Warren, Dean Press CocaCola, PepsiCo, and General Mills on “Shrinkflation” Price Gouging and Tax Dodging

October 07, 2024

Warren, Dean Press CocaCola, PepsiCo, and General Mills on "Shrinkflation" Price Gouging and Tax Dodging

Text of Letters (PDF)

Washington, D.C. - U.S. Senator Elizabeth Warren (D-Mass.) and Representative Madeleine Dean (D-Pa.) wrote to the CEOs of Coca-Cola, PepsiCo, and General Mills, pressing their executives on the companies' pattern of profiteering off consumers, both through "shrinkflation" and dodging taxes on the profits they made from that price gouging.

All three of these companies have shrunk the size of their packaging to squeeze profits out of their customers, and then paid a very slim federal income tax on their billions of dollars in profits. In other words, the companies are sticking the American people with the bill twice over, with American families (1) paying higher prices for smaller packages of food, and (2) paying their taxes while big corporations like PepsiCo avoid chipping in their fair share to run our country.

It is clear that these big companies are engaging in shrinkflation. In fact, reporting indicates that one of the key reasons that General Mills' profits continue to grow is because they've shrunk some of their packaging. For example, the "Family Size" box of Cocoa Puffs went from 19.3 ounces to 18.1 ounces while charging the same price, at least initially. Similarly, PepsiCo replaced its 32 oz Gatorade bottle with a 28 oz bottle for the same price. And Coca-Cola has openly told its shareholders that it had "earn[ed] the right" to hike prices for consumers because of their company's market power.

"Shrinking the size of a product in order to gouge consumers on the price per ounce is not innovation, it is exploitation," wrote the lawmakers. "Unfortunately, this price gouging is a widespread problem, with corporate profits driving over half of inflation."

While these companies continue to profit off consumers, the company is also turning around and paying less of those profits in taxes than the families it price gouges.

According to a recent report by the Institute for Taxation and Economic Policy, from 2018 to 2022, Coca-Cola made $13.4 billion but paid an average effective tax rate of just 13.5 percent, General Mills made $12 billion but paid an average effective tax rate of just 14.8 percent, and PepsiCo made $22.4 billion but paid an average effective tax rate of just 15 percent. These tax rates are even lower than the corporate tax rate that was reduced from 35 to 21 percent by President Trump and Congressional Republicans in 2017.

"We strongly oppose these corporate tax giveaways, and have fought to pass tax increases on big corporations, including the 15 percent minimum tax on billion-dollar corporations," wrote the lawmakers. "No corporation should pay a lower tax rate than working Americans - especially when that same corporation turns around and gouges consumers on the other end through shrinkflation."

As a champion for American consumers and a secure and healthy economy, Senator Warren has engaged in oversight of corporations for unfairly increasing prices for consumers. She has also been calling for more competition and stronger enforcement of antitrust laws to bring down prices for families:

• On February 15, 2024, Senators Warren, Baldwin, Casey, and U.S. Representative Jan Schakowsky (D-Ill.) reintroduced the Price Gouging Prevention Act of 2024, which would protect consumers and prohibit corporate price gouging by authorizing the FTC and state attorneys general to enforce a federal ban against grossly excessive price increases.

• In December 2023, Senator Warren urged the FTC to block the Kroger-Albertsons merger, which would give the five largest food retail companies control of 55 percent of all grocery sales, allowing them to further control and ultimately raise consumer prices, while also reducing job competition, decreasing wages, and decreasing the bargaining power of organized labor.

• In November 2023, Senator Warren called out TransDigm for its refusal to provide cost and pricing information needed to prevent price gouging of taxpayers and the Department of Defense.

• In November 2023, Senator Warren expressed disappointment at the FTC's decision to allow pharmaceutical giant Amgen to move forward with its acquisition of Horizon Therapeutics (Horizon) given the potential impacts on the price of medicine.

• In the past few years, Senator Warren has urged the Biden administration to closely scrutinize other potentially anticompetitive mergers that could lead to higher prices for consumers and accelerate industry consolidation. She has led letters about the proposed mergers of Frontier and Spirit airlines, JetBlue and Spirit Airlines, Sanderson-Wayne, WarnerMedia-Discovery, and Amazon-MGM.

• In March 2022, Senator Warren introduced the Prohibiting Anticompetitive Mergers Act to help stomp out rampant industry consolidation that allows companies to raise consumer prices and mistreat workers. The bill would ban the biggest, most anticompetitive mergers and give the Department of Justice and Federal Trade Commission the teeth to reject deals in the first instance without court orders and to break up harmful mergers.

• In February 2022, at a hearing, Senator Warren called out corporations for abusing their market power to raise consumer prices and boost profits.

• That same month, Senator Warren requested the Department of Justice to take aggressive action against corporations violating antitrust laws to hike prices for consumers.

• In January 2022, Senator Warren questioned Federal Reserve nominee Lael Brainard about market concentration and price gouging driving inflation.

• At a January 2022 hearing, Senator Warren pressed Fed Chair Jerome Powell on the role of corporate concentration in driving up prices for consumers during his renomination hearing to be Chair of the Board of Governors of the Federal Reserve System.

• In a New York Times op-ed published in April 2020, Senator Warren urged Congress to focus on cracking down on price gouging in its ongoing effort to address the impact of the coronavirus pandemic.

• In March 2020, Senator Warren joined her colleagues in urging the FTC to use its full authority to prevent abusive price gouging on consumer health products during the COVID-19 pandemic.

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