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Explainer-Harris' anti-price gouging plan could build on US state law
Harris' plan will include "the first-ever federal ban on price gouging on food and groceries."
Democratic presidential candidate and U.S. Vice President Kamala Harris attends a campaign event at UNLV (University of Nevada, Las Vegas) campus, in Las Vegas, Nevada, U.S., Aug.10, 2024. / Reuters/Kevin Mohatt
(Reuters) - As Vice President Kamala Harris focuses on price gouging in her presidential campaign, state laws and laws proposed by her colleagues in the Senate show potential paths for a crackdown on high prices.
The Democratic candidate planned to lay out her anti-price gouging and other economic proposals in a speech in Raleigh, North Carolina, on Aug.16.
Price gouging laws generally prohibit profiteering during emergencies, but vary widely as to when they apply, said Lindsay Owens, who leads Groundwork Collaborative, an anti-monopoly think tank. Thirty-four states have some form of anti-price gouging law on the books.
"States have been able to use these laws really effectively to prevent companies from exploiting crises to profit," Owens said.
Harris' plan will include "the first-ever federal ban on price gouging on food and groceries," which her campaign says aims to stop big corporations from unfairly exploiting consumers while generating excessive corporate profits.
New York's law, which Owens views as one of the strongest, bans companies from excessively raising prices on consumer staples during an abnormal market disruption. Drugstore chain Walgreens settled with the state last year over allegations it jacked up baby formula prices after a recall led to a nationwide shortage in 2022.
New York Attorney General Letitia James, a Democrat, accused Walgreens of raising formula prices by 10 percent after accounting for increased costs — and, in one case, 70 percent — during the shortage prompted by a recall at major formula maker Abbott Labs.
The only existing federal law against price gouging is aimed at preventing profiteering during wartime or other national emergencies. The law bans hoarding designated scarce items for resale at more than the prevailing market price — a term it does not define.
In 2020, when Harris was a U.S. senator, she co-sponsored legislation that would have defined price gouging in an emergency as charging more than 10 percent above the previous average price. The bill built in a defense for sellers that could show price hikes flowed from their own rising costs.
The proposal was modeled after California's anti-price gouging law, which Harris warned businesses against violating when she was the state's attorney general. The state's current attorney general, Rob Bonta, used it to sue a landlord over rent hikes during the COVID-19 pandemic.
While pandemic-era supply problems have eased, consumer advocates and some Democratic legislators have accused corporations of using the pandemic and general inflation as cover for price hikes to boost profits.
Democratic U.S. senators, including Elizabeth Warren of Massachusetts, introduced a bill earlier this year that would make it illegal to offer goods or services at a "grossly excessive price" — a term the U.S. Federal Trade Commission would define.
A price at least 20 percent higher than the average market price in the previous six months is one definition the agency would have to consider.
It would also require publicly traded companies to disclose their gross margins and pricing strategies in the wake of an emergency or other unusual market disruption.
While that bill had no Republican sponsors, other pricing bills, such as proposed drug price reforms, have received bipartisan support.
Republican Senator Chuck Grassley of Iowa has led the charge on those bills and co-sponsored others aimed at combating the effects of consolidation in the meatpacking industry — an area Harris is expected to highlight in her speech.
Even without additional federal legislation, a potential Harris administration has some existing tools.
The Federal Trade Commission under the Biden administration has already used its existing authority to sue to ask a court to block grocery chain Kroger $24.6 billion deal to buy rival Albertsons, and to launch a study of grocery prices.
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