Justice

Here's Why Amazon and Whole Foods' Big Announcement Could Have a Big Impact on Low-Income People

June 16th 2017

By:
Danielle DeCourcey

Amazon and Whole Foods just announced a huge deal and it could affect low-income Americans the most.

The massive online retailer announced on Friday that it's buying Whole Foods and its 460 stores and facilities in a $13.7 billion deal. The acquisition still has to be approved by federal regulators and the Whole Foods shareholders, according to Politico.

The move comes just one week after Amazon announced that it was cutting the cost of its Amazon Prime service for people receiving benefits on the Supplemental Nutrition Assistance Program, commonly known as food stamps. The deal's announcement started a conversation on social media about its potential effect on consumers, particularly poor Americans.

Here are three ways the Amazon deal could directly affect workers and consumers, both positively and negatively.

1. The huge deal could create less competition and that can mean higher prices.

In a Facebook post about the the announcement, Former Secretary of Labor Robert Reich predicted that Amazon will knock out the biggest food retailers in the country and join Google and and Apple as mega-companies that own large parts of the American economy.

"Will this be good for consumers? No," Reich wrote. "With that kind of economic power, they'll be able to raise prices." He wrote that companies with too much power are bad for society. "Good for American democracy? No. With that kind of power, they'll basically run the government — as did railroads and oil in the Gilded Age."

Patty Lovera, the assistant director of Food and Water Watch, told ATTN: that mergers usually don't result in lower prices.

"As a rule, mergers in the food industry have not benefited consumers. The grocery market is very consolidated and you can look at statistics that show Walmart is the biggest grocer, and as Walmart became more dominant it shut down other grocers," she said. "As we see mergers, as there's more pressure as they shut down stores, that really shuts down the competitive marketplace in the city."

A 2012 working paper by the Federal Trade Commission found that grocery mergers produce mixed results. "We find that mergers in highly concentrated markets are most frequently associated with price increases," the report states. "While mergers in less concentrated markets are most often associated with price decreases."

And while consolidation in in less concentrated markets can lead to lower prices in the short term, it can also lead to the creation of new food deserts in the long-term when those mega stores eventually shut down, as CBS reported in January of 2016 after Walmart shut down more than 150 stores across the country.

2. It's possible that the the deal could widen Amazon's food delivery for low-income people in food desserts, but there's a catch.

As ATTN: previously reported, Amazon has already been working with the U.S. Department of Agriculture on a trial program for people to use SNAP benefits for online food shopping, a move seen as a victory for people who live in low-income areas with limited access access to fresh and nutritious food. The acquisition of Whole Foods could lead to Amazon expanding its online delivery capabilities into more of these "food deserts," as it will obtain greater access to "instant infrastructure" and "expensive facilities needed for handling perishables," according to Politico's Nancy Scola.

However, Lovera is skeptical that a deal with Whole Foods, a store known its high prices, will mean affordable online deliveries for people in food deserts.

"We need to see what happens," she said. "There's a math question and there's a geography question." She said that food delivery shouldn't be discussed as a "silver bullet" for addressing food deserts in low-income communities.

"First, you have to have the ability to receive that shipment. I don't live in a food desert but i can't have packages lying around outside all day."

3. It's possible that people could lose their jobs.

Amazon founder and owner Jeff Bezos has not announced any changes to employment, but given Amazon's testing of automated grocery stories, some are worried that Whole Foods cashiers could be replaced by robots.

“Amazon’s brutal vision for retail is one where automation replaces good jobs. That is the reality today at Amazon, and it will no doubt become the reality at Whole Foods," Marc Perrone, President of the United Food and Commercial Workers (UFCW) International Union, said in a statement on the union's website. “Sadly, the hard-working men and women who work at Whole Foods now face an uncertain future because the Amazon model for grocery stores ultimately leads to fewer jobs, worse benefits, and more automation.'

RELATED: Amazon and FreshDirect Just Did Something Huge for Low-Income People