Perhaps surprisingly, some business groups are cheering the F.T.C. on. The Main Street Competition Coalition, which was formed in October and represents independent grocers, pharmacies, convenience stores and farmers, wrote to the F.T.C. that its members “are increasingly subject to discriminatory terms and conditions, including less favorable pricing and price terms, less favorable supply, less favorable retail packaging, and sometimes an inability to access products in short supply that are available to their competitors.”
It’s telling that the one tier of business that’s not reporting higher profits is small business. A November survey of small businesses by the National Federation of Independent Business found that more businesses were reporting lower than higher profits by a margin of 17 percentage points. The share saying they were rising prices was the highest since 1979, but that was because costs were up.
But the U.S. Chamber of Commerce in a letter released Dec. 15 said that the actions by Khan and the F.T.C. “demand increased congressional attention and oversight.” The chamber says the agency is “overstepping its regulatory authority, undermining our system of checks and balances, ignoring due process and bypassing longstanding regulatory norms to expansively regulate industries and manage our economy with a government knows best approach.”
Competition, or the lack of it, isn’t the only criterion for profiteering. Another is whether sellers are taking advantage of extreme stress — in this case, the pandemic — for commercial gain. Most U.S. states have laws prohibiting price gouging by retailers in times of crisis, such as jacking up the price of plywood that people need to board up their houses and storefronts before a hurricane.
The problem with attempts to restrain profiteering is deciding where to draw the line. For example, while monopoly and oligopoly are bad for consumers, it would be unreasonable for regulators to reach for perfect competition with zero pricing power. Every business tries to differentiate itself — even with something as simple as a new sign out front — to give it a bit of an edge over the competition so it can charge a bit more. Reaching for more profit by trying to escape commodification is the engine of capitalism and innovation.
It’s also true that raising prices in response to a surge in demand can benefit society in certain circumstances. It prevents shortages by suppressing demand and giving producers an incentive to increase production. It makes sure that the limited supply gets into the hands of those who value it most highly. That’s a Pollyanna-ish take, of course: The Economics Observatory in Britain explains why sometimes gouging really is gouging, as when there’s no realistic way to increase supply.
I’ll wrap this up by turning to the wisdom of some of the world’s best economists. In 2012, the Initiative on Global Markets at the University of Chicago’s Booth School of Business asked a panel of top academic economists what they thought of a bill then being considered by the Connecticut Legislature that said that during a “severe weather event emergency, no person within the chain of distribution of consumer goods and services shall sell or offer to sell consumer goods or services for a price that is unconscionably excessive.”