Today, Explained - Tater bot

Episode Date: February 12, 2025

The prices of all kinds of things have stayed stubbornly high even as inflation has cooled. And a spate of lawsuits point to algorithmic price fixing as the culprit. Just look at frozen potatoes. This episode was produced by Peter Balanon-Rosen with help from Devan Schwartz, edited by Jolie Myers, fact-checked by Laura Bullard, engineered by Patrick Bpyd and Andrea Kristinsdottir, and hosted by Sean Rameswaram. Transcript at vox.com/today-explained-podcast Support Today, Explained by becoming a Vox Member today: http://www.vox.com/members Chef Jay Murray at Grill 23 in Boston shows off a dish of tater tots. Photo by MediaNews Group/Boston Herald via Getty Images. Learn more about your ad choices. Visit podcastchoices.com/adchoices

On the show today we're gonna talk about potatoes. Frozen potatoes in particular. Prevents forecast. A freeze is coming. We're gonna talk about frozen potatoes because they actually have a lot to say about where the country's at right now. Brixton's baked potatoes mascot, you see it there. It's the tater trump. Frozen potatoes can tell us a lot about why things cost what they cost, about why it sometimes

feels like the odds are stacked against consumers, about why it sometimes feels impossible to find an apartment to rent in the United States, about how our government has failed to do much to regulate big tech, and why it's high time we hash it all out. Good luck, live in peace. Taterbots coming up on Today Explained. You hear that? Ugh, paid. And done.

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Explain-da. Explain-da. Sean Rommersfurm here with Katya Schwenk, reporter at The Lever, who has been investigating what is going on in the frozen potato industry. There are only four companies that control 97% of this market. And what people say that has led to is price fixing and colluding to keep the prices of your French fries very high.

Katya says this big story starts with a kind of small fry, a guy named Josh. Josh Saltzman is the owner of a small sort of divey sports bar in Washington, D.C. called Ivy and Coney. Josh, like many bar owners, he's getting his french fries from food distributors, which are buying them from these frozen potato companies. And a couple years ago, Josh gets a notice from this food distributor he works with saying, you know, these three or four big companies

that are selling you your french fries, they're all raising the price of their product and they're all raising them by the same amount, by 12 cents a pound, all effective, like the same week or the same day. And, you know, Josh was like, you know, that's really weird. He goes online, he writes a few tweets saying, you know, this looks a lot like price mixing looks like like pollution, you know.

Amazing how all of the major suppliers for French fries and the like are all raising their prices at the same time and by the same amount. Totally not collusion or anything. Right? Big potato? Is this what's going on? Big potato, not to be confused with baked potato. Yes. OK.

So Josh takes to the internet. He sees all of the prices of potatoes going up, but also by the exact same amount. And he says, something's going on here. In this moment of frustration, he's like, it's happening in this way that looks really a lot like price fixing. I'm going to go online and write some tweets about it.

The tweets go viral. And then no one really talks about it for a couple of years. Two years later, Josh's tweets show up cited in this series of private lawsuits calling out price fixing in this frozen potato industry. But he was not the only one to have been harmed by this because all of these lawsuits are being brought with the help of these antitrust lawyers by grocery store chains, restaurants, food suppliers,

all around the country who are saying like, these prices are going up, they're going up in lockstep, and it's hurting our bottom lines. When we talk about the potato companies, who are we talking about? Would people know the names of these companies? Are they, you know, like everyday companies that you see at the grocery store?

These are companies that are a little bit behind the scenes. Their names are Lamb West and Holdings, Cavendish Farms. Probably you're unfamiliar with them if you are a lay person. I've heard of Cavendish. Okay, yeah. You know, they are often part of bigger agricultural conglomerates, in the case of Cavendish Farms. But these are not big brand name companies because they're not usually selling their products to consumers at the grocery store. You're not going to be going to buy your frozen french fries.

They have sort of this niche of the market where they are buying potatoes from growers and then they are preparing those, pre-preparing those potatoes and selling them mostly to big restaurant chains. Presumably this is, you know, free market, they're competing with each other. In reality, what the lawsuits allege is that because this market is so, so consolidated, it sort of allowed these companies to sort of collude tacitly to fix prices by feeding their information into this data sharing platform that allows them to share confidential information about prices. Yes, it's actually called potato track, if you can believe that.

Yeah, so that has done a lot to reduce competition in this market. Unlike Nike and Adidas, maybe, for example, the big potato firms are essentially using the same software to fix the price of potato, and that software is perfectly titled Potato Track. How does it work? That is right. Yeah, this is actually something of a trend in a lot of the big anti-monopoly cases that we're seeing, whether it's from meat processors to sugar, are looking at the rise of these third-party data platforms that allow companies in the industry to feed information. So things like their labor costs, their operational costs, their prices for different products.

And once that it is in this platform, the platform shares that information among the rivals. So it's a way for executives to share the kind of confidential pricing information that you need to do to fix prices without having to like gather together secretly and conspire to fix them which is like against the law. Yeah it's hard to imagine something called potato track being illegal but can you give us an idea of how expensive potato track might be making potatoes? Yeah so prices have gone up really significantly. They actually increased by almost 50% from July 2022 to July 2024. The companies initially justified by pointing to higher operational costs,

you know, supply chain pandemic stuff. But those costs have since gone down, and the prices have stayed high. So this whole time people might have thought my frozen potatoes cost more because of Joe Biden and really it was because of potentially potato track. Right. In fact, you had the wrong villain potentially. People got really mad at Joe Biden. Have people gotten really mad at like Cavendish and potato track and all the rest? So, over the last three months, starting in November of last year, we have seen a bunch of cases against these four companies.

Class action lawsuits were filed in Illinois against four food producers. You're being called the potato cartel. Prosecutors say the companies formed a cartel by having equal access to each other's data on pricing and other sensitive information. Cane Foods, Cavendish Farms, Lamb Weston, and JR Simplet. These are the companies that tried to create a monopoly on our favorite fried food. Grocery stores, restaurants, like bars, like Josh's,

have banded together and they have sued for damages saying these companies, price fixing has hurt our bottom lines. — Has Big Potato spoken about this publicly? Have they said anything to try and ease the public's concerns about the price of frozen potatoes? — Yeah, they've actually been quite, they've said very little. I had one of the companies get back to me saying, you know, we completely deny all of these claims.

The rest haven't said anything. Big Potato remains silent on this issue. For now, they're not saying much. And what does that mean for Josh in the bar in DC? And all of us, are we going to be able to get cheaper French fries and hash browns and all the rest anytime soon? Right. I think that's where this speaks to this bigger problem. If we are living in a world with really lax anti-monopoly enforcement,

we are living in a world where companies are allowed to price fix and buy up all of these markets, and the agriculture supply chains remain as they are. These are the bigger systemic issues. It's hard to know, hard to say if we'll be able to get cheaper french fries until they are solved. But for now, Josh's bar is doing fine.

They're still making it work with the french fries they have. And I think at least the fact that people are talking about this issue has brought a little bit of hope. Katya Schwenk, LeberNews.com. The government, at least parts of it, would like to do something about algorithms. We're going to tell you about it when we return on Today Explained. Support for Today Explained comes from Shopify. Business owners have a lot of spinning plates to balance.

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Plus, move any other eligible account and we'll give you a 1% match. Minimum $15,000 transfer. Register by March 15th. Additional terms apply. Learn more at wealthsimple.com slash match. Bill Baer is a fellow specifically at the Brookings Institution, but he also served in the Justice Department as head of antitrust enforcement and he also also served as the head of antitrust enforcement at the Federal Trade Commission, known by its friends as the FTC. Bill says it's not just frozen potatoes. He says price-setting algorithms are shaping prices across our lives.

The government enforcement agencies, the antitrust enforcers, are very worried that this use of pricing algorithms is growing. There are cases that have been brought by the government relating to the use of a third party called agrostats, which is alleged to be using a pricing algorithm to raise prices for poultry, for chicken, all essential things in our consuming America. All of the major packers are paying agrostats to provide them with information. It's alleged that agrostats organizes and then launders that information across the industry. Total collusion, it makes me have goosebumps. There are also allegations that a third party called RealPage

is limiting competition by suggesting prices and output that have the effect of raising prices and also restricting availability of apartments because shortage allows companies to raise prices. When the Sherman Act was passed an anti-competitive scheme might have looked like robber barons shaking hands at a secret meeting. Today it looks like landlords using mathematical algorithms to align their rents. Third area this appears to be going on involves hotels in major cities across the country. The lawsuit claims those companies used a revenue platform

called Rainmaker to monitor real-time prices for their competitors so an algorithm could adjust their rates on the fly to maximize profits. If those companies sat together and did this, they would go to jail. That's classic price fixing. But they think by being clever and using a third party, they avoid antitrust violations. They don't. Have we seen something like this before, like competitors becoming collaborators to serve

their bottom line? Are there examples of this from before the age of algorithms? The answer is yes. Back when I was in the government in the 90s, we found that Toys R Us, which was the dominant retailer of toys. Once a Toys R Us kid. Always a Toys R Us kid. Was upset that discounters like Costco and Sam's Club

were selling popular toys at prices cheaper than Toys R Us. So Toys R Us went to the toy manufacturers and said, if you all stop selling to Costco and Sam's Club, you'll make more money and we'll make more money. We sued at the Federal Trade Commission. The courts agreed that was designed to facilitate price fixing and limit competition. Wow, that giraffe is evil.

Oh my God. It is evil. Same thing happened in the airline industry. In the 1990s, the government found that airlines were using a third party to announce forthcoming fare reductions on particular routes. The airlines that were making the most money on those routes then would retaliate by proposing a dramatic fare cut on the competing airlines' favorite routes. They coded those flights as FU flights. Are you serious? FU. The implication could not be clearer.

Absolutely. If you cut rates on my bread and butter, guess what's going to happen to your bread and butter? And the result was the airlines moved back to the higher fare rates. So the airlines made money. Consumers got screwed. What happened in each case with the airlines with the giraffe? Did the government say FU back and did they have to pay hefty fines or what?

The government was able to stop the behavior and private plaintiffs acting on behalf of injured consumers were able to secure monetary relief. And yet we're back where we were back then. Surely there are arguments for letting these companies determine their prices through algorithms. What are those arguments? Well, the companies will say it's more efficient if I can respond to developments in the marketplace, if my pricing algorithm allows me to meet a competitor's discount, meet a competitor's sale price. But the worry is, and there is some evidence to suggest, the actual real effect of this is to discourage discounting in the first place. Joe Biden once famously said, Capitalism without competition is not capitalism,

it's exploitation. And that sums up the worry about what's going on here. Come on, man. Joe Biden was, you know, relatively tough on tech. Lena Con, the FTC, they were bringing a lot of antitrust suits. We covered some of them on the show. What appears to be coming with Trump is a much friendlier relationship with big American technology.

Is Congress cooking up any legislation that would address this? There are a number of bills pending. The lead bill by Senator Amy Klobuchar from Minnesota. Because that is sophisticated price fixing, price fixing illegal. I'm Amy Klobuchar, U.S. Senator from the state of Minnesota. Senator Klobuchar, we've been talking about potatoes and algorithms on the show today. Trump has been president for a few weeks now. We've got planes blowing up.

We've got trade wars ramping up. We've got the federal government being remade before our eyes. We've got policies about diversity being rewritten. And yet we asked you here to talk to us about algorithms. Why is now a good time to talk about algorithms? Well, first of all, it's always a good time to talk about algorithms. But the second reason is that when President Trump ran, he talked about bringing prices down on everything from groceries. And from what I see right now, you see chaos up, corruption up, and egg prices

up. But from groceries to healthcare costs, to childcare, and of course to housing. What some of these major landlords are doing right now is they're giving all their data to the company that the competitors go to. Then that company goes through their data with algorithms and says, hey, why don't you both charge this rate? You would not ever under the law allow the two apartment owners to go and shake hands and say, let's both set our rents high.

You would never let them do that. That's against the law. It's against the antitrust laws. But what do we have now? We have high price sophisticated price fixing. They let these algorithms go unchecked with all those broil ofarx that were at the inauguration and all their buddies. If that continues, this is not going to be good for you.

In the same room as you, I saw you guys all in there together. Oh yeah. So you don't have to convince me that we should talk about algorithms because here we are, but I do hope that was useful for our audience. What would your bill do for them? So what this says is this is illegal basically. And it's being sued out in court anyway. I think it is illegal, but we want to make it very clearly illegal that landlords cannot collude by putting all their data

when they compete against each other in one company. And what the bill says is, yeah, you can use algorithms. We're not leadites here. However, you can't give your data to the same place that has your competitors' data in the same market. It undermines all competition in the rental market. And that is the worst thing for consumers. It's great for landlords.

It's horrible for renters. Help people understand why we need new legislation on that front, because presumably we already have antitrust law. we already have the FTC. Why do we need something further? I'm laughing because I want you to picture back to the days of when the Senate, everyone rode horse and buggy there, or like they came in their trains once a month or something. So that's when they did the antitrust laws in the late 80s. They didn't have

algorithms. And one of the frustrations on all of the tech rules in place, despite these incredible companies and what they've done for us, is that a lot of our laws are just not as sophisticated as those marketplaces. So you should make adjustments, right? Ticket prices, let's get this ticket master bill done. That was bipartisan and also Senator Lee and I had a major hearing on Ticketmaster. And that led, I believe, that evidence that we extracted from that hearing led in part to a major Justice Department case

started during the Biden administration, can easily be finished in the Trump administration. And that's, you know, they've hired a pretty good person that they're putting in charge of antitrust. That's not true of a lot of the people they've hired. But on this front, this is a good person who understands these laws. I'm glad you brought up your prior work on this issue. You're basically Senator antitrust out there.

I wrote a book on it. I was on the New York Times bestseller list for 10 days. There you go. Congratulations. Yeah. You've introduced a number of pieces of legislation to this and a lot of them haven't been signed into law. Do you think there's an opportunity here with these price fixing algorithms where maybe

there wasn't on Ticketmaster or some anti-tech stuff? It's not just passing bills, Sean, we can do that. But it's also ours is the law being enforced. Are they actually bringing actions? Are they getting results that matter? In the cases of this, the case going on with RealPage or Ticketmaster or the tech company, so much of it is in the details of what they agree to. They could actually get them to agree the tech companies to a bunch of things they already agreed to in other countries to protect consumers. You were in the same room as the president and the vice president a couple of

times a few weeks ago. A lot of Americans saw that. And in the same car as both presidents. I'm the only person that I know of in history that rode with both President Biden and President Trump from the White House to the Capitol. Did you happen to bring up algorithms? I have to ask. Well, at some point during the day, I mean, it was a little hard to avoid not mentioning tech with all those guys there. And, you know, I believe, and I'm not going to talk about what I talked about, but I believe that they've got to make sure they hold these companies accountable.

It doesn't mean you're going to get rid of these companies. Of course not. But what it means is you're going to have true competition. Senator Amy Klobuchar, you can call her Senator Amy Klobuchar. Before that you heard from Bill Baer from Brookings. Peter Balanon Rosen made our show today. We miss him already. Devin Schwartz helped. Jolie Meyers helped. Laura Bullard helped.

Patrick Boyd played the potato. Here's a fun one. Today Explained is doing a show about the great wealth transfer. If you don't know what that is, I feel you. Some lucky, youngish Americans are getting trillions, literally trillions of dollars from their parents. Not like individually, but when you add it all up. Like, you know, parents pay the credit card bill every month.

They pay the rent for that two bedroom in Brooklyn. They throw you 200K for a down payment on your first house. Tuition for the kids' private schools. Are you getting money from your parents? Call us and tell us about it, if you will. You can be anonymous if you want, 844-453-4448 especially if it's a lot of money we want to hear from you no judgment but we might call you back 844-453-4448. Thanks for sharing! you