In March 2020, two Tennessee brothers gained widespread attention for stockpiling over 17,000 bottles of hand sanitizer, intending to turn a hefty profit amid the widespread Covid-induced panic. The brothers, Matt and Noah Colvin, had driven across Kentucky and Tennessee, buying out hand sanitizer and antibacterial wipes from virtually every store they could find. Their operation, however, was almost immediately stopped by Tennessee’s then-attorney general, Herbert H. Slatery III. Slatery launched an investigation into possible violations of the state’s anti-price gouging law, which prohibits vendors from pricing essential goods and services during an emergency “grossly in excess” of pre-emergency prices. The brothers eventually settled their case, agreeing to donate all the hoarded supplies to a Tennessee nonprofit and officials in Kentucky.
The story of the Colvin brothers and other price gougers, along with pandemic-era inflation (which reached 8 percent in 2022, the highest since the 1980s), helps to explain why the cost of living, and in particular food prices, has remained at the top of voters’ minds. One policy aimed squarely at tackling this challenge is a national ban on food and grocery price gouging—an idea that received newfound attention in August, when Vice President Kamala Harris proposed it during her presidential bid.
Immediately after her announcement, many media outlets pointed out that, since Harris’s proposal “would only apply during emergencies,” the policy likely wouldn’t have much relevance to a United States no longer in a national state of emergency. Likewise, most economists agreed that a plan like Harris’s would not lower grocery prices. Still, even after Harris’s defeat, anti-price gouging proposals should not be ignored. Rather, anti-price gouging legislation should be seen as a valuable first step in providing federal regulators with the resources and authority necessary to ensure competition in key sectors of the economy.
Anti-price gouging laws already exist in 37 states and DC. Generally, these laws only pertain to specific necessities during states of emergency or other supply shocks and apply narrowly to price increases “without a justifiable reason,” such as an increase in the cost of a good. Penalties necessitate a specific “look-back period” before the state of emergency to measure any potential price increase, and their enforcement is designated to state attorneys general. These laws also demonstrate a variety of approaches a potential nationwide price gouging ban could take. For instance, some states define price gouging with a specific percent increase in price, while others use more vague terms such as “excessive” or “grossly exceeding.” Additionally, some states place limits on the number or type of goods that are covered by anti-price gouging laws.
These state laws, however, have one thing in common: They have been used to effect change that benefits consumers. New York’s anti-price gouging law, for instance, was used in a lawsuit against Hillandale Farms, which substantially raised prices on eggs at the beginning of the pandemic. The lawsuit resulted in a settlement whereby Hillandale agreed to end its price gouging practices in addition to donating 1.2 million eggs to New York food banks. In Texas, following Hurricane Harvey, six gas stations were forced to “refund Texans who were charged up to $9.99 a gallon for gas.” Similarly, after Hurricane Helene, the North Carolina Department of Justice received over 100 price gouging complaints, including charges of inflated bread and water prices, and has already opened several investigations into a number of businesses. Thus, despite the uproar over the feasibility of a national plan to counter price gouging and fears of government overregulation—some pundits likened Harris’s proposal to “sweeping” price controls—the plethora of existing state laws shows that such a policy can both protect Americans during an emergency without much government encroachment on the economy.
Many who oppose price gouging bans argue that, when prices increase in the wake of an emergency, essential goods and services are reserved for those who need them most (as people in true need will be willing to pay higher prices for access). This phenomenon, they argue, prevents shortages by decreasing demand and encouraging greater production of such goods and services. However, such reasoning fails to take into account several factors. Most notably, since these emergencies usually represent a temporary supply shock, increased prices “won’t always trigger the long-term investments needed to increase supply.” In addition, “high prices of necessary goods… leave the economically vulnerable unable to obtain the goods they need,” placing the brunt of an emergency on the poorest communities. Prices in the real world are also often “sticky,” meaning that suppliers “may continue to charge inefficiently high prices” even after the disaster has subsided.
A national anti-price gouging law would allow for investigations against larger corporations that many state attorneys general don’t currently have the resources to pursue. Many states whose anti-price gouging laws are “written to deter mom-and-pop stores and local gas stations” remain unprepared to address “the unique incentives and scale of companies like Amazon.” Many large companies also have operations spanning multiple states, making it difficult for individual states to pursue legal action. As such, in a variety of sectors over the last few years, prices have grown faster than the increase in input costs. A March 2024 Federal Trade Commission report, for instance, found that “some in the grocery retail industry seem to have used rising costs as an opportunity to further raise prices to increase their profits, which remain elevated today.” According to a December 2021 White House analysis, meatpacker Tyson Foods raised prices on beef by over 35 percent, resulting in “record profits while actually selling less…than before,” while in the third quarter of 2023, PepsiCo and Coca-Cola “were able to expand their profit margins…by raising their prices by roughly 10 percent each.”
One important similarity between the industries mentioned above is that they are heavily concentrated. The top five grocers control around 44 percent of the market share in the United States, while 93 percent of the carbonated soft drinks industry is controlled by PepsiCo, Coca-Cola, and Keurig Dr Pepper. Four companies control between 55 and 85 percent of the beef, pork, and poultry industries. Thus, in addition to being modeled after existing state laws, a potential national anti-price gouging law should also take inspiration from regulations in Europe and South Africa. These laws designate certain companies with disproportionate market shares in their respective industries as being in a position of “dominance,” allowing for a higher standard of scrutiny for any actions they may take. Such a provision in the United States may also help the federal government better enforce existing antitrust laws in its work against monopolies while simultaneously protecting small businesses from litigation.
When the next national emergency comes around, our government institutions must be prepared to ensure that essential goods and services will be available to those who need them most. A national anti-price gouging law is a necessary step in ensuring that consumers will be able to access vital necessities and in preventing corporations from taking advantage of supply shocks to unfairly raise prices. Campaigning in Pittsburgh on September 25, Harris promised a “pragmatic” and “practical” approach to the economy. Although she did not see victory in November, a federal price gouging ban could fulfill this commitment to pragmatism and sensibility—not some communist craze.