Grocery prices have remained persistently high post-pandemic. The Federal Trade Commission (FTC) claims this is due to large grocery stores’ desire to generate record profits. However, the evidence shows that while profits spiked during the pandemic they have since fallen. Even at the peak of the spike, grocery profits were still within the normal range.

Antitrust theory states grocery store price gouging would require monopoly power, or collusion between grocery retailers. Thankfully, this isn’t the case in the US grocery market. The growth of online grocery shopping provides extra competition for brick and mortar stores. Since the FTC isn’t making a claim of collusion, this means concerns over price gouging are weak at best. A dive into the evidence provides an alternative explanation. 

The FTC’s report shows grocery store revenue over cost changed from roughly five to seven percent between 2015 and 2023, slightly above where it was in 2000. However, other evidence shows that while grocery store profits increased above two percent in 2019 and 2021, by 2022 it was back down to only 1.11 percent. The Food Industry Association shows profits spiked in 2020 to three percent after taxes and started decreasing in 2021, which accelerated the next year.

Grocery stores are known for having thin profit margins. On average grocery stores earn one to three percent returns. The data show grocery store profits stayed within that range through the pandemic and associated recession.

This trend is normal. During economic downturns grocery stores often see increased sales as fewer people dine out. The increase in grocery profits reflect changing market conditions during an economic crisis, not monopolistic pricing.

In its rush to micromanage increasing sectors of the economy, the FTC seems not to have examined the changes in either the supply chains of the retail grocery market nor in consumers’ demands from the grocery market. For example, the FTC’s claim that grocery stores are using supply chain issues as an excuse to keep grocery prices high can be checked against the actual data on producer costs. From February 2020 through February 2024 the producer price index for grocery stores increased nearly 29 percent. Grocery store prices have increased almost the same amount at 25 percent.

Restaurant businesses were slow to recover from the pandemic, and throughout 2023 people continued to eat out at restaurants less. This is likely due to prices of restaurants increasing much faster than those of grocery stores. From October 2022 through September 2023 restaurant prices increased five percent while grocery prices only increased 1.9 percent.

Yet despite prices increasing more than twice as fast, there has yet to be an FTC crackdown on “greedy” restaurants price gouging their customers.

Instead of the heavy-handed approach the FTC has taken in the grocery market, it should allow normal market processes to continue to return grocery market profits to the level they were at pre-pandemic.

Persistently high grocery prices are a problem for many consumers, but the FTC has misidentified the cause. Grocers are still dealing with fluctuating and changing markets as well as the lingering effects of inflation. The evidence shows grocery profits falling after the pandemic, which is a sign of normal market corrections when an industry has greater than usual returns, not a sign of a need for widespread government interference in the grocery market. Someone at the FTC needs to remember that there is a difference between hurting businesses and helping consumers.

Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter (X) @ConsumerPal.