[Federal Register Volume 87, Number 52 (Thursday, March 17, 2022)]
[Notices]
[Pages 15194-15198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05669]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

[Doc. No. AMS-AMS-22-0026]


Competition in Food Retail and Distribution Markets and Access 
for Agricultural Producers and Small and Midsized Food Processors

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Notice; request for public comments.

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SUMMARY: On July 9, 2021, President Biden issued an Executive Order on 
``Promoting Competition in the American Economy,'' which creates a 
White House Competition Council and directs Federal agency actions to 
enhance fairness and competition across America's economy. The 
Executive Order directs the Secretary of Agriculture (the Secretary), 
among other things, to submit a report on the effect of retail 
concentration and retailers' practices on the conditions of competition 
in the food industries. This notice requests comments and information 
from the public to assist the U.S. Department of Agriculture (USDA) in 
preparing the report required by the Executive Order and advancing 
policy steps to promote competition in the food and agricultural 
markets.

DATES: Comments must be received by May 16, 2022.

ADDRESSES: All written comments in response to this notice should be 
posted online at www.regulations.gov. Comments received will be posted 
without change, including any personal information provided. All 
comments should reference the docket number AMS-AMS-22-0026, the date 
of submission, and the page number of this issue of the Federal 
Register. Comments may also be sent to Jaina Nian, Agricultural 
Marketing Service, USDA, Room 2055-S, STOP 0201, 1400 Independence 
Avenue SW, Washington, DC 20250-0201. Comments will be made available 
for public inspection at the above address during regular business 
hours or via the internet at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Jaina Nian, Agricultural Marketing 
Service, at (202) 378-2541; or by email at <a href="/cdn-cgi/l/email-protection#375d565e595619595e5659774244535619505841"><span class="__cf_email__" data-cfemail="90faf1f9fef1befef9f1fed0e5e3f4f1bef7ffe6">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Background

    On July 9, 2021, President Biden issued Executive Order 14036, 
``Promoting Competition in the American Economy'' (86 FR 36987)

[[Page 15195]]

(E.O. 14036). E.O. 14036 focuses on the need for robust and open 
competition in the American economy to secure broad and sustained 
economic prosperity, promote the welfare of workers, farmers, small 
businesses, startups, and consumers, and prevent the threat that 
excessive market concentration poses to basic economic liberties and 
democratic accountability. With respect to agriculture E.O. 14036 
notes:

    Consolidation in the agricultural industry is making it too hard 
for small family farms to survive. Farmers are squeezed between 
concentrated market power in the agricultural input industries--
seed, fertilizer, feed, and equipment suppliers--and concentrated 
market power in the channels for selling agricultural products. As a 
result, farmers' share of the value of their agricultural products 
has decreased, and poultry farmers, hog farmers, cattle ranchers, 
and other agricultural workers struggle to retain autonomy and to 
make sustainable returns.

    In relevant part, E.O. 14036 directs the Secretary, among other 
things--

to improve farmers' and smaller food processors' access to retail 
markets, not later than 300 days after the date of this order, in 
consultation with the Chair of the FTC, [to] submit a report to the 
Chair of the White House Competition Council, on the effect of 
retail concentration and retailers' practices on the conditions of 
competition in the food industries, including any practices that may 
violate the Federal Trade Commission Act, the Robinson-Patman Act 
(Pub. L. 74-692, 49 Stat. 1526, 15 U.S.C. 13 et seq.), or other 
relevant laws, and on grants, loans, and other support that may 
enhance access to retail markets by local and regional food 
enterprises.

    This notice requests comments and information from the public to 
assist USDA in preparing and executing the report required by E.O. 
14036. To facilitate those comments and information on access to retail 
markets, we highlight certain questions and concerns that are relevant 
to our efforts.
    Consolidation in food retail and related parts of the supply chain, 
such as distribution, present potential risks of unfair and 
anticompetitive practices throughout the food supply chain. Increases 
in concentration have been an important trend in food retail over the 
last few decades, as the share of single-store firms or local chains 
has declined from 55 percent in 1977 to 35 percent as of 2007, while 
the concentration ratio of the four largest food retailers hit 34 
percent in 2019.\1\ Food distribution is concentrated in certain 
markets as well, with two firms dominating upwards of 70 percent of the 
national broadline distribution market.\2\ Additionally, insufficient 
analytic attention has been paid to the connections between retail, 
distribution, and processing firms and the implications for competition 
in the food and agricultural supply chains.
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    \1\ Retail Trends, Economic Research Service, USDA, available at 
https://www.ers.usda.gov/topics/food-markets-prices/retailing-wholesaling/retail-trends/ (last accessed March 2022); Lucia Foster, 
John Haltiwanger, Shawn Klimek, C.J. Krizan, and Scott Ohlmacher, 
(2016), ``The Evolution of National Retail Chains: How We Got 
Here,'' Handbook of the Economics of Retailing and Distribution, 
Emek Basker, ed. London, UK: Edward Elgar Publishing.
    \2\ See Federal Trade Commission v. Sysco Corporation, U.S. 
Dist. Ct. (D.C.), Memorandum of Opiniont (2015), available at 
https://www.ftc.gov/system/files/documents/cases/150623syscomemo.pdf; see also, generally, ``Wholesaling,'' USDA 
Economic Research Service, available at https://www.ers.usda.gov/topics/food-markets-prices/retailing-wholesaling/wholesaling/ (last 
accessed March 2022).
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    The rise in food retail and distribution concentration in recent 
decades potentially impacts agricultural producers and small, midsized 
and otherwise independent (SME) processors--as well as potentially 
ultimately impacting consumers. Concentration in food retail and 
distribution may magnify and contribute to consolidation among meat and 
poultry processing firms, among other food system market 
participants.\3\ Such firms themselves may consolidate to secure 
leverage against consolidated food retail firms, which in turn may make 
it more difficult for SME processors to access food retail markets. 
Concerns relating to exclusionary and predatory conduct in food retail 
and distribution thus may be particularly relevant to the viability of 
new and expanded meat and poultry processing facilities and other new 
food system market entrants, which are receiving over $1 billion of 
support under the White House Meat and Poultry Processing Supply Chain 
Action Plan.\4\
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    \3\ Four large meat-packing companies dominate over 80 percent 
of the beef sales market and, yet, over the last five years, 
farmers' share of the price of beef has dropped by more than a 
quarter--from approximately 52 percent to 37 percent--while the 
price of beef for consumers has risen. Four large meat-packing 
companies dominate about 70 percent of the pork market, and four 
large poultry integrators make up 54 percent of the poultry market, 
although a pending merger would raise that further. Annual Report, 
Packers and Stockyards Division, USDA, available at https://www.ams.usda.gov/reports/psd-annual-reports (last accessed March 
2022).
    On monopsony's effects up the supply chain, generally, see Barry 
Lynn, Cornered (New York: Wiley, 2010).
    \4\ Meat and Poultry Supply Chain, USDA, available at https://www.usda.gov/meat (last accessed March 2022).
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    USDA will use public comments received through this notice to 
inform our policymaking and advocacy to help increase fairness and 
competition in food retail and related segments of the American food 
and agricultural markets. We are particularly interested in the role 
that rules, regulations, and enforcement under the Packers and 
Stockyards Act of 1921 and the Robinson-Patman Act of 1936--both of 
which were designed to regulate discriminatory limits on market 
access--may play in enhancing market access for agricultural producers 
and SME processors to retail markets, and especially in preventing 
predatory pricing by incumbent market participants to exclude new 
market entrants and competitors.
    We are also interested in comments addressing the role that grants, 
loans, and other programs and services may play to enhance access to 
retail markets by agricultural producers, SME food processors, and 
other local and regional food enterprises. The Department is 
particularly interested in the role that cooperative or community-owned 
grocery retail and food distribution networks have or may play in 
addressing market challenges and in better serving producer, worker, 
community, and consumer needs, for example in remote locations or 
underserved communities.
    Commenters may further provide information relevant to promoting 
local and regional food systems, creating new market opportunities 
(including for value-added agriculture and value-added products), 
advancing efforts to transform the food system, meeting the needs of 
the agricultural workforce, supporting and promoting consumers' 
nutrition security, particularly for low-income populations, and 
supporting the needs of underserved and small to mid-sized producers 
and processors.

II. Written Comments

    USDA encourages commenters, when addressing the elements below, to 
clearly indicate the question their comments are responding to by 
repeating the text of the question before their response. This would 
assist USDA in more easily reviewing and summarizing the comments 
received in response to these specific comment areas. In addition, USDA 
welcomes commenters to refer, with appropriate explanation, to any 
views set forth in recently or previously submitted comments, such as 
those to E.O. 14017 ``America's Supply Chains'' (No. AMS-TM-21-0034) 
(86 FR 20652) or ``Investments and Opportunities for Meat and Poultry 
Processing Infrastructure'' (No. AMS-TM-21-0058) (86 FR 37728).
    This request for information includes but is not limited to the 
following elements. The questions below are meant to stimulate 
comments, and

[[Page 15196]]

commenters should feel free to respond to those they feel most relevant 
to them, or as their time and interests permit. Comments may overlap or 
be organized as the commenter feels most appropriate. Please offer 
descriptive or quantitative information, as available and relevant.

Competition and Impacts

    (1) Are market concentration and power, and lack of competition, 
problems in food retail and distribution markets? If so, where and in 
what ways? What practices in the food retail and distribution markets 
are most concerning from a competition standpoint? Are there particular 
practices that exclude or disadvantage new market participants or 
potential market participants, unfairly transfer risk, or otherwise 
abuse market power or make it harder to compete? Please describe 
specific experiences and challenges, if possible.
    (2) How do concentration and size in the food retail and 
distribution markets affect the ability of agricultural producers and 
new, SME food processors to access the retail marketplace? Are 
agricultural producers and SME food processors that serve local and 
regional markets affected differently? Are there regional and other 
demographic variations to any of the impacts? Please describe specific 
experiences and challenges, if possible.
    (3) How does competition and concentration among distributors and 
other parts of the wholesale food market relate to food retail 
concentration and competition? How do distribution and wholesale food 
market competition and concentration affect access to markets for 
agricultural producers and SME food processors? Does buying power of 
some retailers at the wholesale level make it difficult for some 
producers or SME processors to access distribution within these 
channels?
    (4) How are SME grocery retailers specifically affected by 
concentration and potentially anticompetitive practices in food retail 
markets? What about distributors that may serve them? Do any of those 
challenges affect agricultural producers and SME food processors? 
Please describe specific experiences and challenges, if possible.
    (5) How are smaller food service businesses, schools, hospitals, 
and other institutional food buyers affected by concentration or 
potentially anticompetitive practices in food processing and 
distribution? What effects do concentration and potentially 
anticompetitive conduct have on food prices, quality and safety, 
distribution and availability of healthy foods that meet nutrition 
standards, or other needs specific to these buyers and food providers?
    (6) How are workers, consumers, other small businesses, 
communities, and others along the food supply chain affected by 
concentration or potentially anticompetitive practices in food retail 
and distribution markets? What effects do concentration and potentially 
anticompetitive conduct have on food prices, quality and safety; 
distribution and accessibility to healthy foods, and food and nutrition 
security; and worker empowerment, equity for underserved producers, and 
environmental sustainability? Are challenges with food deserts 
aggravated by concentration or competition issues in the food and 
agricultural supply chains? Do impacts to any of these concerns vary by 
region, commodity, or by other demographics?

Business Practices

    (7) Please describe the role that exclusive dealing arrangements 
play in the food retail and distribution marketplaces. Do they 
facilitate, inhibit, or otherwise affect opportunities in the industry 
for SME processors? How do they affect the development of new products 
and the growth, diversity, or resilience of the industry? Do they 
facilitate, inhibit, or otherwise affect product quality and risk 
management? Do differences in commodity, product, or region affect the 
practices, risks, barriers, or outcomes? Are tribal businesses and 
enterprises and underserved communities affected differently? Does the 
size, scale, or market power generally of the companies involved in 
such an arrangement matter for how these arrangements affect 
competition?
    (8) Please describe the role that slotting fees, category captains, 
and other preferential access or discounts play in retail food markets, 
including but not limited to meat and poultry. Are certain segments, 
such as organic or value-added products like grass-fed meats, affected 
differently? What affect do such behaviors have on access to the retail 
marketplace? How are preferential relationships in the marketplace 
manifested, and do those relationships limit new market entrants from 
accessing the marketplace? Do those relationships improve risk 
management or otherwise enhance market access in certain circumstances? 
Should any of these practices be limited or changed to support new 
market entrants, and if so, how?
    (9) If you are a small or mid-sized producer, have you had to 
change any business or marketing practices in order to effectively 
navigate required slotting fees to gain market access? Have these 
changes negatively impacted the overall profits of the products you 
sell? Do you believe that slotting fees are adversely or unfairly 
deployed against small or mid-sized producers or otherwise affect 
market access and what is the basis for your belief?
    (10) Please share any concerns relating to predatory pricing by 
incumbent food processors, threats of retaliation by incumbent food 
processors against retailers for offering new or different products, or 
other practices designed to exclude competitors from the marketplace. 
When and where have they occurred? Were antitrust enforcement tools 
able to address the challenges in a timely and effective manner? If 
not, why not?
    (11) Please comment on implications, negative or positive, of 
mergers in the food retail or distribution sectors. Have certain 
mergers changed contracting or sales practices? Have certain mergers 
allowed the acquisition of rivals or technologies or companies that 
competitor firms rely on? Have mergers negatively or positively 
impacted workers? Have mergers delivered efficiencies?

Information and Supply Chain Market Structures

    (12) What roles do control and access to retail data play in 
competition and access for farmers and SME food processors? Are there 
significant imbalances in access to information among producers, 
packers, distributor, and retailers, and how do those imbalances affect 
choices and outcomes in the market? Describe the role that data sharing 
between food retail companies and larger food processors, such as 
packers, plays in the market environment, if any. How do any 
differences affect competition and market access, and should any of 
these be limited, and if so how?
    (13) Describe the role that retailer ownership, including 
financing, of livestock and packing play in supply chain competition 
and access to retail for producers and SME processors? Are competition 
concerns, if any, similar in other agricultural commodity markets? Have 
these practices reduced or eliminated the need for, or competition 
among, certain suppliers to some retail firms? Are certain segments, 
such as organic or value-added products like grassfed meats, affected 
differently? Should ownership, financing, or other forms of vertical 
integration be promoted, limited, or otherwise changed, and, if so, 
how?
    (14) Please discuss how transportation--including rail and

[[Page 15197]]

ocean shipping--and delivery systems may affect competition in food 
retail and distribution. Are certain ownership structures, business 
relationships, or business practices of particular concern? How do 
transportation costs, fees, or levels of service affect the 
competitiveness of downstream businesses? Has concentration in 
transportation industries led to negative service outcomes or other 
potentially unfair practices? Have contractual arrangements that 
penalize suppliers, including transportation companies, for not 
delivering in sufficient quantities or on other particular terms become 
more prevalent? Have they become problematic as market power has grown, 
or in certain circumstances?
    (15) Describe the role that label claims and labeling standards 
play in access to retail markets for agricultural producers. Are public 
or private resources sufficiently available for smaller agricultural 
producers seeking to develop or use labels? Do labels standards, 
verification, and enforcement appropriately support access to markets 
for agricultural producers and SME processors? Are there any instances 
when a larger supplier used, including potentially misused, a label to 
gain market access or advantage over smaller producers or SME 
processors? Please share concerns and recommendations, if any.
    (16) What role, if any, does financing or financial markets play 
any of the issues addressed above?
    (17) Are there any other aspects of the regulatory environment that 
affect retail market competition and access to retail for producers and 
SME processors? Are there specific elements of these requirements that 
could be more effectively tailored? What types of resources would be 
helpful to assist SMEs with compliance?

Policy Responses

    (18) How can antitrust and market regulation and enforcement, 
including relating to mergers, unfair practices, and price 
discrimination, do more to address competition concerns in food retail 
and distribution markets? Should Federal and state antitrust enforcers 
place greater emphasis on adverse consequences of buyer power? Should 
greater attention be paid to information asymmetries and preferential 
access to data? How could USDA utilize its regulatory and enforcement 
authorities more effectively?
    (19) How can predatory pricing by entrenched market participants be 
better identified and acted upon by relevant enforcement authorities? 
Can laws that prohibit discriminatory or preferential pricing, such as 
the Packers and Stockyards Act and the Robinson-Patman Act, play a 
greater role in preventing predatory pricing schemes, or otherwise 
promote greater food market access for agricultural producers and SME 
processors? Please explain.
    (20) How could other USDA programs, services, and authorities be 
further deployed to enhance access to retail markets for agricultural 
producers and SME food processors? For example--
    <bullet> How might grants, loans, and other support from USDA 
enhance access to retail markets by local and regional food 
enterprises?
    <bullet> How might USDA marketing programs enhance access to retail 
markets for agricultural producers and SME food processors, including 
programs which facilitate access to a variety of markets, support 
value-added production and product diversification; increase 
diversification in distribution channels and market development, such 
as food hubs, non-profit and cooperative distribution models; and 
provide technical assistance to producers that helps access USDA 
programs and improve market readiness? \5\
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    \5\ See, e.g., ``USDA Announces Supplemental American Rescue 
Plan Funding Available through the Local Agriculture Market Program, 
Including Funding to Expand Farm-to-Institution Opportunities,'' 
USDA, March 1, 2022, available at https://www.usda.gov/media/press-releases/2022/03/01/usda-announces-supplemental-american-rescue-plan-funding-available.
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    <bullet> How might food and nutrition grant and loan programs 
better support competition in retail and better access for producers 
and SME processors? \6\
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    \6\ See, e.g., Healthy Food Financing Initiative, available at 
https://www.investinginfood.com/what-we-do/ (last accessed March 
2022).
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    <bullet> How might government procurement processes further support 
agricultural producers and SME processors effectively access 
institutional customers, such as schools and hospitals? \7\
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    \7\ See USDA Agricultural Marketing Service, ``Commodity 
Procurement,'' available at https://www.ams.usda.gov/commodity-procurement (last accessed March 2022).
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    <bullet> Are there ways to facilitate easier access to food safety 
compliance resources, and other ways to level the playing field for SME 
processors? \8\
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    \8\ For more information, see ``Food Safety,'' Agricultural 
Marketing Service, available at https://www.ams.usda.gov/services/local-regional/food-sector/food-safety (last accessed March 2022).
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    <bullet> What additional information or transparency could USDA's 
Market News Service provide on retail, wholesale, or distribution 
markets, through the Livestock Mandatory Reporting Act of 1999 or 
otherwise? \9\ Are there information or educational tools, services, or 
access to data that could be helpful?
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    \9\ See USDA Market News, ``Retail Reports,'' available at 
https://www.ams.usda.gov/market-news/retail (last accessed Feb. 
2022).
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    <bullet> What additional market analysis or advocacy could USDA do 
with respect to local and regional food systems, transportation, or 
otherwise that could support fair and competitive food retail and 
distribution markets? \10\
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    \10\ See USDA Agricultural Marketing Service, ``Market Research 
and Analysis,'' available at https://www.ams.usda.gov/services/market-research (last accessed March 2022).
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    <bullet> How else can competition be enhanced in food retail, 
distribution, and related areas? Please discuss any other relevant 
matters USDA should consider.

III. Requirements for Written Comments

    The www.regulations.gov website allows users to provide comments by 
filling in a ``Type Comment'' field or by attaching a document using an 
``Upload File'' field. USDA prefers that comments be provided in an 
attached document. USDA prefers submissions in Microsoft Word (.doc 
files) or Adobe Acrobat (.pdf files). If the submission is in an 
application format other than Microsoft Word or Adobe Acrobat, please 
indicate the name of the application in the ``Type Comment'' field. 
Please do not attach separate cover letters to electronic submissions; 
rather, include any information that might appear in a cover letter 
within the comments. Similarly, to the extent possible, please include 
any exhibits, annexes, or other attachments in the same file, so that 
the submission consists of one file instead of multiple files. Comments 
(both public comments and non-confidential versions of comments 
containing business confidential information) will be placed in the 
docket and open to public inspection. Comments may be viewed on 
www.regulations.gov by entering docket number AMS-AMS-22-0026 in the 
search field on the home page. All filers should name their files using 
the name of the person or entity submitting the comments. Anonymous 
comments are also accepted. Communications from agencies of the United 
States Government will not be made available for public inspection. 
Anyone submitting business confidential information should clearly 
identify the business confidential portion at the time of submission, 
file a statement justifying nondisclosure and referring to the specific 
legal authority claimed, and provide a non-confidential

[[Page 15198]]

version of the submission. The nonconfidential version of the 
submission will be placed in the public file on www.regulations.gov. 
For comments submitted electronically containing business confidential 
information, the file name of the business confidential version should 
begin with the characters ``BC.'' Any page containing business 
confidential information must be clearly marked ``BUSINESS 
CONFIDENTIAL'' on the top of that page. The non-confidential version 
must be clearly marked ``PUBLIC.'' The file name of the nonconfidential 
version should begin with the character ``P.'' The ``BC'' and ``P'' 
should be followed by the name of the person or entity submitting the 
comments or rebuttal comments. If a public hearing is held in support 
of this supply chain assessment, a separate Federal Register notice 
will be published providing the date and information about the hearing.

Melissa R. Bailey,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2022-05669 Filed 3-16-22; 8:45 am]
BILLING CODE P


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