Americans consistently say the economy is the most important issue in the presidential campaign, and that high prices are what they care most about. In one recent poll, 85% cited rising prices as the top factor in determining their vote. Even as inflation has fallen to 2.4%, voters remain irate that food and other necessities still cost about 25% more than they did in early 2020.
No surprise, then, that both campaigns are saying they will bring prices under control. Sen. JD Vance recently did a photo op decrying the high price of eggs. Vice President Harris pledges to stop corporate “price gouging” as a central plank of her campaign. Even Donald Trump showed up at a grocery store promising to drive down prices, telling shoppers, “We’re going to do this for you from the White House.”
But economists say bringing grocery prices down — or keeping them from skyrocketing again in the future — will likely require tougher enforcement of existing antitrust laws as well as new policies to fight anti-competitive practices by companies that dominate in highly concentrated industries. Even if those are the most effective tools, such legislation would be difficult to get through Congress. Former President Trump has not proposed tougher antitrust measures, while Vice President Harris says she’ll go after “unfair mergers” and pledges to focus on investigating and prosecuting price fixing, but has so far offered few details of how enforcement would be stepped up.
Trump has turned to his catch-all solution for seemingly every economic problem: imposing tariffs. He’s suggested that restricting food imports with tariffs will lower prices — though such a policy would likely do the exact opposite. The cost of tariffs on, say, Peruvian blueberries or Mexican avocados would simply be passed by retailers on to customers. “Prices would be higher, supplies would be limited, and variety would be limited, especially for stuff that just simply can’t be grown in the vast majority of the United States for most of the year,” said Scott Lincicome, vice president of the conservative Cato Institute. “It’s crazy; who on earth would be cheering that on?”
There is far more debate about Harris’ proposals — starting with her pledge to enact a federal price-gouging ban on corporations that jack up prices excessively.
It is unclear to what extent such price hikes — or “greedflation” as some have labeled it — contributed to the huge spike in inflation of recent years. Certainly, a host of other factors played a role — Russia’s invasion of the Ukraine sent global wheat prices to historic highs, while the pandemic, hurricanes, drought and recurring outbreaks of avian flu have reduced supplies and driven up the costs of everything from eggs, poultry and meat to orange juice, diapers and medical products.
But those factors alone do not account for the sticker shock consumers have experienced at the checkout line; there’s also plenty of evidence that many companies took advantage of the spike in costs to raise their own prices and profit margins even more — what economist Isabella Weber of the University of Massachusetts Amherst has termed “Sellers’ Inflation.”
A recent Federal Trade Commission report found that revenues at some food and beverage retailers have risen faster than costs in recent years, “casting doubt on the assertions of some companies that rising prices at the grocery store are the result of retailers’ own rising costs.” Other studies have gone further. A report issued early this year by the Groundwork Collaborative, a progressive think tank, found that major multinationals including PepsiCo, Coca-Cola, the Hershey Company and Tyson Foods — which among them produce hundreds of familiar grocery store brands — hiked prices well beyond their own cost increases in recent years. Many even bragged about their fatter profit margins on earnings calls with Wall Street analysts. And a September report by the Economic Policy Institute found that a spike in profits explains well over 40% of the rise in prices between the end of 2019 and mid-2022.
Despite that evidence, many economists were quick to deride Harris’ plans when she first outlined them in August, fearing that she wants to impose the sort of disastrous price controls that could create widespread shortages or give the federal government too much leeway to micro-manage companies’ pricing decisions.
But that caricature bears little relation to what Harris is actually proposing; instead, she’s called for federal regulations that would closely mirror the price-gouging laws that already exist in 37 states. These laws typically outlaw only excessive price hikes on essential goods like food, diapers and gas during natural disasters or an “abnormal market disruption” such as a power outage. The principle is simple. “In an emergency, we shouldn’t ration vital and necessary goods based on the ability to pay for them,” said Fordham University law professor Zephyr Teachout. “We shouldn’t give diapers to the richest person in town because there’s a snowstorm.”
So what constitutes an “excessive” price hike? The definition varies from state to state, but it’s typically a hike of 10% or more above a company’s increased costs. That last part is crucial, said Lindsay Owens, the executive director of Groundwork. “If grain prices are sky-high and you raise bread prices by 30% to pass along your increased costs, that’s not price gouging,” she said. Companies can maintain their profit margins; they just can’t take advantage of a crisis to profit excessively.
The state laws are popular, and used with great regularity — and not just in blue states. Texas Attorney General Ken Paxton sued a group of La Quinta Hotels in San Antonio for tripling the cost of a room during a winter storm in 2021, while Florida began investigating 160 complaints about price hikes after hurricanes Helene and Milton hit the state this fall.
But state AGs can go after violations only within their jurisdiction. That misses much of where alleged price gouging occurs — earlier in the distribution chain. Take for example, common goods like toilet paper or diapers, which are largely produced by big multinationals. “If you see a sudden spike in diaper prices — and we did see one during COVID-19 — the structure of enforcement is well set up for states to go after a grocery store that increases their price,” said Teachout. But if the local store is just passing on a big hike that the manufacturer tacked on three states away, state AGs have little power to do anything. Because of the accounting games big corporations can play, she said, they “can basically place the markup beyond the reach of any given state.”
When Harris first announced her plan to go after price gouging, she pledged to push for a federal ban within the first 100 days of her administration. But making any significant progress — never mind actually seeing prices start to come down — within that time frame is highly unlikely. In the spring of 2020, then-Sen. Harris co-sponsored a similar bill with Sen. Elizabeth Warren (D-Mass.) that would have allowed the FTC to prevent price gouging during national emergencies such as the pandemic. That bill, based on California’s price-gouging law, went nowhere. Earlier this year, Warren reintroduced the legislation. It, too, has seen little movement.
“That doesn’t bode well,” said Owens. “If you didn’t get this type of legislation done during the pandemic, it’s hard to see getting it done now.”
Much will depend, of course, on the specifics of whatever bill a President Harris might eventually propose, as well as which party controls the next Senate. Republicans — and many Democrats — are averse to interfering with the dynamics of the market, particularly when the interests of their corporate donors might be impacted. Passing legislation with real teeth will be difficult. “Given the importance of corporate money to campaigns,” said Hal Singer, an antitrust expert at the University of Utah law school, “it becomes pretty clear that you’re not allowed to say certain things if you want the money to keep rolling in.”
Even if Harris is eventually able to pass a law banning price gouging, inflation-weary consumers are unlikely to see a big break at the grocery store anytime soon. Even those who support such legislation recognize it would do little to force current prices down.
“To be clear, price-gouging laws would not lower existing food prices; they would simply prevent companies from exploiting (future) emergencies to hike prices,” said Weber. They would make up just “one element of a package of tools that we need to protect consumers from price shocks and unfair prices.”
Longer term, she and other economists argue that a broader push by Harris to strengthen antitrust enforcement — particularly in highly concentrated industries such as the food processing, meat and grocery sectors, where it is easier for companies to boost prices without pushback from rivals — will be key to preventing future price shocks.
While the vice president has also pledged to empower federal agencies to “crack down on unfair mergers and acquisitions” and to investigate allegations that companies “illegally collude” to fix prices, she has offered few specifics so far. But progressive economists argue there are a host of things that she could do — starting with keeping Federal Trade Commission Chair Lina Khan on the job to continue building on the aggressive antitrust policies she’s put in place during the Biden administration.
What might that entail? Ali Bustamante, the director of worker power and economic security at the Roosevelt Institute, argues that simply replicating how the states define price gouging at the federal level doesn’t go far enough. While that would allow the feds to prosecute egregious price hikes in an emergency, it would do nothing to end what he sees as a more common and pernicious practice: the steady “price creep” that enables companies in concentrated industries to raise prices 5% or 10% annually, unrelated to how much their own costs increase. “Price-gouging laws, as they currently exist, really don’t address that,” Bustamante says.
He argues a potential Harris administration should broaden its price-gouging agenda to more explicitly tackle the extreme concentration that can give dominant firms the ability to dictate prices with little pushback from competitors. While the Biden administration has been more aggressive in fighting mergers that risk harming consumers — witness its lawsuit to block JetBlue’s acquisition of Spirit Airlines, or the current fight to stop grocery giants Kroger and Albertsons from merging — Bustamante believes that Harris could go further by looking beyond retailers or other consumer-facing companies to the downstream players behind them in the supply chain — the manufacturers, wholesalers, transporters and distributors, where the lack of competition has given some companies too much pricing power — and developing enforcement measures to keep companies from abusing that power. He cites the meatpacking industry, for example, where years of consolidation have given a handful of powerful companies the ability to squeeze the ranchers and cattle producers who supply them while also raising the prices they charge consumers.
“That’s where Vice President Harris should be looking,” Bustamante said. To truly benefit consumers, he added, “this is where price gouging legislation could actually go.”
“Could” may be the operative word there — but will it? The question is how hard Harris would push for an even more robust antitrust policy — and if so, will she be able to muster the political support to get any needed legislation passed?
Even if Harris wins and the Democrats maintain control of the Senate, it will be tough. Already, the pushback against the Biden administration’s aggressive antitrust enforcement has been fierce — particularly in Silicon Valley, where the Democrats typically derive much of their corporate support — and it will only become stronger if Harris pushes to expand the portfolio. Singer, for one, is skeptical. With prominent Democratic donors like Reid Hoffman, co-founder and executive chairman of LinkedIn, and Barry Diller, chairman of media giant IAC, pushing Harris to dump Lina Khan at the FTC, Singer worries that Harris has not shown Khan public support.
Bustamante is more optimistic, citing recent polls that show a majority of Americans favor stronger action against the power of corporate monopolies. “It’s really a matter of Vice President Harris and other policymakers understanding that the public is on their side,” he said.
Following a campaign awash in record levels of corporate cash, if only it were that simple.
