On August 1, 2024, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) virtually hosted the first public meeting of the Strike Force on Unfair and Illegal Pricing. President Biden announced the strike force’s formation in March 2024 to strengthen interagency efforts to root out and stop illegal corporate behavior that burdens American families through anticompetitive, unfair, deceptive, or fraudulent business practices.
Remarks from top FTC and DOJ officials underscored the agencies’ and strike force’s priority to lower prices for Americans.
FTC Chair Lina Khan, DOJ acting Associate Attorney General Benjamin Mizer, Assistant Attorney General Jonathan Kanter, and Principal Deputy Assistant Attorney General Brian Boynton, along with officials from other agencies, highlighted the strike force’s recent enforcement actions, including efforts to tackle unlawful behavior that affects the prices Americans pay for their groceries, transportation, and health care.
The big headline from the meeting was that the FTC and DOJ are launching an inquiry into what they characterize as high grocery prices. During the public meeting, they expressed skepticism that Americans are paying competitive and affordable prices at grocery stores.
While grocery prices emerged as the top immediate priority, the strike force is also focused on conduct that could be viewed as anticompetitive, unfair, deceptive, or fraudulent.
Strike Force Key Initiatives
Khan announced that the FTC and DOJ will launch an inquiry into high grocery prices to ensure that consumers are receiving fair and affordable prices. While grocery prices soared during the pandemic—due in large part to higher costs and supply chain disruptions—Khan explained that costs have since fallen and supply chains have improved. According to Khan, “Many items, though, are still too costly, and many large grocery chains are still raking in enormous profits,” and the FTC and strike force are “determined to understand why.”
Although many products consumers purchase most frequently—such as cereal, pasta, and potatoes—are less expensive than they were a year ago, Khan said, “it still isn’t clear that Americans are fully getting the competitive, affordable prices that they deserve.” The FTC and the DOJ want to ensure that companies “are not exploiting their power to inflate prices for American families at the grocery store,” Khan said.
Mizer, who oversees the DOJ’s antitrust and civil divisions, highlighted the department’s investigations that have “led to the abandonment of mergers that would increase the price of staples that Americans purchase at the grocery store,” along with the DOJ’s lawsuits against companies that target meat processing companies the DOJ believes are sharing competitively sensitive pricing and wage information.
Grocers have already been under heavy scrutiny by federal enforcers this year with the launch of a multistate lawsuit to block the approximately $24 billion Kroger-Albertsons merger. The merger has also been challenged separately by attorneys general in Colorado and Washington State. Kroger and Albertsons recently agreed to pause the merger.
Boynton discussed the DOJ’s crackdown on hidden fees and highlighted the consumer protection branch’s June 2024 lawsuit against Adobe regarding its use of an “early termination fee” as part of its subscription service. The suit, which seeks civil penalties, was filed following a referral by the FTC to the DOJ and names executives, along with the company, in a case where the FTC believes the executives supervised, participated in, and had actual knowledge of the alleged deceptive enrollment practices. Boynton highlighted that the DOJ continues to work with the FTC “to develop and bring civil penalties cases investigated and referred by the Commission.”
Boynton also highlighted the DOJ’s recent activity targeting abusive drug pricing practices, including a $400 million settlement to resolve claims of alleged violations of the False Claims Act for conspiring to fix the prices of various generic drugs.
Other Agency Efforts
Senior officials from the U.S. Department of Agriculture (USDA), Department of Health and Human Services (HHS), Department of Transportation (DOT), Securities and Exchange Commission (SEC), Federal Communications Commission (FCC), and Consumer Financial Protection Bureau (CFPB) highlighted their respective agencies’ work to lower prices across multiple industries for Americans:
- USDA Deputy Secretary Torres Small highlighted the USDA’s efforts to address ongoing food and agricultural pricing challenges faced by both consumers and farms, including the department’s ongoing multiyear investigative study on retail concentration and market practices. Small also discussed the department’s attempt to modernize the Packers & Stockyards Act and a partnership with state attorneys general to leverage both state and federal expertise around fair competition in the agricultural sector.
- HHS Deputy Secretary Andrea Palm highlighted the department’s focus on ensuring the affordability, transparency, and fairness of health care. Palm discussed the need to lower prescription drug prices, expand affordable access to health care, and increase competition and transparency across the health care industry—particularly transparency with respect to ownership interests.
- Acting DOT General Counsel Subash Iyer outlined the DOT’s work to reduce unfair practices that subject airline passengers to high costs, including a proposed ban on family-seating junk fees, and investigation of a top airline provider’s refund, reimbursement, and customer service problems during the recent CrowdStrike outage.
- SEC Chair Gary Gensler addressed the agency’s efforts to curb anticompetitive practices and ensure fair dealing in the securities markets. Gensler highlighted the commission’s rulemaking efforts to promote access and transparency, coupled with thorough market oversight and continued review of thousands of SEC filings each year.
- FCC Chairwoman Jessica Rosenworcel touched on the commission’s endeavors to dismantle unfair and deceptive pricing tactics in the communications sector, noting the adoption of new rules that will cut down on rates that impact the ability of incarcerated Americans to stay connected to their friends and family.
- CFPB Director Rohit Chopra outlined the CFPB’s work on fighting junk fees, including junk fees imposed by companies that process payments for children’s school lunches, and a recent inquiry into junk fees in mortgage closing costs. The CFPB also highlighted its continued scrutiny of the credit card market, including credit card interest rate margins that are at an all-time high.
Takeaways
Businesses should be aware of the FTC’s and DOJ’s priorities to: (1) investigate high grocery prices over the coming months; and (2) crack down on companies offering subscription services that allegedly make it difficult for consumers to understand the terms and cancel. Agency remarks from the first public strike force meeting signaled important points for businesses to keep in mind:
- Companies should consult with antitrust and consumer protection counsel to make sure they are not inadvertently engaging in anticompetitive, deceptive, unfair, or fraudulent practices, particularly when setting prices, adding or changing fees, or offering subscription services.
- Companies should evaluate their pricing practices to ensure they are making independent decisions when setting prices, particularly for groceries.
- When changing prices or adding fees, companies should look closely at the strike force’s priorities and stay attuned to recent enforcement by the regulators in their industries. It is often possible for businesses to thread the needle, achieve their goals, and avoid regulatory scrutiny with the right advice.
- Subscription plans should feature an enrollment flow that clearly discloses all material terms in places that customers will see them. Allowing simple online cancellation, properly training customer service representatives, and making it as easy to cancel as it is to sign up go a long way toward avoiding scrutiny.
- Companies, along with corporate executives, will continue to be a target of regulatory scrutiny, especially those involved in or supervising the alleged unfair or deceptive practices.
- Companies should monitor and address customer complaints and address systemic issues identified by those complaints before regulators become involved.
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