Former President Donald Trump has blasted his rival’s call for a federal ban on food price gouging as “communist” price controls. But experts say the proposal is a far cry from Soviet-style caps, and over three dozen states led by both parties already have versions of their own.
Laying out her economic agenda last week, Vice President Kamala Harris called to crack down on “excessive prices unrelated to the costs of doing business” by food and grocery sellers, including those in the wake of big mergers.
Trump, at a rally in Pennsylvania over the weekend, responded: “After causing catastrophic inflation, Comrade Kamala announced that she wants to institute socialist price controls.”
While some pundits and analysts have criticized Harris’ idea as likely ineffective, comparing it to President Richard Nixon’s freezes on wages and prices in the early 1970s, others say there’s an important distinction.
“A price control is exactly what it sounds like — an agency setting an actual hard cap on a price,” Erin Witte, director of consumer protection at the Consumer Federation of America, a nonprofit group, said in an email to NBC News. Economists generally agree that such caps can cause shortages, as limited profit potential leads companies to produce less of a good even if the lower price juices demand.
Witte said price-gouging laws, by contrast, target corporate conduct rather than mandating concrete pricing levels: “Price-gouging laws require the enforcing agency to look at several factors and decide whether the conduct was unlawful.”
Harris’ plan, while so far light on details, is to work with Congress to impose new “rules of the road” on price-setting for industry heavyweights. She would also authorize the Federal Trade Commission and state prosecutors to investigate and punish “bad actors” who are found to break them.
A potential Harris administration would have no shortage of state anti-price-gouging statues on which to model a federal one, though most have different goals and parameters. Thirty-seven states and Washington, D.C., prevent companies from quickly raising prices on certain goods and services under specified circumstances, according to a 2022 tally by the National Conference of State Legislatures.
The regulations, spanning liberal states like California and New York and conservative ones like Idaho and Alabama, typically kick in during emergency declarations, but some, like Michigan’s, are always in force. Most ban excessive price increases for “essentials” like fuel, medicine, water or other products. Some cover a wider range of goods — or even all consumer purchases — to restrict sellers from taking undue advantage of shortages or unusual spikes in demand.
Many of these rules were enforced heavily during the pandemic, Witte said. Authorities in Texas, which has long had some of the strictest penalties on the books, warned businesses during the early days of Covid that they could face up to $250,000 in fines if the victims of any price gouging were seniors.
In March 2020, Trump himself issued an executive order to head off corporate price gouging and the hoarding of “necessary health and medical resources,” like personal protective equipment and sanitizing products. That move, under the Defense Production Act, ordered the departments of Justice and Health and Human Services to police any pandemic-related corporate malfeasance, including stockpiling “unnecessary quantities of items for the purpose of selling them above the fair market value.”
A Trump campaign spokesperson didn’t respond to requests for comment.
“This is not a blue state, red state issue at all,” said Zephyr Teachout, a professor at the Fordham University School of Law and senior counsel for economic justice in the New York state Attorney General’s office, which proposed its own price-gouging curbs in March 2023. Teachout, an antitrust expert and a consumer advocate who has run unsuccessfully for several statewide offices as a Democrat, said a federal law would help bridge some gaps in the patchwork of state measures.
“The limits of these state laws are that they are effective on small-time operators but not effective against big multinationals, which can play with their accounting so as to avoid the state laws and operate in multiple states,” she said.
Harris’ plan could help “stop the big-shot scofflaws,” Teachout said.
Taming consumer price increases has been a yearslong focus for the Biden-Harris administration that Harris is now extending. She has acknowledged on the stump that voters are still struggling even as inflation has mostly returned to normal levels since peaking above 9% more than two years ago.
Nonetheless, some economists see the fixation on corporate misbehavior as misplaced.
Research this year by the San Francisco Federal Reserve concluded that markups likely aren’t to blame for the latest surge in inflation. And the food industry has criticized Harris’ proposal, saying brands aren’t reporting excessive profits and warning that her crackdown would fuel inflation.
“We’re in a penny business,” Target CEO Brian Cornell said of retailers’ profit margins, speaking on CNBC Wednesday, adding that bargain-hunting shoppers have many options to compare prices.
If Harris wins the White House and persuades Congress to move forward with the idea, its impact would hinge on how it’s implemented, Witte said.
“Any price-gouging ban will only be as good as its enforcement,” she said.
This article was originally published on NBCNews.com
