By Catherine Rampell
August 15, 2024 at 6:42 p.m. EDT

�Price gouging� is the focus of Vice President Kamala Harris�s economic
agenda, her presidential campaign says. She�ll crack down on �excessive
prices� and �excessive corporate profits,� particularly for groceries.

So what level counts as �excessive,� you might ask? TBD, but Harris will
ban it.

That�s the thing about price gouging: As has been said of hardcore
pornography, you know it when you see it.

It�s not hard to figure out where this proposal came from. Voters want to
blame someone for high grocery bills, and the presidential candidates have
apparently decided the choices are either the Biden administration or
corporate greed. Harris has chosen the latter.

In a news release Wednesday, her campaign said the first 100 days of her
presidency would include the �first-ever federal ban on price gouging on
food and groceries � setting clear rules of the road to make clear that
big corporations can�t unfairly exploit consumers to run up excessive
corporate profits on food and groceries.�

What are these �clear rules of the road� or the thresholds that determine
when a price or profit level becomes �excessive�? The memo doesn�t say,
and the campaign did not answer questions I sent seeking clarification.

The most likely template for Harris�s proposal is a recent bill from Sen.
Elizabeth Warren (D-Mass.). (Harris co-sponsored similar legislation with
Warren in 2020, when Harris was a senator.) Warren�s bill would ban any
�grossly excessive price� during any �atypical disruption� of a market.
Alas, no definition was provided for these terms, either; rather, the bill
would empower the Federal Trade Commission to enforce bans using any
metric it deems appropriate.

It�s hard to exaggerate how bad this policy is. It is, in all but name, a
sweeping set of government-enforced price controls across every industry,
not only food. Supply and demand would no longer determine prices or
profit levels. Far-off Washington bureaucrats would. The FTC would be able
to tell, say, a Kroger in Ohio the acceptable price it can charge for
milk.

At best, this would lead to shortages, black markets and hoarding, among
other distortions seen previous times countries tried to limit price
growth by fiat. (There�s a reason narrower �price gouging� laws that exist
in some U.S. states are rarely invoked.) At worst, it might accidentally
raise prices.

That�s because, among other things, the legislation would ban companies
from offering lower prices to a big customer such as Costco than to Joe�s
Corner Store, which means quantity discounts are in trouble. Worse, it
would require public companies to publish detailed internal data about
costs, margins, contracts and their future pricing strategies. Posting
cost and pricing plans publicly is a fantastic way for companies to
collude to keep prices higher � all facilitated by the government.

Normally, the government doesn�t like collusion. In fact, the Harris
campaign�s statement about her anti-�price gouging� agenda highlights a
case she won as California attorney general against companies colluding to
fix prices for LCD flat screens. Presidential administrations of both
parties have similarly pursued cases against cartels and other anti-
competitive conduct.

That�s because price-fixing is already illegal. And it should be! It�s
important to distinguish between real cartel behavior (whether among TV-
makers or meatpackers) vs. temporary spikes in prices and profits due to
high demand or supply-chain disruptions. Harris�s economic advisers are
either too confused or lazy to tell the difference. They don�t seem to
know the history of these kinds of policies and apparently haven�t thought
very hard about what would make markets more competitive or improve the
lives of voters.

They don�t even seem terribly familiar with what�s happening to grocery
prices, where the battle against inflation has, believe it not, pretty
much already been won.

On Wednesday, a government report showed that grocery prices in July were
up a measly 1 percent from last year, as the White House itself touted.
Indeed, annual grocery price inflation has hovered around that level for
the past eight months, way down from the double-digit inflation in mid-
2022.

Additionally, profit margins for supermarkets are notoriously thin.
Despite Harris�s (and Warren�s) accusations about �excessive corporate
profits,� those margins remained relatively meager even when prices
surged. The grocery industry�s net profit margins peaked at 3 percent in
2020, falling to 1.6 percent last year. If that sounds high, note that the
average net profit margin (what�s left over after expenses) for all public
companies nationwide is 8 percent.

So what actually happened with grocery inflation, if not �price gouging�
(however defined)? Superstrong consumer demand plus major supply
disruptions (the coronavirus pandemic, bird flu, Russia�s invasion of
Ukraine, etc.) pushed prices and profits up. Once those shocks abated and
consumers started spending down their pandemic savings, price growth
cooled.

These are the kinds of facts the Harris campaign should be explaining to
consumers, not exploiting for demagogic gain because push-polling suggests
people are mad about �greed.�

But more to the point: If your opponent claims you�re a �communist,� maybe
don�t start with an economic agenda that can (accurately) be labeled as
federal price controls. We already have plenty of economic gibberish
coming from the Republican presidential ticket. Do we really need more
from the other side, too?

https://www.washingtonpost.com/opinions/2024/08/15/kamala-harris-price-
gouging-groceries/