased prices across many industries, according to a recent paper from the Federal Reserve Bank of Boston. ILSR also points to the success of Dollar General, Dollar Tree, and Family Dollar stores in spreading across America, pushing independent grocers out of business, as another reason there’s an uneven playing field. They say the dominance of huge chain stores is proof the Robinson-Patman Act needs to be enforced.
Walmart did not respond to multiple requests for comment. FMI, the Food Industry Association, which represents Walmart, Target, and many other grocers, declined to comment. Neither Dollar General nor Dollar Tree, which also owns Family Dollar, returned a request for comment.
The argument that big chains need to be reined in has gained traction with the Federal Trade Commission, which is tasked with enforcing the Robinson-Patman Act. Under Chairperson Lina Khan, appointed in 2021, the FTC has embarked on an aggressive path of antitrust enforcement, and in March, Khan said that the agency wanted to bring more cases under the law “in short order.” (Khan wrote an influential critique of how antitrust policy failed to rein in Amazon while a student at Columbia Law School.) In addition, FTC Commissioner Alvaro Bedoya has embarked on a listening tour around the country, meeting with independent grocery stores and pharmacy operators and talking about how Robinson-Patman enforcement could help them thrive. The FTC has reportedly opened a preliminary investigation recently into whether pricing practices at Coca-Cola and PepsiCo violated Robinson-Patman, but has not yet brought a formal action.
“The law may be broken—grocery stores like yours, in the way I read the law, should be able to access the same deals as your competitors,” Bedoya told a room of people in July as he visited Oasis, an independent grocery store that opened in 2021 in North Tulsa, Okla., after the city passed an ordinance limiting the proliferation of dollar stores. “One of the big things that means is no secret discounts, no secret deals for one company versus another.”
Bedoya visited Oasis, which has thrived in a predominantly Black neighborhood, and Buche’s, an independent grocery store in Pine Ridge, S.D., in part because he hopes that enforcement of the law will allow more stores like them to proliferate.
“I do think that the corporate power in this country is such that slowly, folks—no matter what their politics are—are starting to say this is too much,” he said, to the people gathered, who included local politicians, residents, and people from other communities hoping to open independent grocery stores. “My hope is that five or 10 or 15 years from now, there will be bipartisan agreement that we need to work harder to protect small businesses like Oasis.”
A bipartisan group of 43 members of Congress, including representatives Hakeem Jeffries (D-N.Y.) and W. Gregory Steube (R-Fla.) wrote a letter to the FTC in March of 2022 asking it to bring more actions against companies that have violated Robinson-Patman. “The anticompetitive effects of discriminatory pricing and product supply directed to certain businesses (sometimes but not always small and medium-sized businesses) ripple through the entire supply chain—harming consumers as well as independent producers,” they wrote in the letter.
Why the Government May Go After Walmart
That government officials are standing up for independent businesses represents a sea change in how we think about what’s good and bad for the American shopper. For decades, the FTC and Justice Department have focused antitrust enforcement on protecting consumers from monopolies that can drive up prices, and concluding that if a shopper is getting a good deal and prices are low, there’s no reason for the government to step in. Enforcing Robinson-Patman would mean the government will focus less on whether I’m getting a good deal on groceries and more on whether the fabric of my community—and others that look very different from it—are better off with the status quo.
The biggest grocery stores and box stores aren’t evenly distributed around the country—they tend to be clumped in more affluent, suburban areas, Bedoya said, in an interview with TIME. Rural and urban areas are disproportionately served by independent grocers, and as dollar stores and big box stores come in and undercut those grocers on price, they go out of business. A Walmart located in the suburbs, even if it’s just eight or nine miles away from a center city, is not a good solution for neighborhoods where people don’t have cars or access to consistent public transit.
“What you’re left with is some of the poorest people in the country, some of the people in the most underserved areas, are left without a place to buy fresh groceries or just groceries, period,” Bedoya says.
For decades, small businesses in America have failed as lower-priced big box stores spread. Many Americans have, by and large, concluded—with views bolstered by pop culture hits like the movie You’ve Got Mail—that small stores can’t compete in a free market where big boxes can win on efficiency. But the FTC is challenging the long-held assumption that the death of independently-owned stores is inevitable in an age of Walmart and Amazon.
“That was unequivocally the heart of Robinson-Patman,” says Bedoya. “That $1 spent at the local store becomes $30 within the community and that this is good for our community in a way that the chains are not.” The Robinson-Patman Act was passed in 1936 in response to the supermarket giant A&P, which was spreading across the country and putting local grocers out of business. Congress decided that Robinson-Patman could help the independent grocers compete with A&P, which seemed important during the Great Depression when stores were going out of business left and right. A&P didn’t offer credit, like the local grocer did, and it didn’t deliver groceries, two reasons why Congress supported Robinson-Patman, says Bedoya.
Small groceries say Walmart sometimes sell groceries for less than they can get them wholesale.
Jeffrey Greenberg/Universal Images Group via Getty Images
For a long time, from when it was passed until the late 1960s, Robinson-Patman was “a prime enforcement priority” of the FTC, John Kirkwood, an antitrust expert and professor of law at Seattle University School of Law. But the field of antitrust underwent a populist revolution starting in the late 1960s and 1970s, in which academics, lawyers, and eventually judges, decided it was more important to prioritize consumer welfare than small businesses. A 1969 report by Ralph Nader excoriated the Federal Trade Commission for protecting small businesses, arguing that doing so drove up prices for consumers.
In the wake of the Nader report and the populist push to prioritize consumer welfare over all else, the FTC and Justice Department slowed the pace of bringing cases under Robinson-Patman. Those that they did bring were less and less successful, until it became extremely difficult to bring a Robinson-Patman case and win, says Kirkwood, who was the lead counsel on one of the last Robinson-Patman cases brought by the FTC, filed in 1988.
The Problem With Walmart’s Low Prices
On one hand, it makes sense Walmart would get lower prices from the cereal company or the juice seller. It’s ordering huge amounts of product and that sheer volume creates efficiencies that arguably save suppliers money. But the grocers are arguing that Walmart and big boxes aren’t actually creating efficiencies—while still using their size to extract deals.
The law allows for suppliers to give retailers a better price if it saves them money to do so, says Bedoya. “If it’s actually cheaper to make and sell someone 1,000 widgets because of some efficiency that you earn at the factory, fine, pass it along, no problem,” he says. “But when it’s the purchaser of 1,000 widgets saying, ‘Hey, I’m big and powerful and you’re gonna give me this deal no matter what,’ for almost 100 years, the federal government has responded with ‘you can’t do that.’”
Many independent grocers have banded together into cooperatives so they’ll have more bargaining power. Those giant co-ops buy billions of dollars of groceries and have warehouses all around the country, just like Walmart does. Associated Wholesale Grocers, for instance, is a food co-op that serves 3,400 member supermarkets, representing $24 billion in sales. By contrast, there are 4,631 Walmarts in the U.S. AWG buys goods by the truckload, rather than the case, so a supplier sends a truck to its warehouse in the same way it would send a truck to Walmart, says David Smith, the president and chief executive officer of Associated Wholesale Grocers (AWG).
When Robinson-Patman was enforced in the 1970s, says Smith, who grew up in the grocery business, suppliers would issue rate cards to tell grocery stores how much an item cost, depending on how much the stores bought. A case, a pallet, and a full truckload of a product would all have different rates. But in the last three decades, he says, as Walmart has grown and gained market power, “there’s no transparency whatsoever. And what’s happening is efficiency is being surpassed by leverage.”
As Walmart has grown over the last three decades, it has gained leverage because of its huge market share—25% of all groceries purchased, compared to around 10% at competitors like Kroger and Costco. AWG’s stores are around 6,000 square feet, compared to 110,000 of a typical Walmart, says Jason Goldberg, chief commerce strategy office at Publicis Group —and so they buy far less product overall.
Suppliers haven’t issued list prices to retailers in decades, Goldberg says; instead, they sit down with retailers and negotiate prices alongside joint marketing spending and product placement. Deals are very hard to compare because they have so many moving parts, but one thing is for sure: “The retailers with the least leverage are going to pay the most,” he says, “and the biggest retailers with the most leverage are going to pay the least.”
The grocers say that the discounts Walmart gets are not commensurate with the efficiencies the company creates. Many store owners have experiences like that of R.F. Buche, who owns 23 independent grocery, convenience, and hardware stores in South Dakota, including the store that Bedoya visited in Pine Ridge. He will sometimes walk into a Walmart and see lower prices on the shelves than he can get wholesale through AWG. In December, for instance, he saw Walmart selling a dozen eggs for $2.27 when he was buying them for $3; Walmart was selling iceberg lettuce for $1.88 a head when he was getting it for $4.46.
“My customers just don’t understand when they look at my shelf price and Walmart’s shelf price,” says Buche, who has had to sell three stores since 2019 because it was impossible to keep them afloat.
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Suppliers’ allegiance to Walmart worsened during the pandemic, say Buche and other grocers. Because Walmart makes up such a big share of a supplier’s business, they could demand on-time delivery even during the pandemic, when everything was running late. In September 2020, Walmart told suppliers they needed to be making on-time and in-full shipments 98% of the time or face steep fines; as a result, suppliers shifted whatever they had available to Walmart. Buche and independent grocers, on the other hand, couldn’t get the items their customers needed, and so their customers switched over to the box stores. It’s perfectly legal for Walmart to enforce those terms; independents could try enforcing them too, but would likely have a harder time doing so because they represent a much smaller share of a suppliers’ business.
Suppliers mince no words explaining how dependent they are on Walmart; in regulatory filings, giants like Kraft Heinz and Nestle mention Walmart by name, explaining that consolidation in grocery has led to customers with increased purchasing power, and that those customers can demand lower pricing, more favorable terms, and more promotional programs.
Federal Trade Commission Commissioners Rebecca Kelly Slaughter (L) and Alvaro Bedoya (R) sit behind FTC Chair Lina Khan as she testifies before the House Judiciary Committee on July 13, 2023.
Chip Somodevilla/Getty Image
Buche says he’s still “on allocation” from hundreds of manufacturers, meaning he can only get a certain amount of certain products, while he sees no evidence of such shortages at Walmart. Sometimes, stores like Dollar General and Walmart will stock products that he isn’t even offered—different sizes or configurations. That’s what is unfair, grocers say—that there appears to be a whole different market for the big guys that’s invisible to everyone else.
“If we’re willing to purchase the same quantities of product as the competition, we should be afforded the same price,” says Chris Jones, senior vice president of government relations at the National Grocers Association, a trade group representing independent grocers. “But those conversations don’t even happen.”
Advocates for business, however, say enforcement of Robinson-Patman would result in higher prices for consumers. By enforcing the law, said former FTC Commissioner Joshua Wright at a Cato Institute event in 2022, the government would not be prioritizing consumer welfare, but would be instead just assuming that “big is bad.”
Who Gets Hurt When Independent Stores Go Out of Business
If you live near a box store—and 90% of Americans live within 10 miles of a Walmart—it may not seem important that there are fewer independent grocery stores, or that prices are going up at those places.
Indeed, some analysts make the argument that small stores aren’t really that necessary, especially in the world of e-commerce. Walmart delivers to my house, after all—can’t it also deliver to food deserts?
“There’s simply no legitimate argument that somehow the U.S. will be worse off if smaller groceries go out of business—as long as there is a replacement for consumers to buy groceries,” says Britain Ladd, a logistics analyst who has tracked the disappearance of small grocery stores. Even if Robinson-Pattman were enforced and prices from suppliers were more even, he argues, many independent grocery stores would fail anyway. They can’t invest in the automation or technology that the giants can, and have a harder time keeping costs down.
But communities that have lost independent grocery stores say their residents don’t have any other options. “Everyone deserves access to healthy foods and eating options,” says Latisha Brunson, a council woman in Pine Bluff, Ark., where a grocery store closed in November 2022, leaving her ward the only one in the city without one. Her ward does have dollar stores with shelf-stable products, but now residents can’t shop for fresh food without a car.
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In theory, Robinson-Patman should have helped keep Pine Bluff’s independent grocer’s open. But it’s going to be “a heavy lift” for the FTC to successfully start enforcing the law again, says Kirkwood, the Seattle University professor.
If the FTC does file cases under Robinson-Patman, they will eventually end up in appeals courts and maybe even the Supreme Court, and both are likely to take a dim view of it because they are so conservative, he says. “You’d have to go up against these judges [who think] it’s the left-wing FTC trying to revive the Robinson-Patman Act when sensible business types think it is a bad idea,” he says. Prosecuting a Robinson-Patman violation might work if the government can prove that consumers, not just small businesses, were the victims of this price bullying, says Kirkwood.
This seems to be the FTC’s tack, and could be why Commissioner Bedoya is visiting communities like North Tulsa and Pine Ridge, where dollar stores and big boxes have made it hard for independent groceries to compete and for consumers to get the groceries they need.
However, there’s a big question for consumers here: whether the FTC’s enforcement actions could drive prices up. I like the idea of shopping at Key Foods, after all, but my pocketbook vastly prefers the cheap prices at Walmart. I should, I suppose, be willing to pay a little more so that Americans living far from a big box store can also get fresh groceries, but few people are going to volunteer to pay higher prices on behalf of an unknown fellow citizen.
Economists are still divided on whether Robinson-Patman enforcement truly raises prices; there are studies that show it does, and studies that show it doesn’t. If the FTC can somehow prove that enforcement won’t raise prices, that it will instead create a country with big chain stores and small independents with similar prices, it may have a fighting chance at restarting enforcement after more than 30 years. But it’s going to be an uphill battle.
And if people like me keep shopping at Walmart while they fight that battle, giving Walmart even leverage, it could get even harder.
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