Elizabeth Warren’s price gouging bill doesn’t define “excessive price increases”

Americans are struggling with rising costs, a problem that Democratic Sen. Elizabeth Warren has blamed on corporate price gouging.

In response, the Massachusetts lawmaker has put forward a bill to address the problem. Yet as Reason contributor Liz Wolfe recently pointed out, the legislation contains an embarrassing omission.  

Legislation targets “unconscionably excessive price increases”

Wolfe began by citing a tweet that Warren released last Wednesday which read, “The prices Americans are paying for groceries and other essentials are at all-time highs.”

“One of the reasons? Giant corporations are price gouging & reaping record profits. We need to put a stop to corporate gouging that drives up prices for families.”

Warren’s bill, known as “The Price Gouging Prevention Act,” would charge the Federal Trade Commission (FTC) with investigating and penalizing those companies which engage in “unconscionably excessive price increases.”

However, a Washington Post columnist noted in a tweet of her own that the bill doesn’t define what price gouging consists of.

As Wolfe explained, companies are “presumed to be in violation” should they use “the effects or circumstances related to the exceptional market shock as a pretext to increase prices.”

“In other words, companies responding to inflation or supply chain woes caused by the pandemic could be presumed in violation and fined by the FTC, unless such price increases were due to costs outside the firm’s control,” she wrote.

Columnist says pricing rules will lead to shortages

What’s more, corporations would also be compelled to report details of their pricing strategies when submitting regulatory filings.

Wolfe pointed out that prices play a valuable role in mitigating scarcity, which means that artificially suppressing them would backfire on consumers.

“Consider what would happen if firms never charged higher prices for goods or services in high demand,” Wolfe asked her readers.

“They would run out of the good or no longer be able to offer the service at all, denying consumers the ability to get the good or service they need.”

Share on facebook
Share To Facebook

Welcome to our comments section. We want to hear from you!

Any comments with profanity, advocacy of violence, harassment, personally identifiable information or other violations will be removed. If you feel your comment has been removed in error please contact us!

Latest Posts