Channel Price Discrimination Exacerbates Supply Chain Problems: NACS

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ALEXANDRIA, Virginia — Channel price discrimination can exacerbate supply chain issues, especially when it comes to packaged beverages.

NACS shared this sentiment and other examples of the effect it is having on the convenience store industry in comments it recently filed with the Federal Trade Commission (FTC), which collects public comment until as of February 28 on the effects of continued supply chain disruptions on competition in consumer goods markets.

“For several decades now, retailers in the convenience channel have noticed that competitors in other channels, whether big-box, grocery or dollar store, are often able to offer these retail beverages at a lower cost than convenience stores can get. wholesale them,” Jon Taets, director of government relations for NACS, said in a Jan. 28 letter to the FTC. “The fact that this issue is long-standing and ongoing would indicate that other retail channels are able to obtain these products at a lower wholesale cost than is available to convenience retailers, regardless of their size. In some cases, we know that’s exactly what happens.

Convenience retailers also aren’t able to get similar pack sizes from suppliers that are made available to other channels, often regardless of price, Taets said. For example, retailers have indicated they can only get the 32-ounce version of a particular sports drink, while other retail channels are offered a 28-ounce version, he said.

“The only reason given for this disparity is often that the smaller version isn’t ‘piped’ for convenience,” Taets said. “This type of arbitrary restriction based on the retail channel reduces the fungibility of products and thus increases the pressure caused by supply chain disruptions, as products cannot be diverted to the stores in which they are most needed, resulting in certain store shelves being emptied even as certain sizes of the same product remain available to other stores across different retail channels.”

Attempts by retailer C-store to reach a resolution directly with suppliers failed, Taets said. The problem is particularly acute in underserved communities such as rural areas or inner-city urban neighborhoods, according to NACS.

“Our industry is often the main source of basic groceries in these communities that sometimes lack large grocery stores,” Taets said. “Over 90% of the US population lives within 10 miles of a convenience store, which cannot be said for any other retail channel.”

NACS asked the FTC to include this style of channel discrimination in its review of supply chain issues and to review existing legislation to find a potential solution.

A potential solution

An old antitrust rule could boost retail competition and help eliminate price discrimination in the supply chain if better enforced, NACS said.

Doug Kantor, general counsel for NACS, sent a letter Jan. 18 to the House Judiciary Committee’s Commercial and Administrative Antitrust Law Subcommittee as it held a hearing on “Addressing the Effects of Economic Concentration on the ‘food supply of the Americas’. He called for better enforcement of the Robinson-Patman Act.

The law was added as an amendment to the Clayton Antitrust Act in 1936 and prohibits certain discriminatory prices, services, and allowances in dealings between merchants. It’s been largely unenforced for decades, NACS said, but President Joe Biden’s 2021 executive order on competition directs federal agencies to enforce antitrust laws.

“What is needed right now is vigorous enforcement of the Robinson-Patman Act,” Kantor said. “All retail channels should compete and do their best to win business based on price and service. No channel should be given a free pass because of an advantage given on the based on the arbitrary assignment of a “channel” designation rather than cost or business fundamentals, regardless of whether manufacturers and suppliers may want this to happen.”

Founded in 1961 as the National Association of Convenience Stores, NACS advances the role of convenience stores as positive economic, social and philanthropic contributors to the communities they serve. NACS, based in Alexandria, Virginia, has 1,900 retailers and 1,800 supplier members in more than 50 countries.

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