Harris aims to ban food price gouging, while industry points to supply chain pressures

By Deniz Ataman

- Last updated on GMT

Source: Getty/	sdominick
Source: Getty/ sdominick
Presumptive Democratic Presidential Nominee Kamala Harris proposes a federal ban on price gouging to lower grocery prices as part of her economic platform for her presidential campaign, however food industry advocates maintain that food prices have remained below year-over-year inflation rates.

As part of broader plans to lower the cost of living for Americans during her economic speech​ in Raleigh, NC, last week, Harris said she intends to address food price gouging during her first 100 days in office.

Harris plans “to make it a top priority to bring down costs and bring economic security for Americans,” and “take on high costs,” such as for food, she said during her speech via Washington Post.

She argued that even though the supply chain has improved since the COVID-19 pandemic, “prices are still too high. A loaf of bread cost 50% more today than it did before the pandemic. Ground beef is up almost 50%.”

She pointed out that while some grocery chains are passing on savings to Americans, “many are not,” highlighting record high profits from food companies.

Contrary to the higher cost of consumer foods, food prices ‘represented a bright spot’

In a prepared response​ to Harris’ plans, FMI – The Food Industry Association’s President and CEO, Leslie Sarasin explained that while inflation has increased prices of consumer goods, food prices “represented a bright spot,” according to data from the 2024 Consumer Price Index​ (CPI).

Sarasin highlights “July’s CPI placed year-over-year food-at-home inflation at 1.1%, which remains below the 2.9% increase in overall inflation,” Sarasin said.

However, Harris compares current food prices to pre-pandemic levels, emphasizing that while inflation may be slowing, the cost of groceries remains higher than before the pandemic.

Sarasin added, “Food retailers’ profit margins are, and always have been, extremely tight – just 1.6% last year,” according to FMI data​.

Sarasin cited the food industry’s ongoing efforts “amidst fierce competition” to tackle inflation and reduce costs for consumers. She emphasized higher labor costs, turbulent energy prices, unpredictable environmental events, supply chain disruptions and “an unprecedented level of regulatory burden” have attributed to an increase in food production costs.

In response to “deceptive practices like price gouging,” Sarasin emphasized its illegality and that “is has no place in our stores."

“It is both inaccurate and irresponsible to conflate an illegal activity like price gouging—a defined legal term in which specific violations of trade practices law occur—with inflation, which is a broad macroeconomic measure of increases in consumer prices over time due to supply chain cost pressures. In the context of food, inflation impacts how far the dollar goes when buying groceries,” she said.

Sarasin highlighted that for Americans and the food industry, “when discussing food prices, it is imperative that our conversations remain grounded in reality and data, rather than rhetoric.”

Supply chain pressures did raise costs, but mostly for manufacturers and retailers

Ricky Volpe, associate professor of agribusiness at California Polytechnic State University echoed these sentiments, adding that “recent media coverage surrounding inflation’s impact on food prices often does not reflect the economic subtleties and nuances that influence the real cost of food in America,” during an interview​ with FMI.

Volpe explained that while the average American income increased by 28% between March 2020 and June 2024, food prices increased 24.6% in the same period, according to data​ from the US Bureau of Economic Analysis Personal Disposable Income, which measures the average amount of after-tax income. Volpe emphasized that although food prices appeared to have increased, the actual cost of groceries, relative to wages, decreased by nearly two percentage points in the same period.

“This has allowed consumer demand to remain high and families to meet their grocery needs even as prices have increased,” he said.

While it remains true that food prices increased relative to wages, Volpe explained that increased supply chain costs were mostly absorbed by grocers and producers.

“The truth is that when producer costs go up, consumer prices go up too — this is standard market dynamics,” he added.

Volpe detailed supply chain pressures such as rising transportation costs caused by a shortage of truck drivers​ and limited refrigerated truck capacity, higher labor costs due to labor challenges, higher turnover rates and severe weather events that have contributed to driving up prices for manufacturers and retailers.

Based on food manufacturing data​ from the Producer Price Index (PPI), which measures the prices businesses pay for goods and services necessary to make their products and data about food at home in the Consumer Price Index between March 2020 and June 20204, consumer prices grew slightly less than producer input costs, while groceries’ costs grew 25.3% and producer costs grew 28%, Volpe explained.

“This suggests that not only are grocers absorbing a portion of the supply chain cost increases, but also that the prices consumers pay are not the result of runaway profits. Rather, they are due to inflationary pressures throughout the entire supply chain that increase costs for businesses producing and selling food,” he said.

For example, fruits and vegetables producer costs increased by 37.1% over the four-year time period, whereas consumer prices went up 16.2%, resulting in a difference of 20.9 percentage points, according to PPI data.

This indicates the supply chain is absorbing a large portion of the input costs to avoid passing significant price hikes on to consumers,” Volpe added.

 

                                                                                                                                             

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