Chairman Cicilline’s Opening Statement at Antitrust Subcommittee Hearing on Food Supply

WASHINGTON, DC – Congressman David N. Cicilline, Chairman of the House Committee on the Judiciary Subcommittee on Antitrust, Commercial and Administrative Law, is today holding a hearing, “Reviving Competition, Part 5: Addressing the Effects of Economic Concentration on America’s Food Supply.” The Congressman’s opening statement, as prepared for delivery, is below.

Statement of the Honorable David N. Cicilline, Chairman,Subcommittee on Antitrust, Commercial and Administrative Law
 Hearing on “Reviving Competition, Part 5: Addressing the Effects of Economic Concentration on America’s Food Supply”
 Wednesday, January 19, 2022, at 10:00 a.m.Virtual Via Zoom

 Across the country, food prices are soaring, families are going hungry, and small businesses are suffering.
 In the wake of recent COVID outbreaks caused by the Omicron variant and weather disruptions, people cannot believe their eyes when they see entire barren sections at their grocery stores.
 Across the country, workers are calling out sick due to the surge in covid cases; truck deliveries and other shipments are facing delays; and people are panic-buying—all leading to product shortages.
 Small businesses and food banks are struggling. And with pandemic profiteering driving up costs, our most vulnerable neighbors are buying their groceries at Dollar Stores just to make ends meet.
 And while prices are declining and are expected to continue to fall in the months ahead, we have seen versions of this story play out repeatedly in recent years due to deep, structural problems in our economy.
 Today, nearly every link of America’s food supply chain is dominated by less than a handful of corporations. We’ve seen consolidation trigger more consolidation, which has caused a domino effect throughout our nation’s food supply.
 In the beef-processing market, for example, four dominant companies control 85% of the market.
 The four largest poultry processing companies made up more than half of the market in 2015, up from 35% of the market in 1986.
 In the pork market, the top four firms control more than two-thirds of the market, double their market share from 1976.
 And, according to the Open Markets Institute, waves of mergers have resulted in four grocery chains controlling 72% of local markets.
 In 2019 alone, there were more than 300 food industry mergers and acquisitions.
 A joint investigation by the Guardian and Food and Water Watch likewise revealed that four firms or fewer controlled more than 40% of market share for the vast majority of groceries.
 They noted, “The size, power and profits of these mega companies have expanded thanks to political lobbying and weak regulation which enabled a wave of unchecked mergers and acquisitions.”
 As a result, hardworking Americans all across this country are paying more as food prices skyrocket, particularly for meat.
 Large corporations have also squeezed out independent businesses that are lifelines to our local communities and critical sources of competition to these dominant firms.
 As Michael Needler will testify today, dominant retail companies have become so powerful that they “have become essential gatekeepers for America’s food suppliers,” giving them power to “extract discriminatory terms—better prices, more favorable terms, unfair allocations of products.”
 Beyond the cost of food, this unchecked consolidation has resulted in the presence of chokepoints throughout America’s food supply chain, creating much of the fragility Americans are experiencing every day.

In competitive markets, there are many businesses of different sizes that can offer a variety of solutions in response to disruptions, such as extreme weather. And if one supplier has a problem, others can fill the gap.
 The corporate consolidation we have seen in the food industry has destroyed that diversity.
 In my district, Ruarri Miller, the owner of Union Burrito, said in a statement for today’s hearing that while mergers may create some economies of scale, “show me the savings I have enjoyed when rocked by bottlenecks and price-hikes in centralized supply chains over the last 18 months.”
 In many cases, smaller, more agile independent businesses have left the market, leaving fewer and larger corporations that are unable to pivot quickly or offer different solutions to supply disruptions.
 And when a single facility controls a large portion of production, one problem with that one factory’s production process can have ripple effects throughout the country.
 As the American Antitrust Institute has noted, “these food goliaths can exercise their market power to suppress competition, which alone is problematic. But as the COVID-19 crisis has demonstrated, such concentration has also contributed to unstable supply chains.”
 For example, in 2019, a fire at a Kansas meat-production facility affected 6% of the entire beef market in the United States, causing shortages for ground beef and steak throughout the country.
 After the fire, prices for beef soared from $153 per cattle to $344 just a week later, while profit margins climbed 10% for the entire industry.
 In April 2020, the Chairman of Tyson Foods took out a full-page advertisement in the New York Times to warn that “the food supply chain is breaking,” adding that “millions of pounds of meat will disappear from the supply chain” due to closures in the wake of the pandemic.
 Last year, an organized cyberattack forced JBS Foods—which controls nearly a quarter of beef processing in the United States—to close all of its facilities in the United States, resulting in a steep reduction of beef processing capacity and a spike in prices.
 And more recently, winter storms and COVID outbreaks have caused delivery delays and empty shelves in grocery stores across the Eastern Seaboard, and jacked up prices for locally owned businesses.
 In the backdrop of these trends, there is also widespread evidence of corporate profiteering. 
 Why?
 They are raising prices because they can, as Federal Reserve Chairman Jay Powell recently testified.
 For example, earlier this month, Walmart and Kroger—the two most dominant grocery chains in the country—announced that they would jack up the price for rapid covid tests following the expiration of an agreement with President Biden to maintain them at affordable levels.
 This is nothing less than pandemic profiteering as we enter the third year of an economic and public-health crisis.
 While prices are rising, corporations are seeing record profits—demonstrating that they are not absorbing the supply shocks exacerbated by the pandemic. Instead, they are taking advantage of the American people to line their pockets in the midst of this crisis.
 In some cases, companies are using the cover of reduced supply to drive prices even higher, while consumers and workers suffer.
 Farmers, ranchers, and other producers are also earning less than ever before. According to some estimates, only 15 cents of every dollar spent at the grocery store goes to farmers and producers. 
 We are in a perfect storm. Markets are monopolized. Demand is high. Omicron is surging across the country. And frontline workers are showing up to their jobs under enormously stressful and unsafe conditions, often for wages that are insufficient to put food on their own tables or pay the rent.
 Across party lines, people are tired, angry, and fed up with the corporate greed and runaway consolidation that are at the heart of this crisis.
 In response, President Biden has undertaken a series of actions as part of his economic agenda to rebuild the backbone of the country—the middle class.
 Earlier this month, President Biden announced a four-part plan to create a fairer, more competitive, and more resilient meat and poultry supply chain.
 This follows actions last year to address supply-chain risks for critical inputs and an executive order directing a whole-of-government approach to promoting competition in the United States, including through the rigorous enforcement of antitrust laws.
 But we can do more, and we must do more to bring all policy tools to bear to address this crisis. 
 We need to create choice for consumers, an even playing field for independent businesses, safe workplaces for essential workers, and protect the livelihoods of farmers by breaking up monopolized sectors of the food system.
 We need to pursue criminal charges of corporate executives who engage in cartel activity, such as price fixing and other forms of criminally anticompetitive conduct.
 In Congress, we must develop new tools to address these problems as part of the Subcommittee’s work to address shortcomings in current law.
 And we need to strengthen worker protections, prohibit price gouging, and explore price controls as part of an industrial policy to address the outbreak of inflation for essential goods and services in industries that are plagued by profiteering.
 In short, we need an all-of-the-above approach to bring down costs and rebuild our economy.
 I look forward to hearing solutions to these problems at today’s hearing, and thank our panel of esteemed witnesses for appearing before us.

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