ALEXANDRIA, Va. — Channel price discrimination can exacerbate supply chain problems—especially when it comes to packaged beverages.
NACS shared this sentiment and more examples of the effect this has on the convenience-store industry in comments it recently filed with the Federal Trade Commission (FTC), which is collecting public comments through Feb. 28 on the effects of ongoing supply chain disruptions on competition in markets for consumers goods.
“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,” said Jon Taets, director of government relations for NACS, in a Jan. 28 letter to the FTC. “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.”
C-store retailers also are unable to get similar packaging sizes from supplier 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 channels of retail are offered a 28-ounce version, he said.
“The only reason given for this disparity is often that the smaller version is not ‘channeled’ for convenience,” Taets said. “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.”
C-store retailer’s attempts to reach a resolution directly with the suppliers have failed, Taets said. The problem is particularly acute in underserved communities such as rural ones 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,” Taets said. “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.”
NACS requested the FTC include this style of channel discrimination in its review of supply chain issues, and that it review existing law to find a potential solution.
A Potential Solution
An old antitrust rule could spur retail competition and help eliminate price discrimination in the supply chain if better enforced, NACS said.
Doug Kantor, NACS general counsel, sent a letter on Jan. 18 to the Antitrust Commercial and Administration Law Subcommittee of the House Judiciary Committee as it held a hearing on “Addressing the Effects of Economic Concentration on Americas Food Supply.” In it, he asked for better enforcement of the Robinson-Patman Act.
The act was added as an amendment to the Clayton Antitrust Act in 1936 and bans certain discriminatory prices, services and allowances in dealings between merchants. It has 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 at this time is vigorous enforcement of the Robinson-Patman Act,” Kantor said. “All retail channels should have to compete and do their best to win business based on price and service. No channel should get a free pass due to an advantage that is bestowed based on the arbitrary assignment of a “channel” designation rather than on costs or business fundamentals—regardless of the fact that manufacturers and suppliers may want that to happen.”
Founded in 1961 as the National Association of Convenience Stores, NACS advances the role of c-stores as positive economic, social and philanthropic contributors to the communities they serve. Alexandria, Va.-based NACS has 1,900 retailer and 1,800 supplier members from more than 50 countries.
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