ACKNOWLEDGMENTS This study was conducted under the general direction of Dr. Willard F. Mueller, Director, Bureau of Economics. Dr. Arthur T. Andersen, Chief, Division of Industry Analysis, and Dr. Russell C. Parker, Assistant to the Director, Bureau of Economics, had primary responsibility for the report. Philip W. Jaynes and Ronald W. Phelon, economists, Bureau of Economics, made substantial contributions to the preparation of the report. James E. Corkey, Attorney Advisor, Bureau of Restraint of Trade, had primary responsibility for the hearings conducted during the course of the investigation. CONTENTS Page Stores with relatively large numbers of higher price deviations__ The raising of prices on dates food stamps and welfare checks are II. Major national and independent supermarket locations in the Wash- ington, D.C., metropolitan area and low-income sections of the II-1. Average price levels of chain and independent supermarkets relative to small stores in low-income areas of six large cities, February II-2. Share of foodstore sales made through supermarkets and concentra- tion of supermarket sales in Washington, D.C., and its suburbs, II-3. Number of supermarkets and small stores in low-income and II-6. Indexes of store expenses and gross margins of low-income and higher-income area Safeway stores, Washington, D.C.-averaged for the period January 1965-September 1967.. IV-1. Frequency of deviations between advertised prices and prices found 27 IV-2. Frequency of deviations between advertised prices and prices found in stores grouped by income area, reported separately for leading chains of the Washington, D.C., and San Francisco metropolitan areas. IV-3. Stores in which a large number of advertised items were found with high-side price deviations in the Washington, D.C., metropolitan area... IV-4. Percent of advertised special items not available in chainstores grouped by income area. IV-5. Percent of advertised special items not available in stores grouped by income area, reported separately for leading chains of the Washington, D.C., and San Francisco metropolitan areas.-- IV-6. Percent of advertised special items not found in stores: A comparison IV-7. Summary of advertised item surveys of leading food chains in the IV-9. Frequency of deviations from areawide prices of market-basket IV-12. Frequency of meat items judged to have "poor appearance" in lead- INTRODUCTION In recent years various aspects of the retail distribution system serving the low-income segments of our society have been subjected to detailed scrutiny. The results of such studies have indicated that frequently the poor pay more, are subject to excessive credit terms, and often receive lower product quality than the more affluent. This was a key conclusion of the 1968 Federal Trade Commission study of marketing practices involving household furnishings and appliances in the District of Columbia.1 Food pricing in inner-city poverty areas is a particularly critical question. Food is a necessity and a major item in the consumer budget. For the Nation as a whole it represents 17 percent of the average consumer budget; and for families with incomes below the poverty level (those with disposable incomes of $3,000 or less per year), it represents over 40 percent.2 The National Advisory Commission on Civil Disorders found that grievances concerning unfair commercial practices were significant in over half of the riot-torn cities studied.3 The strength of this grievance in Washington, D.C., poverty areas was revealed in a recent survey which showed that nearly nine out of every 10 black persons interviewed complained of the poor quality and high prices of the food available in neighborhood grocery stores.* Because of the broad public interest in foodstore pricing practices in low-income areas and because of the numerous allegations of unfair and anticompetitive pricing practices received by the Federal Trade Commission, the Commission directed the staff to investigate the matter thoroughly. A copy of the Commission resolution, issued on October 11, 1967, directing the inquiry is set forth in appendix I. Among the complaints received were allegations that: (1) higher prices were charged in low-income areas; (2) advertised low-price specials were not available in low-income areas; (3) poorer quality meat and produce were sold in low-income areas; and (4) prices in some low-income area stores were raised on the days when welfare checks were issued. In preparing this report three lines of investigation were followed: (1) hearings designed to analyze pricing policies and practices; (2) price surveys to determine actual price patterns; and (3) analyses of competitive forces in low- and high-income areas. Each of these lines of inquiry produced significant findings. In addition, the Commission staff was able to draw from the Commission's extensive investigatory files in the area of food retailing and on economic reports prepared in 1 Federal Trade Commission, Economic Report on Installment Credit and Retail Sales Practices of District of Columbia Retailers, March 1968. 2 Marketing and Transportation Situation, August 1968, Economic Research Service. U.S. Department of Agriculture, and Food Consumption of Households in the United States, Consumer and Food Economic Research Division, Agricultural Research Service, U.S. Department of Agriculture, spring 1965. Report of the National Advisory Commission on Civil Disorders, Mar. 1, 1968. Washington Inner City Poverty Survey, Subcommittee on Employment, Manpower and Poverty, Committee on Labor and Public Welfare, U.S. Senate, 90th Cong., second sess. (December 1968), p. 130. 360-976-69-2 |