Progressives across the country are busy selling an “affordability” agenda, but so far, many of their ideas for enacting that agenda are destined to\u00a0raise<\/em> rather than lower the cost of living. The latest example comes from New York state, where legislators have introduced legislation that effectively cracks down on price differences between large and small grocery stores. If the law passes, consumers will likely face higher food prices and less money in their wallets.<\/p>\n

The grocery discount drama in New York started recently when Mondelez International\u2014which is the producer of snacks such as Oreos, Ritz crackers, Philadelphia cream cheese, Wheat Thins, and more\u2014declared that it was\u00a0ceasing deliveries<\/a>\u00a0to around a thousand independent grocery retailers in New York City. Concerns immediately\u00a0abounded\u00a0that a $5.99 package of Oreos could suddenly cost $6.99 in the Big Apple.<\/p>\n

Mondelez noted that it was moving to a new distribution model that no longer would include directly delivering to many smaller grocery stores, even as it continued deliveries to larger chain stores. The National Supermarket Association\u2014a trade association representing many of the affected NYC grocers\u2014responded<\/a>\u00a0by asserting that Mondelez was violating a federal antitrust law known as the Robinson-Patman Act.<\/p>\n

Passed in 1936,\u00a0Robinson-Patman<\/a>\u00a0forbids sellers of goods from charging different prices to one purchaser versus another purchaser if doing so harms competition. Because NYC indie grocers will now presumably have to pay higher third-party delivery costs, rather than getting delivery from Mondelez itself, the association\u00a0claims\u00a0the packaged food producer has run afoul of this ancient antitrust law.<\/p>\n

The problem with this argument is that few antitrust scholars\u2014let alone the federal government itself\u2014take the Robinson-Patman Act seriously anymore. Enforcement of the act has essentially been\u00a0abandoned<\/a> for over a quarter of a century now, although President Joe Biden’s Federal Trade Commission sought to resuscitate it from the policy graveyard in a few recent cases. In 2007, the bipartisan Antitrust Modernization Commission Report urged Congress<\/a>\u00a0to repeal the act outright; this echoed calls for the law’s repeal in three prior reports published in 1955, 1969, and 1977.<\/p>\n

The problems with Robinson-Patman are numerous, but one of the main issues is the reality that there are many legitimate business reasons that food producers may incur lower costs in delivering and selling to large chain retailers versus smaller retailers. In turn, the producers can then pass these lower costs down to the stores\u2014and eventually to shoppers, who enjoy cheaper prices at the Walmarts and Costcos of the world.<\/p>\n

As economist and law professor John M. Yun of George Mason University has explained<\/a>: “Large chains provide greater and more stable volumes, predictable ordering cycles, reliable payments, minimal credit risk, and lower transportation costs due to bulk deliveries.”<\/p>\n

In other words, there are legitimate economies of scale that come from bulk orders by large national stores. As Yun\u00a0notes, these benefits “are real but hard to quantify,” and it gets incredibly messy trying to sort out what percent of a large chain store’s lower purchase price from a food supplier is due to economies of scale or the mere assertion of monopolistic buying power.<\/p>\n

Despite this reality, New York lawmakers\u2014urged on by Gov. Kathy Hochul and New York City Mayor Zohran Mamdani\u2014have decided to circumvent federal non-enforcement of the Robinson-Patman Act by trying to pass their own state version of the law. Titled the Consumer Grocery Price Fairness Act<\/a>, it is being touted as a way to save New Yorkers from being charged more for Oreos and cream cheese at those smaller independent stores.<\/p>\n

But it’s far from clear that forcing food producers to charge the same price to both larger and smaller retailers will actually lead to lower prices. The theory that food suppliers who charge lower prices to large grocers have to make it up by charging higher prices to small grocers\u2014termed the “waterbed effect”\u2014has little in the way of\u00a0actual economic evidence<\/a>\u00a0to back it up.<\/p>\n

Instead, the most likely effect of this state law would be higher prices at large chain stores that would offset, or even supersede, any cheaper prices seen at smaller stores. It also is worth nothing that many NYC bodegas\u00a0receive<\/a>\u00a0their deliveries through independent distributors already, meaning they wouldn’t even be impacted by any crackdown on Mondelez.<\/p>\n

But New York lawmakers appear undeterred, and the idea of a state-level Robinson-Patman resuscitation is not merely confined to the Empire State. Minnesota lawmakers also introduced their\u00a0own version<\/a>\u00a0of the Consumer Grocery Pricing Fairness Act last year.<\/p>\n

In the end, Robinson-Patman is effectively dead at the federal level for a reason. A state-level revamp is the last thing New Yorkers need. If lawmakers persist, it will likely mean higher grocery prices passed under the banner of “affordability.”<\/p>\n

The post The 'Fairness' Law That Could Raise Grocery Prices for New Yorkers<\/a> appeared first on Reason.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Legislators are trying to pass their own state version of an outdated antitrust law\u2014one that is dead at the federal level for a reason. …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"tdm_status":"","tdm_grid_status":""},"categories":[19,9],"tags":[],"_links":{"self":[{"href":"http:\/\/3rdcitynews.com\/news\/wp-json\/wp\/v2\/posts\/125685"}],"collection":[{"href":"http:\/\/3rdcitynews.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/3rdcitynews.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/3rdcitynews.com\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/3rdcitynews.com\/news\/wp-json\/wp\/v2\/comments?post=125685"}],"version-history":[{"count":0,"href":"http:\/\/3rdcitynews.com\/news\/wp-json\/wp\/v2\/posts\/125685\/revisions"}],"wp:attachment":[{"href":"http:\/\/3rdcitynews.com\/news\/wp-json\/wp\/v2\/media?parent=125685"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/3rdcitynews.com\/news\/wp-json\/wp\/v2\/categories?post=125685"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/3rdcitynews.com\/news\/wp-json\/wp\/v2\/tags?post=125685"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}