Kamala Harris wants to raise prices. It is difficult to find what it agrees with

As she unveiled her most detailed economic plan this week, Democratic presidential nominee Kamala Harris promised voters to fight price hikes to rein in grocery spending.

The vice president first teased the federal ban in mid-August, prompting former President Donald Trump to attack the plan as “Soviet-style” price controls. Although Harris released more details on Wednesday as part of his 82-page economic plan, it remains unclear what price increases his administration would view as illegal “price gouging.”

“The bill would set rules of the road to clarify that large corporations cannot unfairly exploit consumers in times of crisis to drive excessive corporate profits on food and groceries,” Harris-Walz wrote in the campaign policy pitch, which has been released. Six weeks before the election.

High prices — and who is responsible for them — have become a central issue in the presidential race, as steep grocery bills frustrate Americans and retailers anticipate a holiday season marked by deal-hunting. Harris and Trump have offered their own solutions to combat inflation, as Americans continue to pay more for groceries, energy, housing and other everyday expenses.

According to the Bureau of Labor Statistics, over the past year, the price of food at home has risen just 1%. But groceries are still 25% more expensive than they were in August 2019, before prices rose due to supply chain snarls and inflation.

Voters will ultimately weigh what role government leaders should play in setting company values. Generally, Republicans support less economic regulation, although Trump has suggested limiting food imports as a way to lower grocery prices. Economists warn that the strategy will likely backfire.

Stopping price hikes is a popular idea with voters. Sixty percent of US adults support capping increases in food and grocery prices, according to an Aug. 25-27 The Economist/YouGov poll.

Still, Harris will face a tough road to pass any price-fixing legislation in Congress, and it's not yet clear how the crackdown on price gouging will work in practice.

One of the challenges around accusing companies of price gouging — and promising to address it — is that the word means different things to different people. It's usually defined in two main ways, says Rakin Maboud, chief economist at the Groundwork Collaborative, a progressive thinktank.

Economist and lawyer Use a technical definition, which refers to when companies raise prices in an emergency, such as doubling the price of bottled water during a hurricane, he said. 37 US states already have laws that prohibit price gouging during emergencies.

But some consumers and politicians have adopted a looser definition: the practice of companies charging unfair prices because those brands or retailers have the market power to do so, Maboud said.

As the prices of groceries and other goods rise in 2021 and 2022, a popular explanation has emerged: “greed inflation,” the idea that companies have exacerbated inflation by increasing the price of their products without offering consumers more, such as larger quantities or new flavors. The once-fringe theory gained mainstream support, including a study by the Federal Reserve Bank of Kansas City, which found that markups contributed “substantially” to inflation.

But many economists — and Fed Chair Jerome Powell — don't think corporate profits are responsible for inflation. Instead, they attribute the sharp rise in prices to other factors, such as a tight labor market and supply chain issues.

And whatever the term means, the companies involved have argued that they are not responsible for high grocery prices.

“It's important that we get the economic facts right and avoid political rhetoric,” Sarah Gallo, senior vice president for product policy and federal affairs at the Consumer Brands Association, said in a statement in August. “The reality is that there are complex economic factors… The industry supports the Federal Trade Commission's consumer protection mission as well as the Justice Department's already established laws that prohibit price gouging and unfair trade practices.”

Including some retail leaders the target Brian Cornell, the CEO, also pushed back against allegations of price gouging against the industry. In an interview on CNBC's “Squawk Box” in August, he said retailers lose customers to competitors if they raise prices too high.

Yet LSEG director of consumer research Jaron Martis says there are some “red flags” that should draw politicians' attention. He analyzed gross profit margins for a cross-section of firms including grocers, consumer packaged goods companies and restaurants in the years before, during and after the Covid pandemic. The metric measures the percentage of net sales that a company makes relative to its costs.

Some of these are within companies Hooks, Procter & Gamble And Domino's PizzaThey have higher profit margins than before the pandemic. He said it could reflect company-specific moves, such as Domino's selling more pizzas or Kroger's customers gravitating toward its more profitable side. Private label brands.

An antitrust challenge to Kroger's $24.6 billion acquisition of supermarket chain Albertsons has also increased scrutiny of the company's pricing practices. The Federal Trade Commission is trying to stop the merger in court, and during the trial, Kroger's top pricing executive testified that the retailer raised the price of milk and eggs more than necessary to account for higher costs.

In a company statement, Kroger described the allegations of price hikes as “confusing” and said nearly all costs of running a grocery store, including labor and transportation, have risen significantly since 2020.

“We work tirelessly to keep prices as low as possible for customers in our highly competitive industry,” the statement said.

On the other hand, Arun Sundaram, equity research analyst at CFRA Research, who covers grocery and consumer packaged goods companies, said he does not see any evidence of price hikes in the grocery industry. He said some of the higher production costs are being passed on from the companies to the customers.

Higher margins can come from a variety of factors and are not necessarily a sign of corporate greed or price gouging, he said. They may rise because companies are operating more efficiently or because the mix of merchandise they sell has changed.

Margins can also reflect a brand's strength and consumers' willingness to tolerate large markups on fashionable or popular items, such as a unique pair of sneakers or designer clothing.

But Sundaram said the controversy may have some merit in the meatpacking industry, which has faced some price-fixing lawsuits. For example, JBS' Pilgrim's Pride Corporation, one of the nation's largest chicken producers, pleaded guilty in 2021 to conspiring to fix chicken prices and pass the cost on to consumers.

Even if Harris never passes price-gouging legislation, higher cost resistance is already starting to affect prices. So far, pushback from shoppers and grocers has largely moved the needle.

Consumer staples companies eg PepsiCo And Campbell's Soup They have seen sales shrink as consumers opt for cheaper options or opt for fewer snacks. And as inflation has slowed, most have raised their prices less — and less frequently.

“You have a buyer who has seen seven or eight [price hikes] in a year, and you know they're frustrated with it,” said Steve Jurek, vice president of thought leadership at market research firm NielsenIQ.

WalmartThe country's top retailer and grocer by annual revenue, said it is cracking down on price gouging by carry-out vendors. In an earnings call last month, CEO Doug McMillan said inflation in aisles carrying dry groceries and processed foods has stabilized. He said the big-box retailer is calling on its suppliers to hold prices steady or lower.

“We have less upward pressure, but there are some who are still talking about cost increases, and we're aggressively fighting that because we think prices need to come down,” he said on the call.

To combat consumer frustration and slow sales, many food companies are scaling back discounts, according to Jurek.

During the pandemic, many manufacturers stopped offering deals as they struggled to keep shelves stocked. They didn't need to increase demand because customers were already loading their pantries and stocking up on hand sanitizer and toilet paper. Supply chain problems exacerbated the problem, and inflation increased sales without requiring people to buy more of their items.

That dynamic has now reversed for many companies. And it's not just food companies that offer deals.

the target Discounts on thousands of items. Walmart Increased short-term deals on some products, especially in the grocery category. And this week, Party City announced reduced prices on more than 2,000 items like balloons and candy as shoppers gear up for Halloween.

Even so, shoppers are unlikely to see grocery store prices cut across the board, Jurek said.

“From an economic perspective, you never want to talk about deflation — it's almost as bad as deflation,” he told CNBC.

But there are some counterexamples to company value growth. Robert Crane, JM Smucker's vice president of sales and sales commercialization, said the food company has sent “product relief” to consumers whenever possible, such as with its coffee brands, which include Folger and Cafe Bustello. In fiscal 2024, Smucker's margin for its coffee division was 28.1%, down from 31.9% in fiscal 2019.

But in early October, Smucker's plans to raise coffee prices for the second time this year, in response to rising commodity prices.

As it justifies those decisions to top retailers, the company brings in professionals who can explain the market for green coffee products, according to Crain's.

“We'll review the chart, we'll talk about the outlook, and talk about what's driving it — is it weather? Is it forecast driven?” Dr. Crane.

But that doesn't mean it's easy to stop or slow down price hikes, CFRA's Sundaram said.

He said a long list of factors led to inflation, including rising supply-chain costs, rising wages, labor shortages and poor weather in regions of the world that produce food such as corn, soybeans and cocoa. He is skeptical that either administration can come up with a quick solution.

“Because it's a complex set of factors that led to it, it's going to be a complex set of factors that will probably get rid of it as well,” he said.