- Vice President Kamala Harris proposed a federal ban on price gouging for groceries.
- While details are light, it would allow the FTC to intervene when companies charge excessive prices.
Vice President Kamala Harris released the most detailed information yet on her economic platform, which pledges to lower prices for Americans.
It won't be an easy feat.
Last week, Harris announced a proposal for the first-ever federal ban on price gouging, a practice in which companies raise the price of goods to excessive levels. This move is part of her initiative to lower overall prices as Americans continue to recover from high inflation.
The proposal is light on details but said it would enable the Federal Trade Commission and state attorneys general to investigate companies that don't comply with the ban.
According to the fact sheet, Harris would also "crack down on unfair mergers and acquisitions" that enable big food corporations to raise prices and undermine competition.
However, the president can't just tell a grocery store or its suppliers what prices to charge. Experts told Business Insider that anyone wanting to enact a ban would have to carefully define what qualifies as price gouging, leaving little room for interpretation to ensure the ban is applied consistently. Using the Federal Trade Commission to penalize anti-competitive behavior could be an effective way to address excessive pricing, as well.
Many states have existing laws on price gouging that attorneys general enacted during pandemic price hikes, and even former President Donald Trump took action at the start of his term. But state laws are lacking in some areas — and that's where a federal ban could help.
A state-level patchwork and Trump's take on a federal action
Dan Scheitrum, an associate agribusiness professor studying grocery price gouging at California Polytechnic State University, told Business Insider that existing price gouging laws are a patchwork at the state level. He said states have struggled to crack down on the issue because of the scope they use to detect excessive price increases.
For example, he said, some states would consider a 10% to 20% price increase during a national emergency price gouging "unless the retailer can prove that their inputs increased in price."
"Other states define it very, very broadly and prohibit any unconscionable increase in price or any extreme increase in price. And that's very vague and overbroad," Scheitrum continued. "And the trouble with these price gouging laws is that they're either too specific or so broad that they don't often get litigated and found in favor of detecting price gouging."
The pandemic served as a prime opportunity for states to go after price gouging. Scheitrum said that during the initial stay-at-home orders, consumers were changing how they purchased food, and key everyday items saw price swings — particularly eggs.
A range of state attorneys general filed lawsuits against various egg producers over price gouging. For example, Minnesota's Keith Ellison reached a settlement with a Minnesota-based egg producer in 2021 over accusations the producer raised egg prices excessively.
The lack of consistency across states when it comes to the treatment of price gouging means it's not being enforced as effectively as it could, and that's one thing a federal ban could help combat, Scheitrum said.
Isabella Weber, an economist at the University of Massachusetts Amherst, also pointed to Trump's efforts to crack down on price gouging on medical supplies during the pandemic. In March 2020, Trump signed an executive order to prevent hoarding and price gouging of medical resources, showing existing precedent for administrations to address price gouging in emergencies.
"I think it's feasible because, in the grocery sector, we are talking about extreme levels of corporate concentration. So it's not like you would need to investigate endless numbers of firms, but you would need to investigate a handful of gigantic firms," Weber said. "So the problem is severe, but it's in a way manageable because of the enormous level of concentration that we have in the food industry."
The FTC could be the most effective tool in preventing too-high prices
Scheitrum said a problem Harris could encounter with her current proposal is conflating price gouging with unfair prices.
"If you were to try and cut down grocery prices today, there's no state of emergency. So most price gouging protections wouldn't apply at all. There'd be nothing to detect because there's no relative price to measure against right now," Scheitrum said. "So there's high prices from just inflation and increased prices across the board."
But focusing on companies' anti-competitive behavior could have teeth, he said, given that many big players in the food industry have been sued or are suing regarding this issue.
The FTC has investigated the cause of high grocery prices over the course of the pandemic. Most recently, the FTC and Justice Department launched an interagency effort to investigate why grocery prices are remaining high.
"Many large grocery chains are still raking in enormous profits — the FTC is determined to understand why," FTC Chair Lina Khan said during a virtual August meeting.
The FTC has filed lawsuits against major companies like Amazon, Microsoft, and Google over anticompetitive behavior. The legal process is lengthy, but it could have success — the agency has succeeded in blocking major airline and biotech mergers that could stifle competition.
A safeguard for a national emergency
Weber said a federal ban on price gouging would allow the US economy to be prepared "for when the next shock hits."
"The kind of profit bonanza that we have seen in the food sector, from the grain traders all the way down to the grocery stores, is not going to happen to that extent," she said.
Some economists and Democratic lawmakers lauded Harris' announcement for managing price hikes and ensuring the food industry stays competitive. However, some conservative lawmakers and economists criticized the plan and its impact on the economy, with Trump even calling it communism for involving the government in prices.
Weber said that implementing a federal ban on price gouging "makes a lot of economic sense" and would allow the government to manage excessive pricing in a national emergency, like what the US experienced during the pandemic.
"We are really talking about the prices of essentials," Weber said. "We're talking about the prices that really hurt when they go up so that a lot of these ideas of, 'Oh, prices go up and therefore people consume less and therefore prices go down again,' just doesn't apply because people need a place to live. People need to eat."
The food industry isn't so sure. The Wall Street Journal reported on Monday that big companies are pushing back on Harris blaming corporate greed for high prices. "The proposal calling for a ban on grocery price gouging is a solution in search of a problem," the National Grocers Association told the Journal.
Still, Weber said a federal ban isn't as extreme as some critics have said.
"So we are really talking about a cost-of-living crisis and the price of essentials to ensure a decent life," Weber added, "and not about price controls for the whole economy or anything like that."