Kickbacks and Corporate Concentration: How Exclusionary Discounts Limit Market Access for Community-Based Food Businesses

Food and agriculture systems program manager Claire Kelloway co-wrote a paper with senior fellow at American Economic Liberties Project, Matthew Buck, examining exclusionary payments as an unfair tactic used by dominant retailers to abuse their market power to corner food retail markets and marginalize new and community-based producers.

 Dominant food manufacturers and similarly dominant retailers abuse their market power to corner food retail markets and marginalize new and community-based producers. This paper will examine the effects of one of these unfair tactics: exclusionary payments. Dominant food vendors can offer retailers powerful incentives for not dealing with rivals or limiting business with them, such as offering rebates tied to reaching a set sales volume or a portion of all purchases. Using qualitative data from interviews with food retail professionals, industry studies, and academic research, we will analyze both the prevalence of exclusionary discounts in food retailing and the barriers they may pose to market access for new, small, or community-based food businesses.

Our research suggests that exclusionary payments do exist in the grocery and institutional cafeteria industry but are more widespread in the latter. These payments have become an important revenue stream to retailers since the 1990s. As exclusionary payments become a greater part of the food retail business model, dominant firms can corner the lion’s share of retailers’ food spending and shelf space, excluding rivals and limiting growth for new and community-based businesses. Policymakers have several legislative and administrative options to contain exclusive arrangements.

Read full paper here.