Former President Donald Trump has criticized his rival’s call for a federal ban on food overpricing as “communist” price controls. But experts say the proposal is a far cry from Soviet-style caps, and more than three dozen states ruled by both parties already have versions of their own restrictions.
Vice President Kamala Harris last week vowed to lay out her economic agenda if elected, cracking down on “exorbitant prices that have nothing to do with the cost of doing business” by food and grocery retailers, including those resulting from major mergers.
Trump responded at a rally in Pennsylvania over the weekend: “After causing catastrophic inflation, Comrade Kamala announced she wants to institute socialist price controls.”
Some experts and analysts have criticized Harris’ idea as unlikely to be effective, comparing it to President Richard Nixon’s wage and price freeze in the early 1970s. Others, however, say there is an important difference.
“A price control is exactly what it sounds like: an agency that effectively puts a hard cap on a price,” Erin Witte, director of consumer protection at the nonprofit Consumer Federation of America, told NBC News in an email. Economists generally agree that such caps can cause shortages because limited profit opportunities lead companies to produce less of a product, even if the lower price stimulates demand.
Witte said that predatory pricing laws, in contrast, focus on the behavior of companies rather than setting concrete price levels: “Pursuit pricing laws require the enforcement agency to look at several factors and decide whether the conduct was unlawful.”
Harris’ plan, though few details are known so far, is to work with Congress to impose new “rules of the road” on pricing for industry heavyweights. She would also empower the Federal Trade Commission and state attorneys general to investigate and punish “bad actors” who violate the rules.
A potential Harris administration would have no shortage of state-level anti-usury models, though most have different goals and parameters than her proposal. According to a 2022 tally by the National Conference of State Legislatures, 37 states and Washington, D.C., prevent businesses from quickly raising the prices of certain goods and services under certain circumstances.
The regulations, which apply to liberal states like California and New York and conservative ones like Idaho and Alabama, typically go into effect during states of emergency, but some, like Michigan’s, are in effect all the time. Most prohibit excessive price increases on “essentials” like fuel, medicine, water or other products. Some cover a broader range of goods — or even all consumer purchases — to prevent sellers from taking advantage of shortages or unusual spikes in demand.
Many of those rules have been rigorously enforced during the pandemic, Witte said. Authorities in Texas, which has long had some of the toughest penalties on the books, warned businesses in the early days of Covid that they could face up to $250,000 in fines if the victims of predatory pricing were senior citizens.
In March 2020, Trump himself issued an executive order to crack down on corporate overpricing and hoarding of “essential health and medical supplies,” such as personal protective equipment and disinfectants. That measure, under the Defense Production Act, directed the Departments of Justice and Health and Human Services to oversee any pandemic-related corporate abuses, including stockpiling “unnecessary quantities of items to sell above market value.”
A Trump campaign spokesman did not respond to a request for comment.
“This is not a blue-state versus red-state issue at all,” said Zephyr Teachout, a professor at Fordham University Law School and senior adviser for economic justice at the New York attorney general’s office, which proposed its own 2023 tax relief bill. Teachout, an antitrust expert and consumer advocate who ran unsuccessfully for several state-level positions as a Democrat, said a federal law would help fill some of the gaps in the patchwork of state measures.
“The limitations of these state laws are that they are effective against small operators, but not against large multinational corporations, which can fiddle with their accounting to circumvent state laws and operate in multiple states,” she said.
According to Teachout, Harris’ plan could help “stop the big lawbreakers.”
Taming consumer price increases has been a focus for the Biden-Harris administration, which Harris is now expanding, for years. She acknowledged on the campaign trail that voters are still struggling, even as inflation has largely returned to normal levels since peaking above 9% more than two years ago.
Still, some economists say the fixation on corporate misbehavior is misplaced. Research this year by the San Francisco Federal Reserve concluded that the markups are unlikely to be to blame for the latest wave of inflation. And the food industry has criticized Harris’ proposal, saying brands are failing to report 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. He added that bargain hunters have plenty of options to compare prices.
If Harris wins the White House and moves forward with the idea, its impact will depend on how it is executed, Witte predicted.
“A ban on predatory pricing will only be as effective as its enforcement,” she said.
This article was originally published on NBCNews.com
