‘Tis the Season for a CPG Supply Chain Study

Nothing says “happy holidays” quite like the issuance of Federal Trade Commission (FTC) orders – essentially, subpoenas – to large retailers, wholesalers and suppliers of food, cosmetics, personal care and OTC products, among other things, during the supply chain’s busiest time of the year. Antitrust has had an unusually crazy year, and things are getting crazier with the FTC section 6(b) study into the consumer goods supply chain approved by the FTC on November 29, 2021.

Back in July, the White House issued an Executive Order on Promoting Competition in the American Economy which set forth 72 initiatives for multiple federal agencies suggesting sweeping and decisive change in antitrust policy and priorities at the agency level. As one of those initiatives, the FTC is tackling concerns with the consumer goods supply chain. While the study will do nothing to alleviate the economy’s current bottlenecks, it could shape future regulatory actions intended to maintain or increase competition in key industries, consistent with the Executive Order.

Section 6(b) of the FTC Act allows the FTC to conduct “wide-ranging studies that do not have a specific law enforcement purpose.” The FTC is planning to study the effect of the supply chain disruptions of the past year on competition, and states it “will examine whether supply chain disruptions are leading to specific bottlenecks, shortages, anti-competitive practices, or contributing to rising consumer prices.”

The recent section 6(b) orders were sent to Walmart Inc., Amazon.com, Inc., Kroger Co., C&S Wholesale Grocers, Inc., Associated Wholesale Grocers, Inc., McLane Co, Inc., Procter & Gamble Co., Tyson Foods, Inc., and Kraft Heinz Co. It is possible the FTC will issue orders to other participants in the supply chain at a later date. The FTC seeks information about “the primary factors disrupting [these companies’] ability to obtain, transport and distribute their products; the impact these disruptions are having in terms of delayed and canceled orders, increased costs and prices; the products, suppliers and inputs most affected; the steps the companies are taking to alleviate disruptions; and how these companies allocate products among their stores when they are in short supply.” The orders also seek internal company documents such as “strategies related to supply chains; pricing; marketing and promotions; costs, profit margins and sales volumes; selection of suppliers and brands; and market shares.” The FTC is soliciting public comments on the impact of supply chain disruptions on competition in consumer goods and retail.

As mentioned above, section 6(b) studies do not have a specific law enforcement purpose, but they could lead to focused investigations and help reshape the FTC’s enforcement strategy. Conduct that may raise potential antitrust concerns such as exclusive agreements, allocation systems, or sudden price increases will certainly catch their eye. Additionally, a number of groups (see here, here, and here) have recently raised concerns to the FTC, House and Senate about industry practices that include price discrimination, trade promotion, category captain and online retail sales.

The information the FTC is collecting, the comments it is soliciting, and the hearings it will hold will eventually be distilled down to a written report, but that will take time – perhaps a year or longer. While the supply chain disruptions will hopefully be a distant memory by the time the report is issued, the report will no doubt provide insights into antitrust issues in the CPG supply chain and the direction of the FTC’s future enforcement efforts.