The Call for a Federal Ban on Food Price Gouging: A Misguided Solution

Last week, Vice President Kamala Harris called for a new federal law to ban "price gouging on food" in North Carolina. The idea of such a law may resonate with many Americans struggling with high grocery bills, but experts warn that it would likely have little to no impact on reducing food prices—and might even make things worse. This is especially disappointing because the proposal distracts from the real policy changes that could actually bring relief to consumers.

The root of the problem lies in misunderstanding the causes of rising food prices. While many politicians blame corporate greed and price gouging, the evidence supporting this narrative is thin to nonexistent. A recent report from the New York Federal Reserve found that post-pandemic food inflation was primarily driven by higher commodity prices and significant wage increases for grocery store workers—not excess profits at grocery stores or food manufacturers. Similarly, a 2023 report from the Kansas City Federal Reserve highlighted that rising food prices were concentrated in processed foods, which are more sensitive to labor-market conditions and wage hikes. While grocery store profits did rise during the pandemic, this increase was largely due to heightened demand—fueled by government stimulus and more people eating at home—colliding with supply-chain disruptions caused by the pandemic, closures, and the war in Ukraine.

Why Banning Price Gouging Won’t Solve the Problem

Even if corporate profiteering were the cause of higher food prices, a federal ban on price gouging would do little to ease the burden on American households. For starters, food prices have largely stabilized. From January 2023 to July 2024, the "food at home" portion of the Consumer Price Index rose by just over 1 percent, aligning with long-term, pre-pandemic trends. Additionally, the share of income Americans spend on groceries—while higher during the pandemic—has declined in recent years and remains below historical levels.

The grocery industry is also not a cash cow for corporations. Data from NYU’s Stern School of Business reveals that the industry’s average net profit margins were just 1.18 percent in January 2024, ranking it near the bottom of all industries surveyed. Even President Biden’s own economists have downplayed the role of corporate profiteering in driving recent price trends. Instead, inflation is a broader macroeconomic issue tied to monetary and fiscal policies, not the actions of individual companies.

The Real Causes of Food Price Inflation

Food prices are influenced by factors beyond government or corporate control. Weather events, geopolitical conflicts, and natural disasters all play a role, which is why economists often exclude food prices when measuring "core inflation." Policymakers would do well to focus on these larger forces rather than scapegoating businesses. For example, the war in Ukraine disrupted global grain and fertilizer supplies, while extreme weather events in key agricultural regions have impacted crop yields.

Additionally, the wages of grocery store workers have risen significantly in recent years, and these labor costs are naturally passed on to consumers. While higher wages are a positive development for workers, they contribute to inflationary pressures. Politicians proposing bans on price gouging rarely acknowledge these complexities, opting instead for simplistic solutions that resonate with voters but fail to address the real issues.

Policy Reforms That Could Actually Lower Food Prices

While bans on price gouging are unlikely to help, there are several federal policies that could provide meaningful relief to consumers—but they come with political risks. One major culprit driving high food prices is trade protectionism. The United States imposes tariffs and trade restrictions on a wide range of imported foods, including beef, seafood, and healthy produce like cantaloupes and spinach. These measures artificially inflate prices to protect domestic industries. For instance, U.S. sugar prices are roughly twice the global average due to tariffs and subsidies for sugar producers.

Regulatory protectionism further exacerbates the problem. Strict FDA regulations limit the importation of safe, foreign-produced foods, such as baby formula and tuna, keeping prices high. During the 2022 baby-formula shortage, the Biden administration had to import foreign alternatives to meet demand, exposing how these regulations harm consumers. Similarly, mandatory labeling rules for imported meats—though scrapped after litigation—cost consumers and businesses billions of dollars annually.

The Political Challenges of Meaningful Reform

Despite the benefits of reforming trade and regulatory policies, such changes are unlikely to happen anytime soon. The policies inflating food prices—such as tariffs, subsidies, and regulatory barriers—deliver concentrated financial benefits to powerful interest groups, such as farmers, ranchers, and food manufacturers. For example, the Renewable Fuel Standard, which mandates the use of corn-based ethanol in fuel, benefits corn producers while raising food prices and harming the environment.

Politicians often find it difficult to oppose these special-interest groups, as they are politically influential and generous campaign donors. Meanwhile, the cost of these policies is spread out among millions of consumers, making it harder for individuals to mobilize against them. As a result, voters are often left with empty promises of quick fixes, like bans on price gouging, instead of meaningful reforms that could lower food prices over the long term.

Corporate Greed and the Grocery Market: A Nuanced Reality

The final irony is that "corporate greed" does play a role in the U.S. grocery market—but not in the way politicians often suggest. While grocery stores and food manufacturers are not profiteering at the expense of consumers, the broader food system is shaped by policies that protect powerful industries at the expense of everyday Americans. Trade restrictions, subsidies, and regulatory barriers all contribute to higher prices, benefiting special-interest groups while hurting low-income families and large households the most.

Until policymakers are willing to tackle these systemic issues, proposals like bans on price gouging will remain symbolic gestures rather than meaningful solutions. For now, relief for consumers will depend on time—as global supply chains recover and wage growth outpaces price increases. But for politicians facing an election, advocating for patience is a hard sell. The result is a political cycle that prioritizes short-term optics over long-term solutions, leaving American families to bear the cost of policies designed to protect the powerful.