NEW YORK, March 21 (Reuters) - The U.S. Federal Trade

Commission recommended Thursday that policymakers look further

into profits at grocery store operators that remain elevated

since the pandemic and promotions that consumer products makers

offer retailers.

The report comes as the FTC is suing to block Kroger's ( KR )

acquisition of smaller grocery store rival Albertsons

over its concerns that the deal would hike prices for millions

of Americans.

The FTC launched the study in 2021 when it ordered

Walmart ( WMT ), Kroger ( KR ), Procter & Gamble ( PG ), grocery

wholesalers and others to turn over detailed information

relating to the supply chain crisis during the pandemic, which

contributed to once-in-a-generation levels of inflation and

double-digit price increases on household necessities.

"Overall, our concentrated and brittle grocery food supply

chains were quite vulnerable to shocks. Critically, the report

finds that some in the industry took advantage of this moment of

vulnerability," an FTC official said on a call with reporters.

The official said the commission will pass the report onto

lawmakers, "where there has been broad interest from members of

both parties."

U.S. President Joe Biden took aim at grocery chains earlier

this year, accusing them of "ripping people off" at a time when

food costs remain a problem and a political headache for the

president.

In Thursday's report, the FTC found that a measure of annual

profits for food and beverage retailers "rose substantially and

remains quite elevated." The commission said that revenues for

grocery store retailers were 6% over total costs in 2021, and 7%

in the first nine months of 2023, higher than a peak of 5.6% in

2015.

"This casts doubt on assertions that rising prices at the

grocery store are simply moving in lockstep with retailers' own

rising costs," the FTC said, adding that the elevated profit

levels "warrant further inquiry" by both policymakers and the

commission, which is tasked with protecting the public from

unfair business practices.

The FTC also said that trade promotions - or payments by

consumer goods companies to retailers for favorable product

placement in stores and on e-commerce websites - "may warrant

further study."

The FTC found that consumer products manufacturers reduced

spending on these promotions during the pandemic because there

were product shortages and high demand for everyday essentials,

like toilet paper.

The reduction in spending harmed traditional grocers that

use a "high-low" pricing strategy with more frequent promotions,

the FTC found.

Retailers that offer "everyday low pricing" with fewer

promotions, like Walmart ( WMT ), benefited, according to the study.

The FTC's findings did not inform its recent case against

Kroger ( KR ) and Albertsons, the FTC official said. "The information

that was used to build that case was compiled via the typical

merger review process," she said.

The FTC also added that the report doesn't make claims of

illegality. "We're shedding light on what we're seeing in the

market, which has broader relevance to policymakers beyond law

enforcement."