A University of Wisconsin study prepared for the joint Economic Committee of Congress has claimed that food prices and supermarket profits are higher in cities where a handful of chains dominate the market - such as metropolitan Washington.
In markets where four large firms are the dominant food retailers, chain store prices are about 5 per cent above markets where the top four firms have only 40 per cent of overall sales, Wisconsin researchers Willard Mueller and Bruce Marion told the comittee yesterday.
Extrapolating from their data, the university economists claimed that consumer may have paid "monopoly overcharges" of at least $662 million in the concentrated markets during 1974.
A spokesman for the nation's food chains immediately denounced the report as based on "shallow data" and "an unwarranted attack . . . which does not merit the dignity of further considerations."
Timothy M.Hammonds, research director of the Food Marketing Institute told the committee that the alleged monopoly told U.S. supermarkets profits for that year.
The study released yesterday was commissioned by the congressional committee two years ago as part of a broad inquiry into inflation. Mueller and Marion said their report was based on confidential profit data of 17 companies that operate in 50 metropolitan areas and food prices in 36 areas subpoeaned by the committee.
Mueller formerly was director of the bureau of economics at the Federal Trade Commission, where he participated in similar studies of alleged over-concentration in the supermarket industry. In 1973, the FTC voted 4-1 against staff recommendations that a case be filed against Safeway Stores, Inc., and Giant Food, Inc., for alleged monopolization of the Washington area market.
"City B," apparently Washington, was described as "one of the most concentrated food retail markets" in the entire nation, with the largest four food chains controlling 76 per cent of sales in 1974 and two dominant firms controlling 62.3 per cent.
The report noted that in "City B," the 1972 concentration for the top four chains was 76.3 per cent and, in a separate table of all metropolitan areas, the D.C. area was the only one where four chains had 76.3 per cent of food sales in 1972.
In all metropolitan areas studied for 1974, the average four-firm concentration amounted to 51 per cent of the sales or 24.5 per cent below the level in the Eastern city cited, where two dominant firms each held more than 30 per cent of the market - an apparent reference to Safeway and Giant. Business sources in Washington have estimated sych a share of the local market by those two companies for several years.
The third and fourth largest markets in the "City B" had market shares of 6.8 per cent and 6.4 per cent, apparently meaning the Great Atlantic & Pacific Tea Co. and Grand Union Co.
Mueller and Merion said their survey of food prices showedna range of 10 per cent with the largest chaines having the highest prices and a fifth company - with only 1.4 per cent of metropolitan area sales - having the lowest prices.
"The two dominant chains had essentially identical prices for a grocery basket as well as for a broader market basket that included grocery, diary and frozen food products," they said.
Higher and nearly identical prices of the two largest firms "suggest that little, if any, and further tabulations showed that the firms had identical prices on 66 per cent of the items, Mueller and Marion concluded.
They said "City B" reflected an environment where there was an absence of "keen rivalry in the market" that caused consumers to pay "monopoly overcharges" of $83 million or 6.9 per cent of sales in 1974 for the top four chains in the area.
In contrast, a selected Midwest city studied by the Joseph Danzansky, president of Giant, disputed the report yesterday and noted that his firm had profits of $7 million when alleged overcharges were $83 million, for the year in question. "That's not an excess profit," he said of the 1974 results - a return of less than 1 per cent on sales and 10.6 per cent on stockholders' equity in Giant.
Although grocery store prices have remained stable here over the past year, according to Labor Department data, Washington food prices are among the highest in the nation - reflecting high transportation costs for produce from the West Coast and meats from the Midwest, higher than average wages.
A Labor Department study in 1975 found, however, that the real dollar cost for food by low income families here was ninth out of ten areas surveyed. The D.C. area has a large concentration of relatively affluent families, who normally buy more expensive food products, retailers said.
A spokesman for Safeway, based in Oakland, Calif., said yesterday's report was being studied and there would be no reason. Safeway is the nation's largest food retailer. Southland Corp., the Washington area's third-largest food retailer through its 7-Elven stores, was not included in the data published yesterday.