Kamala Harris is determined to combat price gouging, but there is a lack of consensus on its definition.

• The practice of charging inflated prices has gained attention during the election, with shoppers continuing to complain about the increased cost of food and other items.
• Kamala Harris presented a plan to address the issue, but it may be challenging to pass and implement legislation.
• The interpretation of the term varies among individuals, and many states have laws prohibiting price gouging during emergencies, including natural disasters.

This week, Kamala Harris, the Democratic presidential nominee, unveiled her most detailed economic plan yet and vowed to combat price gouging to reduce the cost of groceries for voters.

The vice president initially hinted at a federal ban in August, which prompted former President Trump to criticize the plan as "Soviet-style" price controls. Despite Harris providing more details about her 82-page economic plan on Wednesday, it remains unclear what price increases her administration considers illegal "price gouging."

The Harris-Walz campaign released a policy pitch six weeks before Election Day, stating that the bill will establish guidelines to ensure big corporations cannot exploit consumers during crises to increase their profits on food and groceries.

The central theme in the presidential race is the rising prices, which have been attributed to various factors, including steep grocery bills and retailers' anticipation of a deal-hunting holiday season. Both Harris and Trump have proposed their own solutions to combat inflation, as Americans continue to pay more for groceries, energy, housing, and other everyday expenses.

Although the Bureau of Labor Statistics reports that food prices at home have only increased by 1% in the past year, groceries are still 25% more expensive than they were in August 2019 due to supply chain disruptions and inflation.

Government leaders' role in companies' pricing will ultimately be determined by voters. While Republicans generally support fewer economic regulations, Trump has proposed limiting food imports to lower grocery prices. However, economists have warned that this strategy may not be effective.

A majority of U.S. adults support limiting price increases on food and groceries, according to a recent poll by The Economist/YouGov, conducted from Aug. 25-27.

It is uncertain whether Harris will be successful in passing any legislation against price-gouging in Congress, and it remains unclear how effectively enforcing price controls would work in practice.

What is price gouging?

The challenge of accusing companies of price gouging and addressing it is that the term has different meanings to different individuals. According to Rakeen Mabud, chief economist at progressive thinktank Groundwork Collaborative, the term is typically defined in two major ways.

In emergencies, companies may increase prices, as defined by economists and lawyers, and this practice is prohibited by law in thirty-seven U.S. states.

Mabud stated that some consumers and politicians have adopted a broader interpretation: companies can charge exorbitant prices simply because they possess market dominance.

Inflation worsened in 2021 and 2022 due to "greedflation," the idea that companies exacerbated the problem by raising prices on their products without providing more to customers, such as a larger quantity or new flavor. This theory has gained mainstream support, including a study from the Federal Reserve Bank of Kansas City, which found that markups contributed "substantially" to inflation.

Jerome Powell and many economists believe that corporate profits are not the cause of inflation, but rather a combination of factors including a tight labor market and supply chain issues.

The companies involved have maintained that they are not responsible for the increase in grocery prices.

"Sarah Gallo, senior vice president of product policy and federal affairs for the Consumer Brands Association, emphasized the importance of getting economic facts right and avoiding political rhetoric in a statement in August. According to Gallo, there are complex economic factors at play, and the industry supports the Federal Trade Commission's consumer protection mission as well as the Department of Justice's already established laws that prohibit price gouging and unfair trade practices."

Some retail leaders, including CEO Brian Cornell, have refuted price gouging accusations directed at the industry. In an interview on CNBC's "Squawk Box" in August, he stated that retailers lose customers to competitors if they increase prices excessively.

LSEG's director of consumer research, Jharonne Martis, pointed out some "red flags" that politicians are paying attention to. Martis analyzed gross profit margins for a variety of companies, including grocers, consumer packaged goods companies, and restaurants, during the years before, during, and after the Covid pandemic. Gross profit margins measure the percentage of net sales that a company makes compared to its costs.

Some companies, including Domino's and Kroger, have higher gross profit margins than before the pandemic. This can be due to company-specific actions, such as Domino's selling more pizza or Kroger customers shifting towards its more profitable private label brands.

The acquisition of Albertsons by Kroger has sparked an antitrust challenge, which has intensified scrutiny of companies' pricing practices. The Federal Trade Commission is attempting to halt the merger in court, and during the trial, Kroger's top pricing executive testified that the retailer raised prices on milk and eggs beyond what was necessary to cover increased costs.

Since 2020, nearly all costs of running a grocery store, including labor and transportation, have increased significantly. Kroger refuted accusations of price gouging, stating that they were "misleading."

Our industry is highly competitive, but we strive to provide the lowest prices to our customers by working tirelessly.

Arun Sundaram, an equity research analyst at CFRA Research, stated that he does not observe any evidence of price gouging in the grocery industry. Instead, he explained that price increases are a result of companies passing on some of their higher production costs to customers.

The increase in margins can result from various reasons, including improved efficiency or a shift in the type of products sold, according to him.

The popularity and allure of fashionable items, such as unique sneakers or designer dresses, can influence consumers' willingness to pay higher prices, even if the margins reflect the brand's power.

Sundaram acknowledged that there may be some value to the discussion surrounding the meatpacking industry, which has faced price-fixing lawsuits. For example, JBS' Pilgrim's Pride Corporation, one of the largest chicken producers in the country, admitted in 2021 to conspiring to fix chicken prices and pass on costs to consumers.

How shoppers are influencing prices

Despite the lack of legislation against price-gouging, the resistance to high costs has already begun to impact prices. The pushback from shoppers and grocers has caused a shift in the market.

Companies such as and have experienced a decline in sales volumes due to consumers choosing cheaper alternatives or reducing their snacking habits. Additionally, as inflation decreases, these companies have raised their prices less frequently and at a slower rate.

According to Steve Zurek, vice president of thought leadership at market research firm NielsenIQ, a shopper who has experienced seven or eight price hikes in a year is likely feeling frustrated.

The nation's largest retailer and grocer, Walmart, announced it is taking action against price hikes by vendors it carries. During an earnings call last month, CEO Doug McMillon stated that inflation has been more persistent in aisles that sell dry groceries and processed foods. As a result, Walmart is urging its suppliers to maintain or lower prices.

He stated on the call that although there is less upward pressure, some are still discussing cost increases, and they are fighting back aggressively because they believe prices should decrease.

According to Zurek, many food companies are reintroducing discounts in an effort to address consumer dissatisfaction and sluggish sales.

During the pandemic, manufacturers faced challenges in keeping their shelves stocked, which led them to stop offering deals. Customers were already stockpiling essentials, so manufacturers didn't need to boost demand. Supply chain issues and inflation further complicated the situation, causing sales to rise without the need for additional purchases.

Many companies are now offering deals, not just food companies.

This week, Party City has announced lower prices on more than 2,000 items such as balloons and candy, in anticipation of Halloween shopping.

Zurek stated that it is unlikely that grocery store prices will be significantly reduced for shoppers.

He stated to CNBC that from an economic perspective, discussing deflation is almost as unfavorable as discussing inflation.

J.M. Smucker's vice president of sales and sales commercialization, Robert Crane, stated that the company has passed on "commodity relief" to consumers when possible, such as with its coffee brands, which include Folgers and Cafe Bustelo. Despite this, Smucker's profit margins for its coffee division were 28.1% in fiscal 2024, down from 31.9% in fiscal 2019.

In response to rising commodity prices, Smucker plans to increase its coffee prices for the second time in 2021 in early October.

According to Crane, the company brings in professionals to explain the green coffee commodity market to top retailers in order to justify their decisions.

Crane stated, "We would discuss charts, outlooks, and the driving factors behind them, whether it's weather or speculation."

Sundaram of CFRA stated that stopping or slowing price increases is not an easy task.

Inflation is caused by a variety of factors, including increased supply chain costs, wage increases due to labor shortages, and poor weather in regions that produce food such as corn, soybeans, and cocoa. The speaker believes that neither administration can solve the issue quickly.

"Due to the intricate nature of the factors that caused this, it's likely that the same complex set of factors will resolve it," he stated.