• NACS Files Comments With FTC on Channel Price Discrimination

  • NACS Files Comments With FTC on Channel Price Discrimination

    Pricing isn’t the only form of discrimination that the convenience industry is experiencing.

    February 01, 2022

    Beverages in Convenience Store

    ALEXANDRIA, Va.—NACS has filed comments with the Federal Trade Commission (FTC) outlining the impact that channel price discrimination has on the industry and specifically how it can exacerbate supply chain issues, especially when it comes to packaged beverages.

    “Over many decades now, retailers in the convenience store channel have noticed that competitors in other channels, be it big box, grocery or dollar stores, are often able to offer these beverage products at retail at a lower cost than convenience retailers can obtain them wholesale. The fact that this issue is longstanding and consistent would indicate that other channels of retail are able to obtain these products at a lower wholesale cost than is made available to convenience retailers, regardless of size. In some cases, we know that is exactly what is happening,” wrote NACS in its letter to the FTC.

    Pricing isn’t the only form of discrimination that the industry is experiencing. C-store industry retailers often are unable to get similar packaging sizes from suppliers that are made available to other channels, often regardless of price.

    “The only reason given for this disparity is often that the smaller version is not ‘channeled’ for convenience. This type of arbitrary restriction based on retail channel reduces the fungibility of products and thereby increases the strain caused by supply chain disruptions as products cannot be diverted to the stores in which they are most needed—leading to some store shelves going empty even while some sizes of the same product remain available to other stores in different retail channels,” writes NACS.

    NACS points out that some convenience retailers have attempted to find alternative sourcing, including purchasing products at retail from big box stores only to have the beverage company or bottling company threaten retaliatory action against that retailer, the convenience retailer or both.

    Convenience retailers’ attempts to reach a resolution directly with the supplier companies have failed as well. When convenience retailers attempt to negotiate different pricing, they are often told that the price others may get are simply not for the convenience channel. This problem is particularly acute in many underserved communities such as very rural or inner-city urban neighborhoods, according to NACS.

    “Our industry is often a primary source of basic grocery products in these communities which sometimes lack larger grocery stores. Greater than 90% of the U.S. population lives within 10 miles of a convenience store, something that cannot be said for any other channel of retail,” writes NACS.

    “There is clearly a market failure which exists in the nonalcoholic beverage market which is, at a minimum, likely exacerbating supply issues being experienced due to the COVID-19 pandemic. … We encourage the FTC to include this type of channel discrimination in its review of supply chain issues. … Furthermore, we request that the FTC review existing law to find a potential resolution to this matter,” write NACS.

    Doug Kantor, NACS general counsel, argued in a letter to the editor published in the December 31, 2021, edition of The Wall Street Journal, that an old antitrust rule can spur retail competition and help eliminate price discrimination in the supply chain that favors certain retail channels over others when it comes to packaged beverages.

    NACS in November sent a letter to the House Agriculture Committee asking for better enforcement of the Robinson-Patman Act as the committee weighs information on supply chain issues. The Robinson-Patman Act was added as an amendment to the Clayton Antitrust Act in 1936. It bans certain discriminatory prices, services and allowances in dealings between merchants. The Robinson-Patman Act has been largely unenforced for decades, but President Biden’s July 2021 Executive Order on Competition directs federal agencies to enforce antitrust laws.

    In January, the Antitrust, Commercial and Administrative Law Subcommittee of the House Judiciary Committee held a hearing on “Addressing the Effects of Economic Concentration on Americas Food Supply,” and a letter written by NACS to the subcommittee was included in the hearing record.

    The letter outlines NACS’ position on the impact that channel price discrimination has on the industry and specifically how it can exacerbate supply chain issues. This hearing was the fifth in a series on reviving competition that the committee has held.