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Report Exposes How Chains Like Dollar General Prey on the Poor With Cash-Back Fees
Dollar General, Dollar Tree, and Kroger rake in a combined $90 million a year from cash-back fees, according to a new report by the Consumer Financial Protection Bureau.
Aug 27, 2024
The Consumer Financial Protection Bureau published a report Tuesday highlighting how large retailers such as Dollar General and Kroger exploit low-income communities' lack of access to local banking to hit consumers with predatory cash-back fees.
The CFPB found that while many retailers still offer free cash back at the register, Dollar General, Dollar Tree, and Kroger collectively rake in $90 million a year from fees imposed on people using the retail locations to access their own money.
"At Dollar General and Dollar Tree/Family Dollar, cash-back fees for small withdrawal amounts are the highest in the sample ($1 fee or more for cash-back amounts under $50)," the bureau found. "Kroger, the country's largest grocery chain, recently announced new charges at their Harris Teeter stores (75 cents for $100 cash back or less), and charges 50 cents for up to $100 cash back at their other brand stores such as Ralph's, Fred Meyer, and others."
The CFPB emphasized that such fees are disproportionately levied against people with lower incomes, who are more likely to live in areas with fewer banking options—forcing residents to rely on dollar stores for easy access to cash. The report notes that banking industry consolidation and branch closures have left a "void" of cash access spots that retailers like Dollar General have rushed to fill.
"While retail chains had long provided cash back on debit card purchases for free, the CFPB has found that dollar store chains and other retailers are now charging fees for access to cash," Rohit Chopra, the CFPB's director, said in a statement Tuesday. "Many people living in small towns no longer have access to a local bank where they can withdraw money from their account for free. This has created the competitive conditions for retailers to charge fees for cash back."
"Dollar General alone chalked up gross profits of $11.82 billion in 2023. But they nonetheless find new ways to squeeze even more money from their shoppers."
Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance (ILSR), applauded the CFPB's new research as an "important report" that "exposes yet another way in which dollar stores' exploitative business practices take advantage of consumers."
"The three big dollar store chains make enormous profits," said Mitchell. "Dollar General alone chalked up gross profits of $11.82 billion in 2023. But they nonetheless find new ways to squeeze even more money from their shoppers—in this case, by charging them a few dollars to get cash back on their transactions, which average only a modest $25 or so. All three major dollar store chains have been fined for overcharge errors, and all use their market muscle to force suppliers to create 'cheater' sizes for them. CFPB's report will help alert shoppers to these abusive retailing practices."
ILSR has long worked to shine light on the abuses of dollar stores, releasing a report last year detailing how the retailers have invaded low-income communities and preyed on vulnerable consumers as well as workers.
"One might assume that the dollar chains are simply filling a need, providing basic retail options in cash-strapped communities. But the evidence shows something else," reads ILSR's report. "These stores aren't merely a byproduct of economic distress, they are a cause of it."
"In small towns and urban neighborhoods alike," the report adds, "dollar stores drive grocery stores and other retailers out of business, leave more people without access to fresh food, extract wealth from local economies, sow crime and violence, and further erode the prospects of the communities they target."
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FTC and State AGs Sue to Block Kroger-Albertsons 'Mega Merger'
"By suing to block the Kroger-Albertsons merger, the FTC is keeping grocery bills down and workers in their jobs," said one anti-monopoly campaigner.
Feb 26, 2024
The Federal Trade Commission and a bipartisan group of state attorneys general joined forces Monday on a lawsuit aimed at blocking the supermarket giant Kroger from buying up the Albertsons grocery chain, warning the merger would hamper competition, further drive up food prices, and harm workers.
If completed, the $24.6 billion deal would mark the largest supermarket merger in U.S. history at a time when grocery chains are facing growing scrutiny for driving up prices to pad their bottom lines. A Kroger-Albertsons grocery behemoth would control more than 5,000 stores and 4,000 retail pharmacies across the country, according to the FTC.
"This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years," said Henry Liu, director of the FTC's Bureau of Competition. "Kroger's acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today."
"Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating," Liu added.
The attorneys general of Arizona, California, Washington, D.C., Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming are joining the FTC's suit, which was filed in the U.S. District Court for the District of Oregon.
The lawsuit drew immediate praise from progressive advocacy groups and opponents of food industry consolidation.
Stacy Mitchell, co-executive director at the Institute for Local Self-Reliance (ILSR), said the decision to sue shows that the FTC "sees what we have long argued—there was no upside to this merger for anybody other than the top executives at these two companies and their investors."
ILSR has estimated that if the deal survives legal challenges, Kroger-Albertsons and Walmart—the largest low-wage employer in the U.S.—would control 70% of the grocery market in over 160 cities.
"Concentration in grocery retail has already caused food prices to skyrocket," said Mitchell. "We know from past grocery mergers that this one would have sent prices for consumers even higher. It would have left many communities, especially on the West Coast, with little to no competition or choice about where to shop. And it would have hurt retail workers by giving the combined companies even more leverage to push down wages and dictate terms."
Grocery prices have outpaced overall inflation in the U.S. over the past four years, surging by roughly 25%—and they remain stubbornly high even as inflation has fallen substantially from its peak of 9.1% in the summer of 2022.
The FTC, which has been assessing the proposed merger for more than a year, said Monday that because Kroger and Albertsons are direct competitors, a merger of the two "would eliminate head-to-head price and quality competition, which have driven both supermarkets to lower their prices and improve their product and service offerings."
"If the merger takes place, grocery prices will increase, and Kroger and Albertsons' incentive to improve product quality and customer service will decrease, further harming customers," the agency said.
The deal would also bring economic pain for workers, according to merger opponents. The Economic Policy Institute (EPI) has estimated that if the acquisition is completed, roughly 746,000 grocery store workers in over 50 metropolitan areas of the U.S. would see their annual earnings fall by a combined $334 million.
"Workers' ability to negotiate better pay and working conditions rests on their capacity to switch jobs," EPI senior economist Ben Zipperer explained in a 2023 memo. "By decreasing the number of outside options available to workers, the merger will limit competition for hiring and retaining employees, and grocery store worker earnings will fall as a result."
The FTC said Monday that executives at both Kroger and Albertsons have admitted that the proposed merger is anticompetitive. The agency quotes one unnamed executive as saying, "You are basically creating a monopoly in grocery with the merger."
Morgan Harper, director of policy and advocacy at the American Economic Liberties Project, said in a statement that "by suing to block the Kroger-Albertsons merger, the FTC is keeping grocery bills down and workers in their jobs."
"From higher prices for consumers, worse wages and benefits for workers, a tighter squeeze on producers and farmers, to an increased risk of grocery and pharmacy deserts across the 48 states this merger affects, the harms of this deal were clear from the start," said Harper. "No divestiture or concession would make it work—which is why over 100,000 workers and countless advocates have spoken out against this disastrous merger."
"Kroger and Albertsons would be wise to save everyone's time and abandon this deal," she added.
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FTC Hits Amazon With 'One of the Most Important Antitrust Cases in US History'
"Breaking up Amazon is key to repairing the online market and opening the way for competition," said one expert.
Sep 26, 2023
Economic justice advocates applauded on Tuesday as the Federal Trade Commission and 17 states filed a sweeping antitrust lawsuit against Seattle-based Amazon.com for illegally dominating the online retail economy at the expense of consumers.
"Freedom of commerce is a fundamental liberty of American democracy," declared Open Markets Institute executive director Barry Lynn in response to the suit. "Today the FTC took a first step to restoring the liberty of every individual and business who relies on essential internet platforms to exchange goods, services, and ideas with one another."
Lynn praised the commission for "targeting some of the most egregious abuses by Amazon of the dominant position it has acquired over vast swaths of online commerce, and the corporation's routinized manipulation of other people's business for its own private purposes."
"Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people."
The 172-page complaint "lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies," said FTC Chair Lina Khan in a statement. "The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them."
The document—filed in a federal court in Washington state—alleges that Amazon maintains "durable monopoly power" in the online superstore and marketplace services markets, including by stifling price competition and coercing sellers into using its fulfillment service. The section on its algorithmic tool "Project Nessie" is heavily redacted.
"Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people," noted John Newman, deputy director of the FTC's Bureau of Competition. States led by both Democrats and Republicans—Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin—joined the highly anticipated lawsuit.
Amazon—which was founded by Jeff Bezos, one of the richest people on the planet, and is now the second-largest private employer in the United States—swiftly pushed back on Tuesday.
David Zapolsky, the company's senior vice president of global public policy and general counsel, claimed the FTC case "is wrong on the facts and the law." He said the challenged practices "have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices, and faster delivery speeds for Amazon customers and greater opportunity for the many businesses that sell in Amazon's store."
Meanwhile, critics of the company joined Open Markets in celebrating the development—echoing praise for FTC in June, when the commission sued Amazon over its "yearslong effort to enroll consumers into its Prime program without their consent while knowingly making it difficult for consumers to cancel their subscriptions."
Matt Stoller, director of research at the American Economic Liberties Project, said Tuesday that "the FTC is right to challenge Amazon, a company that appears to offer low prices under the guise of free shipping but in fact inflates prices across the whole economy."
"In order to reach most online customers, sellers must sell through Amazon. This market power enables Amazon to set the price floor on almost every online retail item offered by sellers, extract a 50% cut from each sale, and punish sellers who try to sell elsewhere at lower prices," he explained. "At the same time, it leverages its dominance to block rivals from entering the markets in which it offers services, while its own marketplace is increasingly saturated with pay-to-play junk ads."
"There's no such thing as 'free shipping' just as there's no such thing as a free lunch, Amazon is just hiding from consumers how much they have to pay," Stoller stressed. "Amazon is a monopoly, and we're thrilled to see the FTC end its coercive tactics."
Stacy Mitchell, co-director at the Institute for Local Self-Reliance—which has spent over a decade sounding the alarm about the retail giant's practices—charged that "for too long Amazon has been allowed to maintain a stranglehold on the online market."
"The filing of this lawsuit is a victory for freedom and self-governance; it marks a crucial rekindling of public authority to check unaccountable private power," said Mitchell. "This is one of the most important antitrust cases in U.S. history."
"Breaking up Amazon is key to repairing the online market and opening the way for competition," she argued. "As this lawsuit shows, Amazon's anti-competitive tactics largely hinge on leveraging the interplay between its retail division, third-party marketplace, and logistics operation. Separating them would eliminate Amazon's ability to monopolize the market. We are encouraged that both the scope of this case and the FTC's request for the court to consider structural remedies show that the agency intends to tackle Amazon's monopoly power at its root."
Demand Progress communications director Maria Langholz called the case "long overdue," given the company's record of "shamelessly engaging in exclusionary and unfair tactics to trap third-party sellers in its own marketplaces, gouge them with predatory fees, and punish them for trying to offer lower prices to consumers."
"This marks a historic step in challenging Amazon's abuse of its market dominance and its anti-consumer, anti-worker, anti-small business practices," Langholz said. Like Mitchell, she also suggested that the suit should be "a catalyst for a broader conversation about the need to break up Amazon as the best and most effective remedy."
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