Opportunistic corporations are using inflation to conceal their abuse of pricing power, exponentially increasing prices for American consumers
Thursday, May 12, 2022
Washington, D.C. – As Oregonians face rising prices for everyday essentials, Oregon’s U.S. Senator Jeff Merkley today joined U.S. Senators Elizabeth Warren (D-MA), Tammy Baldwin (D-WI), and Rep. Jan Schakowsky (D-IL) in introducing the Price Gouging Prevention Act of 2022. This legislation would tackle the inflation and rising prices consumers are facing by prohibiting the practice of price gouging during all abnormal market disruptions – including the current pandemic. The bill would authorize the Federal Trade Commission (FTC) and state attorneys general to enforce a federal ban against unconscionably excessive price increases, regardless of a seller’s position in a supply chain. This legislation also strengthens and expands requirements for public companies to disclose their pricing strategies in their filings with the Securities and Exchange Commission (SEC) and grants new funding to the FTC. A recent study by the Economic Policy Institute concluded that fatter corporate profit margins have driven more than half of price increases since 2020.
“Americans are sick and tired of being taken advantage of. Whether it’s outrageous prices for prescription medications, the high cost of gas, or the rising costs of everyday necessities, price gouging only benefits big corporations,” said Senator Merkley. “In the Senate, we work for the American people, not for Big Pharma or Big Oil. These companies can’t be allowed to use a deadly pandemic, a war, or any other abnormal market disruptor as another opportunity to price-gouge Americans—we have to put the interests of the American people above the interests of lining executives’ pockets.”
American families already struggling to make ends meet during this public-health crisis should not be burdened even further by companies out to boost profits. The COVID-19 pandemic has led to a surge in demand for—and shortage of—many essential consumer products and necessities. While several retailers have taken steps to maintain access to these products, there have been numerous reports of corporations taking advantage of the current crisis to prey on consumers by hiding behind rising inflation and raising prices even more than necessary to cover any increases in their costs. In a call with investors, the CEO of grocery chain Kroger noted that “a little bit of inflation is always good in our business.”
The Price Gouging Prevention Act specifically would:
- Prohibit price gouging at the federal level:The proposed bill would allow the FTC and state attorneys general to enforce a new standard against sellers charging an unconscionably excessive price during periods of exceptional market shock. The bill clarifies that price gouging is illegal wherever it occurs in a supply chain or distribution network.
- Create an affirmative defense for small businesses acting in good faith: Local businesses often must raise prices during crisis events because they have little negotiating power with their price-gouging suppliers. This affirmative defense protects small businesses earning less than $100 million from frivolous litigation if they show legitimate cost increases.
- Target dominant companies that have exploited the pandemic to boost profits: The bill would create a rebuttable presumption of price gouging against firms that exercise unfair leverage and companies that brag about increasing prices during periods of inflation.
- Require public companies to clearly disclose costs and pricing strategies:During periods of exceptional market shock, the bill requires public companies to transparently disclose and explain changes in their cost of goods sold, gross margins, and pricing strategies in their quarterly SEC filings.
- Provide additional funding to the FTC: The bill appropriates $1 billion in funding to the FTC to carry out its work.
In addition to Warren, Baldwin, and Schakowsky, the legislation is cosponsored by Senators Bob Casey (D-PA), Sheldon Whitehouse (D-RI), Bernie Sanders (I-VT), Edward J. Markey (D-MA), Tammy Duckworth (D-IL), and Dianne Feinstein (D-CA). In the U.S. House of Representatives, this legislation is cosponsored by Judiciary Committee Chairman Jerrold Nadler (D-NY), and Representatives David Cicilline (D-RI), Val Demings (D-FL), Katie Porter (D-CA), Ro Khanna (D-CA), and Bobby L. Rush (D-IL).
Final bill text can be found here.
Summary of the bill can be found here.