Today's links
It's not a crime if we do it with an app: How Big Potato and the other food cartels did greedflation and got away with it.
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Two caricatures of top-hatted millionaires whose bodies are bulging money-sacks. Their heads have been replaced with potatoes. The potatoes' eyes have been replaced with the hostile red eye of HAL 9000 from Kubrick's '2001: A Space Odyssey.' They stand in a potato field filled with stoop laborers. The sky is a 'code waterfall' as seen in the credit sequences of the Wachowskis' 'Matrix' movies.
It's not a crime if we do it with an app (permalink)
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The core regulatory proposition of the tech industry is "it's not a crime if we do it with an app." It's not an unlicensed taxi if we do it with an app. It's not an illegal hotel room if we do it with an app. It's not an unregistered security if we do it with an app. It's not wage theft if we do it with an app.
Inflation is one of the most politically salient factors of this decade, and so much of inflation can be attributed to a crime, done with an app, with impunity for the criminals. The entire food supply has been sewn up by cartels of 2-5 giant companies, and they colluded to raise prices, and bragged about it, and got away with it, because neoclassical economists insist that it's impossible for this kind of price fixing to occur in an "efficient market."
Some of these cartels are well-known, like the Coke/Pepsi duopoly. Pepsi's bosses boasted to their shareholders about "Pepsi pricing power," and how they were able to raise prices over the inflationary increases caused by covid and the Russian invasion of Ukraine:
https://pluralistic.net/2023/03/11/price-over-volume/#pepsi-pricing-power
You might know that pretty much every packaged good in your grocery store is made by one of two companies, Unilever and Procter and Gamble. Both CEOs boasted to their investors about their above-inflation price increases:
https://pluralistic.net/2021/11/20/quiet-part-out-loud/#profiteering
But other cartels are harder to spot. It may seem like your grocer's eggs department is filled with many different companies' products. In reality, a single company, Cal-Maine Foods, owns practically every brand of eggs in the case: Farmhouse Eggs, Sunups, Sunny Meadow, Egg-Land’s Best and Land O’ Lakes. They made record profits after the pandemic and through bird flu, a fact that CFO Max Bowman attributed to "significantly higher selling prices" and "our ability to adapt to inflationary market pressures":
https://pluralistic.net/2023/01/23/cant-make-an-omelet/#keep-calm-and-crack-on
But Cal-Maine is comparatively transparent. The other food cartels – especially those that serve the restaurant sector – are harder to spot. In The Lever, Katya Schwenk describes how four companies – Lamb Weston, JR Simplot, McCain Foods and Cavendish Farms – have captured the frozen potato market and all that comes with it (fries, tater tots, etc):
https://www.levernews.com/the-rise-of-big-potato/
These companies have been hiking prices for years, but really started to turn the screws during the post-covid inflationary period. One of Schwenk's sources is Josh Saltzman, owner of the DC sports bar Ivy and Coney. Ten years ago, Saltzman charged $3 for fries; now it's $6 – and Saltzman's margins have declined. Saltzman has a limited number of suppliers, and they all get their potatoes from Big Potato, and they bundle those potato orders with their other supplies, making it effectively impossible for Saltzman to buy his potatoes from anyone else.
Big Potato controls 97% of the frozen potato market, and any sector that large and concentrated is going to be pretty cozy. The execs at these companies all meet at industry associations, lobbying bodies, and as they job-hop between companies in the cartel. But they don't have to rely on personal connections to rig the price of potatoes: they do it through a third-party data-broker called Potatotrac. Each cartel member sends all their commercially sensitive data – supply costs, pricing, sales figures – to Potatotrac, and then Potatotrac uses that data to give "advice" to the cartel members about "optimal pricing."
This is just price-fixing, with an app. The fact that they don't sit around a table and openly discuss pricing doesn't keep this from being price-fixing. What's more, they admit it. A director at McCain said that "higher ups" forbade anyone in the company from competing on price. A Lamb Weston exec described the arrangement as everyone "behaving themselves," chortling that they'd "never seen margins this high in the history of the potato industry." Lamb Weston's CEO attributed a 111% increase in net income to "pricing actions."