The Federal Trade Commission has just released its long-anticipated report on the major disruptions to America’s grocery-supply chain during the coronavirus pandemic—and it confirmed the worst. According to the report, large grocery companies saw the pandemic as an opportunity. They deliberately wielded their market power amid food shortages, entrenching their dominance and keeping their shelves stocked even as smaller companies had to scramble for goods or simply close up shop. For the big players in the grocery industry—companies such as Walmart—the pandemic was a boon. And profits have continued to climb, along with food prices, even as supply-chain disruptions have vanished.
Why did all of this happen? The FTC report implied an answer but did not state it outright: A handful of companies now control the food system of the United States, stifling competition in ways not seen since the great trusts and monopolies of the late 1890s. The mergers and acquisitions of the past four decades have greatly reduced the number of companies—a fact hidden by the multiplicity of brands. Kroger, the nation’s largest supermarket chain, runs grocery stores under more than two dozen names. That number would nearly double if its announced merger with Albertsons is allowed to proceed.
Almost a quarter of a century ago, my book Fast Food Nation called attention to an accelerating phenomenon: corporate, quasi-monopolistic control of America’s food system with harmful consequences for workers, consumers, livestock, and the land. The forces identified then are even more powerful today.
According to a 2021 study by the public-interest group Food & Water Watch, four companies now control about 52 percent of the American market for rice, about 61 percent of the market for fresh bread, and about 79 percent of the market for pasta. Four companies are responsible for processing about 70 percent of the nation’s hogs and 85 percent of its cattle. The widespread adoption of factory farming has extended monopoly power even to commercial-livestock genetics. Three companies now provide the breeding stock for about 47 percent of the world’s hogs. Two companies provide the breeding stock for about 94 percent of the world’s egg-laying hens. The same two companies, EW Group and Hendrix Genetics, provide the breeding stock for 99 percent of the world’s turkeys. EW and Hendrix are also two of the world’s largest providers of breeding stock for farmed trout, salmon, and tilapia.
Economists have a metric known as the “four-firm concentration ratio,” sometimes deployed in shorthand as “CR4.” It is a measure of competitiveness in a market for goods or services. When four companies gain a combined market share that is greater than 40 percent, an oligopoly has formed. The prices offered to suppliers, the prices charged to consumers, and the wages paid to workers are no longer determined mainly by market forces. Further, the power these corporations exert within their industries and the economy as a whole leads to a well-documented dynamic: Effective government regulation becomes difficult, whether because state and federal agencies are “captive” or because they are outmatched in terms of resources and personnel.
For the oligopoly, this is a welcome state of affairs. On occasion, a single event illuminates the consequences for the rest of us.
Cronobacter sakazakii is an emerging pathogen that can be dangerous to infants who are younger than two months, born prematurely, or immunocompromised. After infection with the pathogen, the estimated death rate among such babies ranges from 40 to 60 percent. Many of those who survive have lifelong intestinal and brain damage and seizure disorders. The incidence of Cronobacter infections in the United States is unknown—until January of this year, only two states, Michigan and Minnesota, made a point of recording the number of cases. The overwhelming majority of infections go undetected. Since the late 1980s, powdered infant formula has been recognized as an important route of transmission to infants. Unlike liquid formula, powdered formula is not sterilized before being sold. Cronobacter may survive in powdered formula for at least a year. Once liquid is added to the powder, Cronobacter becomes bioactive and potentially deadly.
In September 2021, a case of Cronobacter was diagnosed in Minnesota. The baby was hospitalized for three weeks but survived. The Minnesota Department of Health promptly shared information about the case—and the brand and the lot number of the powdered formula linked to it—with the FDA and the CDC. During the next several months, three more infants were diagnosed with Cronobacter in other states. Two of them died. All of the illnesses were linked to formula produced at the same plant: the nation’s largest infant-formula factory, occupying almost 1 million square feet, covering more land than a dozen football fields. It was located in Sturgis, Michigan, and owned by Abbott Nutrition.
Poorly managed and notoriously reluctant to confront major food companies, the FDA was slow to react. In the fall of 2021, a former employee at the Sturgis plant had contacted the FDA to warn that safety records there were routinely being falsified, essential cleaning steps were being skipped, and baby formula was being packaged and shipped without being tested for lethal bacteria. The whistleblower sent the FDA a 34-page document describing a lack of concern about food safety in Sturgis, inexperienced and poorly trained workers, an emphasis on simply getting product out the door, and a corporate culture at Abbott Nutrition that encouraged retaliation against employees who raised uncomfortable questions.
Four months elapsed before the FDA, in early 2022, showed up in Sturgis to conduct a thorough inspection of the Abbott plant. Multiple strains of Cronobacter were discovered in the facility. FDA officials later described conditions at the plant as “shocking” and “unacceptably unsanitary.”
In February, Abbott voluntarily shut down its Sturgis factory and recalled three brands of powdered formula made there: EleCare, Alimentum, and Similac. The plant did not fully reopen for more than six months.
Abbott Nutrition has insisted that neither the FDA nor the CDC could “find any definitive link between the company’s products and illnesses in children.” But Frank Yiannas, a former vice president of food safety at Walmart who served as a deputy commissioner of the FDA during the formula recall, found Abbott’s denials misleading. Multiple factors suggested that Abbott was indeed responsible for those four cases of Cronobacter, Yiannas testified before Congress: “Abbott’s Sturgis plant lacked adequate controls to prevent the contamination of powdered infant formula … sporadic contamination of finished product actually did occur, and it is likely that other lots of [infant formula] produced in this plant were contaminated with C. sakazakii strains over time, which evaded end-product testing, were released into commerce, and consumed by infants.”
The health threat posed by the Abbott formula was bad enough. But there were other ramifications, because Abbott Nutrition was the largest firm in an infant-formula oligopoly. About 99 percent of the nation’s supply of infant formula was controlled by just four companies: Abbott, Mead Johnson, Nestlé/Gerber, and Perrigo. The Abbott factory in Sturgis produced about 20 percent of the infant formula consumed in the United States. It also manufactured the majority of the specialty formulas needed by infants, children, and even adults with certain gastrointestinal ailments.
The shutdown of that one plant led to nationwide shortages of infant formula that lasted throughout 2022. The other three companies stepped in to make up for the shortfall, earning large profits in the process. Nevertheless, formula shortages, hoarding, and panic buying created anxiety among countless American parents that their babies might not be able to eat.
Two years later, a number of steps have been taken to improve the safety of powdered infant formula. Cases of Cronobacter in every state must now be reported to the CDC. Spurred by food-safety advocates, the FDA last year formed a unified Human Foods Program that promises a streamlined bureaucracy with a strong dedication to preventing the sale of contaminated food. We will see. In terms of resources, the FDA is outmatched. The FDA’s Center for Food Safety and Nutrition, which is responsible for the oversight of about 80 percent of the food consumed in the United States, has 1,071 employees—about the same number of employees it had in 1978. The nation’s population has increased by more than 100 million since then.
The dominance of the four companies that control the market for powdered infant formula is even more pronounced within individual states, where one company typically controls more than 90 percent of the formula market. That’s the result of the single-supplier contracts demanded by the federal Women, Infants, and Children program. The concentrated power of the four companies has made infant formula more expensive in the United States than it is in the European Union, despite the EU’s more stringent rules on organic ingredients and food additives in formula.
Acting with common purpose and singular focus, oligopolies are influential. The infant-formula oligopoly benefits from government restrictions on EU and Canadian imports. It has thwarted innovation, avoided criminal penalties for sickening infants, and maintained factories with obsolete equipment. It has left the United States with a production capacity that lacks resilience.
This is the state of affairs in a single industry. But it extends to the entire economy.
America’s Founders despised monopolies. James Madison called them “sacrifices of the many to the few.” Thomas Jefferson suggested that the Constitution ought to include what would now be regarded as an antitrust provision. Writing to a friend in 1788, Jefferson listed the essential freedoms that a Bill of Rights should defend. The first three on his list were “freedom of religion,” “freedom of the press,” and “freedom of commerce against monopolies.” In some quarters, none of these three would make the cut today.
The trustbusters of the early 20th century were remarkably successful at creating and preserving competitive markets in the American economy. But the relaxation of antitrust enforcement during the 1980s soon led to greatly reduced competition not only in the food industry but also in banking, publishing, aerospace, and many other industries.
Forty years ago, the United States had three large manufacturers of passenger aircraft. Today it has only one: Boeing, whose arrogance and incompetence can be attributed to the lack of domestic competition. Thirty years ago, the United States had more than 50 prime defense contractors. Today it has only five. Production delays, cost overruns, and vulnerable supply chains now threaten national security. The hollowing out of rural America—the loss of about half of the nation’s cattle ranchers, about 90 percent of its hog farmers, and more than 90 percent of its dairy farmers since the Reagan era—has fueled political extremism and a sense of desperation in the heartland.
Mergers, acquisitions, and the creation of corporations of massive size and scope are typically justified on the basis of greater “efficiency.” But they are efficient only at centralizing profits and fostering inequality. During the past three decades, adjusted for inflation, the hourly pay of American workers has increased by about 18 percent—and the annual compensation of CEOs at the largest American corporations has increased by about 1,300 percent. In California, where business groups have strongly opposed minimum-wage increases, fast-food cooks and clerks had a median annual income of about $15,000 in 2020. The following year, the CEO of McDonald’s was paid almost $20 million. Throughout the economy, concentrated power keeps wages low. Despite all the business-school rationalizations and jargon, corporations usually buy their competitors for one simple reason: They don’t want to compete with them.
And ordinary people foot the bill, even if they’re not aware of the actual cost. Market power and the capture of government regulatory agencies enable food corporations to “externalize” many of their business costs—that is, to make other people pay for them. Americans annually spend more than $1 trillion on food. But that doesn’t count the cost of foodborne illnesses, diet-related health problems, poverty wages, and the environmental degradation caused by our industrial food system. According to a study by the Rockefeller Foundation, the true cost of the food we consume is three times higher than what we think it is.
The FTC and the Justice Department during the Biden administration have renewed the battle against monopoly power, reviving antitrust enforcement with support from some Republican members of Congress. On February 26, the FTC sued to block the merger of Kroger and Albertsons, arguing that it would raise the cost of groceries and lower the wages of grocery workers. But the fight against oligopolies and monopolies won’t be easy. A small number of corporations have tremendous political influence, expensive attorneys, and great skill at rigging markets in ways the public just can’t see.