Earlier this month, the French supermarket giant Carrefour placed signs throughout its stores informing customers that it no longer planned to sell PepsiCo products of any sort. That meant no Cheetos, Doritos, or Quaker cereals—and certainly no Pepsi or 7-Up. The reason, Carrefour said, was the food giant’s “unacceptable” price increases.
A brouhaha soon broke out in the press, with PepsiCo saying it had made the decision to break things off, and Carrefour countering that that was not the case. Regardless, the battle was the clearest encapsulation yet of a battle that has been transpiring across the Atlantic. On one side is the French government, which is working hard to get food prices down; on the other side are international food conglomerates such as PepsiCo; and in the middle are supermarket chains like Carrefour.
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In the U.S., concerns about the cost of food have been similarly top of mind for years. The root issue is the stubbornly high price of a basket of groceries, as what would have cost supermarket shoppers $100 in December 2019 is now setting them back $125, and there have been few signs that number will decrease anytime soon.
Surveys have repeatedly shown that regardless of political affiliation, Americans are most concerned about rising prices when it comes to those grocery bills. In one poll late last year by Yahoo Finance and Ipsos in which Americans were asked to list their top inflation concerns, 67 percent said food costs. By comparison, 15 percent cited gas and transportation, and 12 percent named housing costs. Other polls have even shown that food prices are Americans’ top economic concern, above their own wages.
But outside of the brunt force action of raising interest rates, the U.S. government has acted all but powerless, watching from the sidelines as the price of raw materials like wheat, eggs and energy decline, but the cost of the foodstuffs they turn into do not. President Joe Biden, the most powerful man in the world, has so far stuck to feeble attempts to shame corporations into doing the right thing. “Any corporation that has not brought their prices back down, even as inflation has come down, even as the supply chains have been rebuilt, it’s time to stop the price gouging,” Biden said in November.
Perhaps the situation in France could act as a window into another world, one where the U.S. government could attempt a targeted, aggressive approach to give American consumers some much-needed relief at the grocery store. According to a poll performed by YouGov on behalf of Motherboard, which surveyed 1,000 U.S. adults between January 9 and 11, there is strong appetite for such intervention. Sixty-four percent expressed support for “a law requiring food producers to lower prices when the cost of their raw materials decreases,” compared to only 19 percent who opposed such action.
Those surveyed also broadly supported Americans grocery stores taking similar action to Carrefour and pulling major brands from shelves if food companies do not lower prices when the cost of raw materials drops. Overall, 53 percent supported such a stance while only 23 percent opposed it.
France has set up a food pricing system that will sound foreign to American ears: Consumer goods companies like PepsiCo must negotiate with the country’s grocery stores on prices in the stores during a set period. If they can’t come to a compromise, PepsiCo won’t be able to get its products on the grocer’s shelves. The negotiations provide French consumers with a small but valuable piece of power, and President Emmanuel Macron has been trying to use the system to his advantage as he aggressively pushes to get the country’s high food prices down, saying they should reflect the fact that the prices of many raw materials have recently declined.
That is not the case here. “In the U.S., no such protections for farmers and grocery stores exist, allowing big companies like Pepsi to raise prices at any time and with little consequence,” said Lindsay Owens, the executive director of the Groundwork Collaborative, a progressive economic think tank in Washington, D.C.
This has made it easier for large corporations to raise prices in the U.S., something large corporations have sometimes acknowledged. In the spring of 2022, for example, the chief financial officer of Nestle said on an earnings call that it was “usually easier to implement pricing [in the U.S.] because we have less constraints than in Europe, timing-wise.” On the same call, an executive said Nestle was instituting “higher pricing in the U.S. market than comparatively in Europe or elsewhere” due to inflation.
The prospect of the government playing any role in grocery prices—or prices anywhere else for that matter—has been politically unthinkable ever since former President Nixon last tried his hand at the matter 50 years ago. Back in 1971, with prices rising quickly, Nixon imposed a 90-day freeze on wages, prices and rents. The decision was initially celebrated, but each time Nixon tried to pull the controls, prices spiked—and the stock market often tanked—leading him to institute more controls with diminishing returns. Ultimately, the controls were viewed as a failure by most people. Treasury Secretary George Shultz later told Nixon that the primary benefit of the policy had been teaching the nation “that wage‐price controls are not the answer.”
But Nixon’s failure has masked the fact that other moments of government intervention in prices proved more successful, and that such ideas were once more acceptable.
“It was absolutely mainstream from the start of World War II until the Reagan administration,” University of Texas economist James Galbraith told The New York Times in 2022.
In WWII, FDR’s administration instituted price controls that proved less devastating, so much so that a collection of top economists called for the controls to be extended in a letter to The New York Times after the war ended. Top economists called for the “strategic” use of price controls and their eventual end. But rather than ending the controls strategically, they were stripped all at once, bringing on inflation.
In 2021, Isabella Weber, then a little-known economist at the University of Massachusetts Amherst, cited the WWII price control while arguing that “strategic price controls” could once again prove useful in the modern environment. Weber had come to believe that corporate greed (or “sellers’ inflation”) was a primary driver of inflation, and that government action on pricing could do more to stem inflation than painful interest rate increases.
“We need a systematic consideration of strategic price controls as a tool in the broader policy response to the enormous macroeconomic challenges instead of pretending there is no alternative beyond wait-and-see or austerity,” she wrote.
For the suggestion, she endured international ridicule from her fellow economists—Paul Krugman called her “truly stupid”—but a number of reports, including one from the Kansas City Federal Reserve, have since backed her claim about corporate profits. (Krugman also apologized and said there was something to the theory.)
One part of Weber’s once-controversial theory has become broadly accepted by the American public. Overall, Americans are now more likely to blame national inflation on corporations’ desire to maximize profits than any other factor except for federal spending, which received equal blame in the YouGov poll this month for Motherboard.
The question has been if Weber and those of her political persuasion can convince the public that government intervention in rising prices could prove fruitful.
Individual action against corporations has become more commonplace since inflation took hold after the pandemic. The Canadian grocery giant Loblaws stopped selling Frito-Lay products for a time in 2022 amid its own negotiations with PepsiCo. Then, last year, the German supermarket giant Edeka similarly called out “unjustified and exaggerated price increases by some international brands” last year. Walmart has also expressed concern about high prices by consumer product companies, though CEO Doug McMillion said on a recent earnings call that his goal in trying to lower prices for food items was to free up shoppers to spend more money elsewhere in the store.
This year, soon after Carrefour announced the decision, the president of France’s largest supermarket chain, Michel-Édouard Leclerc, backed its competitor.
“We must in the coming month convince all these big suppliers who made the mistake of overly increasing their prices, to lower them now, or moderate them,” Leclerc said.
In an email to Motherboard this month, Weber similarly celebrated Carrefour’s decision, particularly its decision to announce the reason inside the store, saying that “the only way to avoid repeated episodes of sellers’ inflation of the type we have experienced is for companies to find that there is a real cost to price hikes.” She noted that food companies have been “reluctant to pass” savings from the falling price of raw materials on to consumers, preferring instead to set “themselves up for windfalls.”
But Weber said individual actions by grocers, even ones as big as Carrefour, or even individual countries, will not be enough. “For this kind of strategy to be effective, more countries have to follow the French example,” she said.
Biden can shame corporations all he wants, but the U.S. will need to take more “concrete action” to get the problem under control, Weber said. Doing so, she noted, could prove politically popular, and that in and of itself is a significant sea change.
