FTC & DOJ Must Step in to Stop Dominant Middlemen Ripping off Independent Restaurants
Washington D.C. — The American Economic Liberties Project today sent a letter, cosigned by American Sustainable Business Network, Farm Action, Independent Restaurant Coalition, and Protect Our Restaurants to the Federal Trade Commission and Department of Justice urging them to crack down on dominant broadliner corporations that use their middleman control over food distribution to price gouge local restaurants in a time of crisis for the industry.
“For years, independent restaurants have suffered under the tyranny of a handful of distributors that extort and exploit them at every turn,” said Maureen Tkacik, Senior Fellow at the American Economic Liberties Project. “Uncontested consolidation has given Sysco, US Foods, and PFG unmatched market power. This allows them to hike prices on restaurants still struggling after the pandemic while delivering orders hours and sometimes even days late – if they show up at all – because they don’t want to pay their workers a dignified wage.”
“It’s a playbook used by dominant corporations everywhere in the pandemic and its aftermath,” Tkacik continued. “Raise prices well beyond their cost, limit bargaining power, buy back stock in lieu of hiring back laid off workers, and openly brag about it on earnings calls. It’s time for antitrust enforcers to step in.”
Dominant broadliner corporations — the middlemen between food producer and restaurant — have spent the last 20+ years acquiring food distributors and consolidating their power. This leaves restaurants with little choice and no bargaining power, allowing broadliners to raise prices and degrade service at will. These effects ripple across the economy. The exercise of market power by dominant broadliners is squeezing the already-thin profit margins of independent restaurants, with the potential to crush an industry that is only now recovering from the effects of the pandemic.
The letter to the FTC and DOJ estimates that the top 10 broadliners control 60-to-70% of the sector’s national sales, the top 5 control over 50%, and Sysco alone controls over 30%. To address the exploitation of market power, the letter recommends that antitrust enforcers conduct a thorough investigation of abusive practices by dominant distributors, prosecute any violations of the antitrust laws, adopt regulations and enforcement policies to restrain abusive conduct, and block any future mergers or acquisitions in the industry.
The American Economic Liberties Project would like to thank Basel PLLC for the research and drafting of this letter.
Read our letter to the Federal Trade Commission and Department of Justice here.
Learn more about Economic Liberties here.
The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.