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HARTFORD — Attorney General William Tong enjoys soft and hard-boiled eggs. It’s a preference, he said, that has become more costly.
“The cost, not even of organic eggs or free range or cage free eggs, but basic eggs in the supermarket, sometimes are several dollars higher than they used to be,” Tong said at a press conference on Thursday.
At the request of Democratic members of the Senate, the Attorney General announced that his office plans to open an inquiry into grocery store prices in the state to evaluate whether the increased cost of groceries since the pandemic are the result of supply-chain cost increases or a desire by the grocery store chains to make more profit.
Heading into the fall elections, Democrats nationwide have faced significant political exposure due to high and unresolved inflation under the Biden administration.
State Sen. Bob Duff, D-Norwalk, referenced a March 24 report by the Federal Trade Commission which found that food and beverage retailer profits rose substantially during the pandemic, and remained at 7 percent as recently as the first three quarters of 2023. The report says that the increased profits “cast doubt” on the idea that increased costs of goods sold at the market are just a reflection of the increased production prices.
“One would think as society has returned to normal from the pandemic and our supply chain has increased production the cost of groceries would lower. Yet every time I go to the grocery store, it seems like the price of groceries increases,” said Duff.
Tong said he intended to send letters out to both large grocery chains and small grocery stores requesting their profits and revenues.
Democrats said they planned to add a section to a bill on consumer protection that would give the Attorney General greater power to take action against “price gouging.” Under current law, the attorney general can only pursue unfair pricing at the level of retailers, without addressing producers or distributors.
In 2020, New York Attorney General Letitia James sued one of the country’s largest egg producers for increasing prices unfairly for consumers. Earlier this month, James received over 1 million free eggs for the state of New York in a settlement.
But not everyone is convinced that the rise in prices constitutes the need for increased scrutiny. Steve Lanza, a professor of economics at the University of Connecticut, told CT Examiner that economists tend to view the term “price gouging” with skepticism — generally, he said, the rising prices are simply the market balancing out at a time when demand outstrips supply.
Lanza said that while food prices have continued to rise, that rate of increase has also moderated. He noted that the increase in food prices is now below the overall inflation rate.
The most recent data from the Bureau of Labor Statistics shows that the Consumer Price Index increased 0.4 percent in March, pushing the overall inflation rate for the last year up to 3.5 percent. During that same 12-month period, grocery costs have increased 1.2 percent.
“It’s sort of where you would expect to be and where the Fed would expect things to be — where they want them to be before they would start easing up on interest rates,” said Lanza.
In comparison, over the last year electricity rates have increased 5 percent, housing costs have increased 5.7 percent, and transportation costs have risen 10.7 percent.
Lanza said that food also represents a small portion of consumers’ budgets — below 10 percent. But it’s a visible portion.
“It’s one of those things that people confront all the time. They’re always out at the store and they see those high prices and even if they’re not rising that quickly or even if they just stopped rising … it’s higher than what people are used to,” said Lanza.
Lanza said that, with the cost of transportation and wages also rising, expecting food prices to go down is “wishful thinking.”
“I wouldn’t expect prices to go down, but I think I would expect prices to sort of settle down so that they’re not going up as fast, and people can make better decisions when they’re when they’re shopping in terms of the allocation of of their limited incomes to grocery items that get them the best deal for their dollar,” he said.
Tong posited market consolidation as a potential driver of the high prices.
“The number of major grocery chains is dwindling and the number of independent grocery retailers is dwindling every single day. We should all do our best to shop local and support our small businesses, but as choice becomes ever more restricted, those prices will continue to go up,” Tong said.
Suppliers have also consolidated. The report found that, in 2019, four companies were responsible for 85 percent of the beef market, 67 percent of the pork market and 53 percent of the chicken market.
Brendan Cunningham, a professor of economics at Eastern Connecticut State University, told CT Examiner in an email that in the last 20 years or so, profits constituted an average 10 percent of the total GDP of the United States — an increase from the 6 percent average that characterized the 57 years before. He said this change indicated reduced competition across the board. He also said that data from the USDA indicated that market concentration in the grocery industry was on the increase.
“The FTC’s report indicating a spike in the revenue / cost ratio for the grocery industry is troubling. It is appropriate to take steps in order to restore more normal levels of competition and profitability in the American economy, the grocery market included,” said Cunningham.
But Cunningham also said he didn’t like the idea of creating regulations related to “price gouging.”
“There is not a very good, objective, definition of price gouging. It is an amorphous and subjective notion,” he said. “A better solution would be to lower barriers to entry for grocers and increase competition. That, too, could be a complicated approach but it is more likely to address elevated prices and also create jobs at the same time.”
Democratic lawmakers have been trying to expand the powers of the Attorney General to address high prices for years, but the effort has met fierce opposition.
Republican lawmakers accused Democrats of trying to shift focus away from the real cause of the high prices — policies created by the Biden administration.
“Grocery stores are critical partners in our local and state economies, employing thousands of people here despite an ever-changing—and costly—regulatory environment,” State Sen. Stephen Harding R-Brookfield and State Rep. Vincent Candelora, R-Branford said in a statement. “Instead of this transparent PR stunt, Democrats should look in the mirror and face the reality that their decisions, coupled with Bidenomics, have compounded the financial stress faced by residents who are tired of paying an arm and a leg for a bag of chips.”
Wayne Pesce, The Connecticut Food Association, which represents retail grocery stores, told CT Examiner that the evidence in the FTC report was “speculative at best” and said the claim that Connecticut grocers were raising prices unfairly was “without merit.”
“While it’s fair to scrutinize the actions of businesses, including grocers, it’s essential to respect their right to operate profitably within the bounds of fair competition and regulatory compliance,” said Pesce. “As long as grocers are conducting their operations ethically and within the confines of the law, their ability to make a profit should be respected and even encouraged as a sign of a healthy and vibrant marketplace.”
He also questioned why grocers were being singled out when other sectors like energy and housing also showed increased cost.
Tong said that if the state had the resources, they would attempt to address prices in every sector, but that he felt it made sense to start with food.
“You can’t find a more important commodity than basic sustenance,” said Tong.