Categories: Business

How some big grocery chains help ensure that food deserts stay barren

Supermarket chains can keep low-income communities from easy access to food, with a dastardly (but legal) provision they write into lease agreements.

Last fall, first-year law student Karissa Kang arrived at Yale University and quickly set out to find a supermarket within walking distance. “I like cooking,” she explained, and she didn’t have a car. Her hometown of Atlanta was loaded with shopping options like Publix and Kroger so she was surprised to discover that the only full-service grocery choice in her New Haven neighborhood was one Stop & Shop about a half-mile from campus. Adding to her surprise was the fact that she never encountered other law students shopping there—anyone with wheels drove to a Trader Joe’s in another town. Why, wondered Kang every time she made the walk to the store, “does [this part of] the city only have one national grocery chain?”

New Haven has long been a city rife with inequities; its (non-Yale) residents currently experience a poverty rate of almost 26 percent, while its food insecurity rate is twice the national average. Scads of research has made the connection between the necessity of food access—namely, easy-to-reach grocery stores—in addressing hunger and healthy food procurement, especially in BIPOC communities. (New Haven’s Black population experiences a poverty rate of over 27 percent, and one in three residents in its lowest-income communities experience food insecurity.) In an attempt to unravel the mystery of her local Stop & Shop, Kang started to research the grocery business. In so doing, she stumbled on some big barriers to that access: restrictive covenants and other insidious tactics used by grocery chains to stifle competitors. And, she learned, it’s consumers who pay the price.  

Restrictive covenants are provisions written into deeds and lease agreements that govern how a piece of property can or cannot be used, sometimes indefinitely. Grocery chains have been using them at least since the 1950s as a way to make sure that if they’ve built out a large and costly brick-and-mortar supermarket—a store’s footprint can sprawl for 5,000 square feet or much more—no other supermarket will threaten its profits. As Kang wrote in a paper that she recently delivered at a Yale Law School grocery conference, “It’s self-evident from these restrictions that [grocery companies’] tactic is solely and wholly intended to hinder competition.”

A restrictive covenant might work like this: Stop & Shop, which is owned by Dutch conglomerate Ahold Delhaize, builds a supermarket in a community that needs it. Great news! However, if Stop & Shop eventually decides it no longer wants to keep this store open, it might lease the space to another retailer. Only, it can add a clause to the lease that disallows the new retailer from opening another grocery store in the space—or even a bodega, a farm stand, or any kind of food vendor. It’s not known whether Stop & Shop would use such a provision if it decided to vacate its Central New Haven location; however, the company did employ this tactic in 2012 in Stonington, Connecticut, about an hour’s drive east of Yale, when it refused to sublease a storefront there after it relocated. (Stop & Shop did not respond to a request for comment.)

Even if a large chain grocery does remain in a neighborhood, it can ensure that residents miss out on a second piece of the food-access puzzle—a choice about where to shop.

Even if a large chain grocery does remain in a neighborhood, it may otherwise ensure that residents miss out on a second piece of the food-access puzzle—a choice about where to shop. That’s because of another way groceries can use restrictive covenants: By buying up nearby land parcels with big enough footprints to support other supermarkets that might come into a neighborhood and claim a portion of their slice of the grocery pie. This keeps other grocers out as long as the company holds onto the property. But even if the company decides to sell, it can add a deed restriction to the land purchase agreement that specifies it cannot be used to house another food outlet. 

In one such instance on Cape Cod, Stop & Shop purchased 11 acres in Eastham, Massachusetts, for $1.3 million, allegedly to keep another supermarket from moving near one of its stores. It then sold the land back to the town for $1.6 million, with a deed restriction that stipulated the community could not use any piece of the property for “a food supermarket, a food superstore, a food warehouse store, a specialty food store (e.g. a butcher shop, fish market, fruit and/or vegetable market or stand), a wholesale club store operation or a convenience store, or for the sale of food or food products for off-premises consumption (whether by humans or animals),” as The Provincetown Independent reported last December. 

Instead of selling, a company might instead be inclined to hang onto the land and just do nothing with it, thereby preventing a community from developing anything else it might need or want—drug store, senior center, roller rink. In Greenfield, Massachusetts, Stop & Shop paid a realtor for a decade not to develop a property that might have brought in a competing supermarket. A win-win-win for the grocer; in most instances a lose-lose-lose for the community, perhaps for a generation or longer. 

“Having an empty storefront probably impacts people’s property values, and increases the potential for there to be crime,” said Laurie Beyranevand, director of the Center for Agriculture and Food Systems at Vermont Law School. Not to mention, many of these supermarkets come with “enormous parking lots and all of that space could obviously be used for something else that would be more beneficial to the community.”

Instead of selling a grocery location, a company may be inclined to hold onto vacant property, preventing the community from developing anything they may see fit.

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Over the years, critics have called restrictive covenants violations of U.S. antitrust law and there have been some cases in which a company’s right to use them has been challenged in the courts. Back in 2010, a Walmart representative told The Sheboygan-Press that, “We welcome competition in the marketplace, but what we can’t be doing is providing infrastructure for our competitors in the same market.” So far, judges have found this line of reasoning to be legally sound.

Stop & Shop is hardly the only supermarket chain to use restrictive covenants; the clauses are also employed by the likes of Albertson’s, Albertson’s subsidiary Safeway, and most significantly, by Walmart, the biggest grocer in the U.S., according to a report by the Institute for Local Self-Reliance (ILSR). Nationwide, ILSR found, U.S. residents spend 25 percent of their grocery budgets at Walmart. This, argue the authors of the report, “illustrate[s] the failure of corporate antitrust policy.”

Kang points out that federal antitrust legislation would be the most straightforward and efficient way to address restrictive covenants. The issue “seems so black and white, because [restrictive covenants] have no purpose other than to block out a competitor,” Kang said. 

And yet, some legal experts worry that in the eyes of the Federal Trade Commission (FTC), grocery consolidation might be way-too-small potatoes to care about. If the agency was compelled to act, however, Beyranevand, thinks FTC would be able to address restrictive covenants by invoking a little-used piece of antitrust legislation called the Robinson-Patman Act, which was “designed to protect small and independent businesses from price discrimination,” as The Hill reported. In essence, the legislation was meant to prevent large grocers, who can sell goods for less money because of their greater buying power, from putting smaller grocers out of business. 

The supermarkets offer typically low-paying jobs to community members who are often forced to shop where they work; if that supermarket decides to up and leave the community, those jobs go, too.

In the absence of federal action, some municipalities have tackled the issue on their own. Notably, Washington, D.C. prohibited restrictive covenants back in 2018. The problem with this approach, according to Beyranevand, is that it’s piecemeal—it could take literally forever to abolish restrictive covenants everywhere they crop up, and a community often only finds out about their existence when a supermarket moves out and a new one fails to manifest. Another significant problem is that municipal legislation is applicable only to new contracts and can’t be retroactively applied to existing ones.

Beyranevand believes that in order to make any sort of dent in restrictive covenants’ muscle, municipalities have to begin using a lot more caution in allowing development within their borders. “Proactive zoning measures are going to be the thing that moves the needle going forward, so you don’t have these sprawling cities where people are just throwing up big retail centers all over the place and then in five years abandoning them…and suddenly you have all these empty storefronts,” she said. 

Vermont, for example, has its longstanding Act 250, a land-use law where, said Beyranevand, “If you want to develop property, and you get to a certain size of acres, you have to go through a pretty significant review process to get it approved.” This could prevent a grocery chain from, say, buying a second or third large parcel of land then sitting on it. Other possible courses of action would be giving cities the option to demolish an abandoned supermarket and to build another one in its place—and mandating reuse plans for a supermarket building before a company abandons it. “In essence, you create your own restrictions on development,” said Beyranevand. Still, none of these address the retroactive issue.

As bad as it is that restrictive covenants impede food access in certain neighborhoods, they clearly aren’t the only problem. The mere presence of large-scale grocery chains can have broader ripple effects that can destroy communities from the inside out, according to ILSR. When a powerful chain like Stop & Shop or Walmart moves in, they can afford to offer prices low enough to put mom and pop food outlets out of business, for starters. “And I would say the odds of those businesses that got pushed out ever coming back are not very high at all,” Beyranevand said. So begins a spiral of impoverishment: The supermarkets offer typically low-paying jobs to community members who are often forced to shop where they work; if that supermarket decides to up and leave the community, those jobs go, too. Add a restrictive covenant and any economic benefit the presence of the supermarket could give to a community, Beyranevand said, “That’s all gone.”

Back in designated food desert Central New Haven, before Stop & Shop arrived in 2011, that cluster of neighborhoods had had zero national chain groceries for a year; the arrival of the supermarket was considered a score for residents. But Kang frets about what would happen if Stop & Shop pulled out now. She concedes that she’s lucky—she can always hitch a ride to Trader Joe’s with a friend. But “I’m deeply concerned about [what happens] even if [Stop & Shop] moves two miles away from their current location; a lot of people can’t walk those two miles to get their groceries,” she said. “Where are they going to go?”

Lela Nargi
Published by
Lela Nargi

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