[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
PANDEMIC PROFITEERS: LEGISLATION TO STOP
CORPORATE PRICE GOUGING
=======================================================================
HYBRID HEARING
BEFORE THE
SUBCOMMITTEE ON CONSUMER PROTECTION AND
COMMERCE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 2, 2022
__________
Serial No. 117-64
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Published for the use of the Committee on Energy and Commerce
govinfo.gov/committee/house-energy
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
57-562 PDF WASHINGTON : 2025
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COMMITTEE ON ENERGY AND COMMERCE
FRANK PALLONE, Jr., New Jersey
Chairman
BOBBY L. RUSH, Illinois CATHY McMORRIS RODGERS, Washington
ANNA G. ESHOO, California Ranking Member
DIANA DeGETTE, Colorado FRED UPTON, Michigan
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California BRETT GUTHRIE, Kentucky
KATHY CASTOR, Florida DAVID B. McKINLEY, West Virginia
JOHN P. SARBANES, Maryland ADAM KINZINGER, Illinois
JERRY McNERNEY, California H. MORGAN GRIFFITH, Virginia
PETER WELCH, Vermont GUS M. BILIRAKIS, Florida
PAUL TONKO, New York BILL JOHNSON, Ohio
YVETTE D. CLARKE, New York BILLY LONG, Missouri
KURT SCHRADER, Oregon LARRY BUCSHON, Indiana
TONY CARDENAS, California MARKWAYNE MULLIN, Oklahoma
RAUL RUIZ, California RICHARD HUDSON, North Carolina
SCOTT H. PETERS, California TIM WALBERG, Michigan
DEBBIE DINGELL, Michigan EARL L. ``BUDDY'' CARTER, Georgia
MARC A. VEASEY, Texas JEFF DUNCAN, South Carolina
ANN M. KUSTER, New Hampshire GARY J. PALMER, Alabama
ROBIN L. KELLY, Illinois, Vice NEAL P. DUNN, Florida
Chair JOHN R. CURTIS, Utah
NANETTE DIAZ BARRAGAN, California DEBBIE LESKO, Arizona
A. DONALD McEACHIN, Virginia GREG PENCE, Indiana
LISA BLUNT ROCHESTER, Delaware DAN CRENSHAW, Texas
DARREN SOTO, Florida JOHN JOYCE, Pennsylvania
TOM O'HALLERAN, Arizona KELLY ARMSTRONG, North Dakota
KATHLEEN M. RICE, New York
ANGIE CRAIG, Minnesota
KIM SCHRIER, Washington
LORI TRAHAN, Massachusetts
LIZZIE FLETCHER, Texas
Professional Staff
TIFFANY GUARASCIO, Staff Director
WAVERLY GORDON, Deputy Staff Director
NATE HODSON, Minority Staff Director
Subcommittee on Consumer Protection and Commerce
JAN SCHAKOWSKY, Illinois
Chair
BOBBY L. RUSH, Illinois GUS M. BILIRAKIS, Florida
KATHY CASTOR, Florida Ranking Member
LORI TRAHAN, Massachusetts FRED UPTON, Michigan
JERRY McNERNEY, California ROBERT E. LATTA, Ohio
YVETTE D. CLARKE, New York BRETT GUTHRIE, Kentucky
TONY CARDENAS, California, Vice LARRY BUCSHON, Indiana
Chair NEAL P. DUNN, Florida
DEBBIE DINGELL, Michigan GREG PENCE, Indiana
ROBIN L. KELLY, Illinois DEBBIE LESKO, Arizona
DARREN SOTO, Florida KELLY ARMSTRONG, North Dakota
KATHLEEN M. RICE, New York CATHY McMORRIS RODGERS, Washington
ANGIE CRAIG, Minnesota (ex officio)
LIZZIE FLETCHER, Texas
FRANK PALLONE, Jr., New Jersey (ex
officio)
C O N T E N T S
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Page
Hon. Jan Schakowsky, a Representative in Congress from the State
of Illinois, opening statement................................. 2
Prepared statement........................................... 4
Hon. Gus Bilirakis, a Representative in Congress from the State
of Florida, opening statement.................................. 6
Prepared statement........................................... 8
Hon. Frank Pallone, a Representative in Congress from the State
of New Jersey, opening statement............................... 11
Prepared statement........................................... 13
Hon. Cathy McMorris Rodgers, a Representative in Congress from
the State of Washington, opening statement..................... 19
Prepared statement........................................... 21
Witnesses
Alex Harman, Competition Policy Advocate, Public Citizen......... 24
Prepared statement........................................... 27
Sarah Frasch, Chief Deputy Attorney General and Director, Bureau
of Consumer Protection, Pennsylvania Office of the Attorney
General........................................................ 34
Prepared statement........................................... 36
Glenn Richey, Jr., Ph.D., Harbert Eminent Scholar and Chair,
Department of Supply Chain Management, Auburn University
Harbert College of Business.................................... 41
Prepared statement........................................... 43
Rakeen Mabud, Ph.D., Chief Economist and Managing Director of
Policy and Research and Groundwork Collaborative............... 48
Prepared statement........................................... 50
Submitted Material
Letter of February 1, 2022, by Chuck Bell, Programs Director and
George P. Slover, Senior Policy Counsel, Consumer Reports, to
Ms. Schakowsky and Mr. Bilirakis, submitted by................. 96
Letter of February 2, 2022, from America Hospital Association,
submitted by Ms. Schakowsky.................................... 100
Letter of February 2, 2022, by Doug Kantor, General Counsel,
National Association of Convenience Stores, to Ms. Schakowsky
and Mr. Bilirakis, submitted by Ms. Schakowsky................. 103
Tweet, Bob McNally, submitted by Mrs. Rodgers.................... 108
Factsheet, Food Industry Association, submitted by Ms. Schakowsky 109
Article of December 2, 2022, ``Inflation causing financial strain
for nearly half of U.S. households, poll finds,'' by Taylor
Telford, Washington Post, submitted by Ms. Schakowsky.......... 113
Letter of January 26, 2022, by Anne Reinke, President and CEO,
Transportation Intermediaries Association, to Mr. Mayorkas,
submitted by Ms. Schakowsky.................................... 115
Letter of February 1, 2022, by David French, Senior Vice
President, Government Relations, National Retail Federation, to
Mr. Pallone, et al., submitted by Ms. Schakowsky............... 116
Letter of April 3, 2020, by Mr. Pallone, et al., FTC, to Mr.
Simons, submitted by Mrs. Rodgers.............................. 120
Letter of February 2, 2022, by Neil L. Bradley, Executive Vice
President, Chief Policy Officer and Head of Strategic Advocacy,
U.S. Chamber of Commerce, submitted by Ms. Schakowsky.......... 123
Statement of February 2, 2022, from Julie Anna Potts, President
and Chief Executive Officer, North American Meat Institute,
submitted by Ms. Schakowsky.................................... 126
PANDEMIC PROFITEERS: LEGISLATION TO STOP CORPORATE PRICE GOUGING
----------
WEDNESDAY, FEBRUARY 2, 2022
House of Representatives,
Subcommittee on Consumer Protection and Commerce,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:30 a.m., in
the John. D. Dingell Room 2123, of the Rayburn House Office
Building, and remotely via Cisco Webex online video
conferencing, Hon. Jan Schakowsky, (chairwoman of the
subcommittee) presiding.
Members present: Representatives Schakowsky, Rush, Castor,
McNerney, Cardenas, Dingell, Kelly, Soto, Fletcher, Pallone (ex
officio); Bilirakis (subcommittee ranking member), Upton,
Latta, Guthrie, Bucshon, Dunn, Lesko, Pence, and Rodgers (ex
officio).
Also present: Representative Carter.
Staff Present: Katherine Durkin, Policy Coordinator; Lisa
Goldman, Senior Counsel; Waverly Gordon, Deputy Staff Director
and General Counsel; Jessica Grandberry, Staff Assistant;
Tiffany Guarascio, Staff Director; Perry Hamilton, Clerk; Ed
Kaczmarski, Policy Analyst; Zach Kahan, Deputy Director
Outreach and Member Service; Mackenzie Kuhl, Press Assistant;
David Miller, Counsel; Elysa Montfort, Press Secretary; Kaitlyn
Peel, Digital Director; Caroline Rinker, Press Assistant; Chloe
Rodriguez, Clerk; Andrew Souvall, Director of Communications,
Outreach and Member Services; C.J. Young, Deputy Communications
Director; Sarah Burke, Minority Deputy Staff Director; Michael
Cameron, Minority Policy Analyst, Consumer Protection and
Commerce, Energy, Environment; Nate Hodson, Minority Staff
Director; Peter Kielty, Minority General Counsel; Emily King,
Minority Member Services Director; Tim Kurth, Minority Chief
Counsel, Consumer Protection and Commerce; Brannon Rains,
Minority Professional Staff Member, Consumer Protection and
Commerce.
Ms. Schakowsky. The Subcommittee on Consumer Protection and
Commerce will now come to order.
Today we will be holding a legislative hearing entitled,
``Pandemic Profiteering: Legislation to Stop Corporate Price
Gouging.''
So due to COVID-19 public--the public health emergency,
members can participate in today's hearing either in person or
remotely, via online video conferencing. Members who are
participating in person must wear masks, except when you are
speaking. Staff and press who are present in the room must wear
masks.
For members participating remotely, your microphones will
be set on mute for the purpose of eliminating inadvertent
background noise. Members participating remotely will need to
unmute your microphones each time that you wish to speak.
Please note that, once you are unmuted, your microphones are--
will catch everything you say, so you want to make sure that
you go on mute when you aren't speaking.
Since members are participating from different locations at
today's hearing, all recognition of members shall be for --
let's see, I am sorry, you know my reading thing--for questions
will be in the order of subcommittee seniority.
Documents for the record can be sent to Ed Kaczmarski. He--
at the end--at the--what is this? At the email address that we
have provided to staff. All documents will be entered into the
record at the conclusion of the hearing.
The Chair now recognizes herself for an opening statement
of 5 minutes.
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
So today we will consider legislation to protect consumers
from corporate greed and price gouging related to the pandemic.
The COVID-19 Price Gouging Prevention Act will empower the
Federal Trade Commission and state attorneys general with the
enforcement tools that are needed to effectively go after price
gougers.
Throughout the pandemic health emergency, we have seen
skyrocketing billionaire wealth and corporate greed take
advantage of people's fears and uncertainty and needs. We have
seen, actually, unconscionable price hikes in everyday consumer
goods like toilet paper, face masks, and hand sanitizers, as
well as critical medical supplies like respirators and personal
protective equipment. In the last month alone, we have seen Big
Pharma increase the price of 559--554 drugs, with an average
price hike of 6.3 percent.
Pfizer has raised prices on 125 drugs, more than any other
company. This came after Pfizer reported record profits in 2021
from the--from their taxpayer-funded COVID-19 vaccines, and
after boosting their CEO pay 17 percent, to $21 million.
Johnson and Johnson executives are no different. They
raised prices according--across all consumer health products,
despite a 13.6 percent increase in the--in revenues last year,
and projected 3 to $5 billion in revenue in 2022 from their
COVID-19 vaccine alone.
Instead of giving Americans a break from skyrocketing
prices, companies are pocketing these extra--this extra cash.
Last week it was reported that UnitedHealth Group spent $5
billion buying back its own stock, and paying shareholders $5
billion in dividends in 2021. This came after it reported $24
billion in profits, the largest ever in its industry--in its
industry's history.
And there--and those--these trends aren't limited to
health-related goods and services. S&P 500 companies' 2001
(sic) earnings were up nearly 50 percent for the year, and
corporate profits--profit margins reached a 70 percent year
high.
Procter & Gamble has repeatedly raised prices on its U.S.
products during the pandemic, while raking in $21 billion in
profits in 2021, up 6 percent from the previous year.
Grocery giant Kroger posted record earnings during the
pandemic, including $132 billion in 2020, all while raising
prices, decreasing wages paid to--by--to workers by 8.1
percent, authorizing billions in stock buybacks, and its CEO
taking a $6.4 million raise--that is just the raise. And enough
is enough.
We are at war with this pandemic, war with this virus. And
during World War II, war profiteers were held accountable. The
same should be applied here today. We are absolutely at war,
and we have to take action. We will not tolerate corporate--
corporations taking advantage of American consumers by gouging,
by price gouging, especially not during a pandemic.
So the critical--this critical legislation needs to be
heard and ultimately passed.
[The prepared statement of Ms. Schakowsky follows:]
Prepared Statement of Hon. Jan Schakowsky
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. And I want to thank our witnesses for being
here, and I now recognize Mr. Bilirakis for his 5 minutes of
opening statement.
OPENING STATEMENT OF HON. GUS BILIRAKIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Mr. Bilirakis. Thank you, Madam Chair, and I thank the
witnesses, as well.
Our constituents are facing a serious problem with
inflation. And as we have seen from recent mishaps by the Biden
Administration, we need to be smarter about our policy choices
so the--OK.
First, I would be remiss if I didn't express some
disappointment that we are not joining in the theme of our
friends in the Transportation and Infrastructure Committee,
Madam Chair, who are discussing a path forward on autonomous
vehicles, which will provide a true opportunity to transform
our economy and save thousands of lives.
That said, I certainly don't want to dismiss the importance
of our discussion here today about how our constituents are
paying higher and higher prices.
I greatly respect the work we tasked the FTC with
executing. And as our comprehensive privacy and data security
draft bill demonstrates, I also believe in working closely with
the state attorneys general to help enforce a preemptive law.
But we must have an honest discussion about the real
challenges our country and constituents are facing, rather than
a bait-and-switch about where to push blame.
I know my colleagues on the other side of the aisle are
aware of inflation problems and the crunch on our supply chain,
and the President was questioned about this in his most recent
press conference. However, somehow we are supposed to be
convinced that there is widespread price gouging occurring.
Even the majority's memo for today's hearing disputes its
own thesis by footnoting an article from The Washington Post
called ``The Inflation-Causing Financial Strain for Nearly Half
of U.S. Households.'' That article doesn't reference price
gouging once. Instead, it attributes increased prices to
surging inflation, booming consumer demand, and crippling--
crippled supply chains. Not that price gouging is not
occurring, but we have to address the real problems. The
article even goes on to say--and I quote--``The picture is
further complicated by widespread labor shortage and the
revolving door of the pandemic.''
The legislation brought forth by the Chair today, which
would give, again, more new authorities--broad new authorities,
in my opinion--to the FTC to go after price gouging during the
public health emergency, does not define what excessive price
gouging is, and does not adequately account for any of the
causes for increased prices.
The legislation is missing a full account for the supply
and consumer demand of certain goods: the bottlenecking of a--
our ports and distribution centers, current labor shortages, or
even the organized crime ripping goods right off freight rail,
like we are seeing in cities like Los Angeles.
This committee should seek to avoid unintended consequences
on businesses when protecting consumers, and thus I can't
support this legislation in front of us today, and we shouldn't
let it divert our attention from President Biden's big
government spending programs and over-regulation that are
crushing our economy and keeping it from fully recovering.
The fact is, I am not sure the American public buys into
the narrative, either. They know that honest local mom-and-pop
stores are doing their best with whatever products they can get
their hands on. Add to that a recent article from the New York
Post reporting the results of a study that found 69 percent of
respondents disapprove of how President Biden is responding to
the inflation crisis, with only 29 percent approving.
This committee has a duty to protect consumers and promote
commerce. We have supported providing FTC with the tools they
need to be successful, like when we gave them first-time civil
penalty authority to go after COVID-19 scams. But giving
consumers a false protection here, without properly identifying
actual harms, we will give the FTC chair more unchecked powers
at a time when her actions should be--should receive more
sunshine. Where is the sunshine in this case?
I am hopeful this committee can get back to the business of
how to grow our economy with innovation springing from clear
regulatory frameworks, like for AVs and artificial
intelligence, and protect consumers with clearly defined
authorities for FTC, like we do in our privacy and data
security draft.
I know we can do better.
[The prepared statement of Mr. Bilirakis follows:]
Prepared Statement of Hon. Gus Bilirakis
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Bilirakis. With that, Madam Chair, thank you for giving
me the opportunity, and I thank the witnesses for being here
again, and I look forward to your testimony. Thank you so much,
and I yield back.
Ms. Schakowsky. I thank the gentleman, and just want to
point out I think that we are making some real progress on the
AV issue, and I certainly agree that we need to be working on
that promptly. So, yes, it is good news.
And at this point I want to welcome the Chair of the full
committee, Mr. Pallone, for his 5 minutes of opening statement.
OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Madam Chair. I mean, I--look, I--
certainly, we can work on AVs, but, I mean, I got to be honest
with you. I think AVs are not the answer to inflation, and
price gouging, and our economic problems. It is certainly
something we can do, but it is not something that is very--that
is going to solve that problem or any of those problems.
My concern right now--and I don't want to go into it --I
just get the impression more and more--and I hope it doesn't
continue to the end of this session--that, you know, the answer
to everything that we talk about is no.
You know, we talk about the COMPETES Act. We were at Rules
yesterday. I have been hearing for the last year or so from the
Republicans about China, and the competition from China. But
yes, when we were at the Rules Committee yesterday, ``No, no,
we can't do this bill, this bill is no good, this isn't going
to solve the problem.''
Now we talk about price gouging. ``Well, I can't support
this bill because this bill isn't going to solve the price
gouging problem.''
I mean, I just hope I am wrong, and that we just don't get,
between now and the election, nothing but ``We can't do this,
we can't do that.'' It is just sad, because I want to work in a
bipartisan basis on everything, even AVs. But we are just--you
know, we are really not getting much cooperation from the other
side, in all honesty.
Now let me just say that we are--we still face major
challenges with our economy, clearly, but we are seeing major
signs of economic recovery.
Last year, overall gross domestic product grew 5.7 percent,
the highest annual rate in nearly 4 decades. The economy added
6.4 million jobs, the largest annual increase in American
history. That historic job creation reduced unemployment for 15
percent at the beginning of last year to just 3.9 percent
today. Wages are increasing. We did have the American Rescue
Plan and the bipartisan infrastructure bill--I say bipartisan,
but I think there were only 12 House Republicans that supported
it--and we do now lead the world on our economic pandemic
recovery.
But our economy, while it is recovering, it is true that
American families are still struggling to make ends meet.
Rising prices for food and other household necessities. But a
lot of these price increases are a result of the ongoing
pandemic. That is why we are taking action later this week to
pass the America COMPETES Act. I hope we do get some Republican
support. That deals with the supply chain issue and shortages
of critical goods, and tries to have more goods made here and
today, made here in the USA. And yes, reduce --you know, make
us more competitive with China and other countries.
But the fact of the matter is there are price--there is a
lot of price gouging taking place. Some businesses are simply
price gouging consumers. And these actions have been constant
throughout the pandemic, evolving with each phase, and
disproportionally harming the most vulnerable when they can
least afford it. And opportunist price gouging initially
focused on the sudden need for items like personal protective
equipment and hand sanitizer, but more recently we have heard
reports of overpriced COVID test kits and face masks, and now
pandemic profiteering has expanded to virtually all types of
consumer goods.
And I do think that corporate greed is motivating large
companies to use the pandemic and supply chain issues as an
excuse to raise prices, simply because they can. And a lot of
executives brazenly boast to investors about raising prices on
consumers without consequences. And these executives are saying
they are going to continue to do so.
The legislation under discussion today is basically
designed to bring this outrageous price gouging to an end. The
Act is a straightforward solution to the immediate problem. It
is introduced by Chair Schakowsky and--along with myself,
Representatives Cicilline, and Nadler. It would give the FTC
the authority to seek civil penalties from those price gouging
during the COVID-19 pandemic. States attorneys general would be
able to enforce the legislation without losing any of their
existing authority under state law.
And the fact of the matter is there is no Federal price
gouging law today. While most states do have some kind of
authority, those laws are inconsistent, and many fail to
address the unique circumstances of the COVID-19 pandemic. So
Congress has to give the FTC and states the authority
enforcement tools they need to go after companies that are
gouging consumers. It is mostly large companies.
So I look forward to the discussion today, and I hope we
can find bipartisan agreement to act on this important
legislation that puts consumers first.
[The prepared statement of Mr. Pallone follows:]
Prepared Statement of Hon. Frank Pallone, Jr.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Pallone. And with that, Madam Chair, I yield back.
Ms. Schakowsky. The gentleman yields back, and the Chair
now recognizes the ranking member of the full committee, Mrs.
Rodgers, for 5 minutes.
OPENING STATEMENT OF HON. CATHY McMORRIS RODGERS, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
Mrs. Rodgers. Thank you, Madam Chair. Good morning, and
welcome to our witnesses.
American families are feeling the pain of one-party rule.
President Biden's inflation has hit a 40-year high. Prices have
risen across the board, from the pump to the grocery store and
everything in between. I just heard a mom in my district who is
struggling to find baby formula. She said, ``The supply chain
crisis is really hurting my family in being able to find
food.''
I appreciate the comments of the chairman, but I think the
frustration on this side of the aisle for many Republicans is
that we continue to see a go-it-alone approach: bills that are
being put together in the Speaker's office without input from
the Republicans. And it is--the fact of the matter is the
Democrats have the votes. They are running the show. And we see
record spending, we see top-down mandates, COVID-19
restrictions, surging energy costs that are making rising
prices and empty shelves worse. It is all connected.
To be transparent with Americans about rising prices,
today's topic should be focused on how to reverse the damage
that is resulting in supply chain and inflation crises.
Unfortunately, what we see is a diversion. It is a deliberate
diversion on the root issues, on the price of--on the issue of
price gouging.
Standing up against those who have profiteered during the
pandemic is a bipartisan issue. Last Congress I joined with
Chairman Pallone and Subcommittee Chair Schakowsky, along with
then-Ranking Member Walden, in sending a letter to the FTC. The
letter requested biweekly updates from the FTC on their
tracking of illegal behavior during the pandemic, like price
gouging and scams. And I will be entering that letter into the
record.
So a question is, if the majority believes this is a top
concern, why don't you restart the FTC updates this Congress,
and why don't you consider our suggestions from two years ago
on how to make this legislation better?
Again, we see a go-it-alone approach. They seem to be more
comfortable in the partisan solution.
As I said, today's hearing is a deliberate diversion from
the inflation crisis.
The COVID-19 Price Gouging Prevention Act still contains
the flaws it did two years ago. For instance, it fails to
define what constitutes an excessive price increase, despite
many states having established their own laws specifying an
allowable percentage, while taking into account supply chain
factors.
This proposal is supposed to be targeting the goods and
services during the public health emergency that are the most
vulnerable to gouging, but it fails to address the real issues
for spiking prices. It doesn't take into account when schools
are forced to shut down. Many parents leave the workforce,
unable to participate in the economy. It doesn't address
workers being forced out of their job for refusing to submit to
vaccine mandates. It doesn't take into account that we are in a
very different stage of this pandemic than we were two years
ago. It doesn't take into account hundreds of billions of
dollars that Democrats continue to pump into the economy,
causing consumer demand to spike, even as fewer products are
available due to supply chain strains and workforce shortages.
The record spending by the Federal Government only
exacerbates the inflationary death spiral. Last Congress we
were able to enact bipartisan, bicameral legislation for the
first offense penalty authority to tackle COVID-19 scams. It is
disappointing that that legislation failed to be included
today.
Let's work together. Let's work in--together. We all agree,
we want America to compete, America to lead.
My colleague brought up the issue of autonomous vehicles.
Today Transportation and Infrastructure Committee is having a
hearing on autonomous vehicles. One month from now, the
National Institute of Standards and Technology within the House
Science Committee has--which has jurisdiction over--is holding
a workshop on autonomous vehicles. We are talking about price
gouging.
I was pleased to hear the subcommittee chair say that she
is open to autonomous vehicle legislation. Four years ago we
passed bipartisan--Republicans and Democrats came together and
passed--legislation to lay out a national standard for--a
framework for autonomous vehicles. We need that in order to win
the future. We hear a lot about electric vehicles, but we need
the autonomous vehicle language, the framework. That is our
future, and America should be leading in developing this
technology, rather than allowing China to continue to dominate,
and test, and move forward.
My colleagues and I are ready to work on real solutions,
whether it is supply chains, inflation, innovation. Let's win
the future. Let's work together. I yield back.
[The prepared statement of Mrs. Rodgers follows:]
Prepared Statement of Hon. Cathy McMorris Rodgers
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. The gentle lady yields back, and the Chair
would like to remind all members that, pursuant to committee
rules, they are--that any written opening statements shall be
made part of the record.
And now it is my pleasure to introduce our witnesses for
today's hearing.
We have Alex Harman, Competition Policy Advocate at Public
Citizen, and who is here remotely.
We have Sarah Frasch, who is Chief Deputy Attorney General
and Director for the Bureau of Consumer Protection at the
Pennsylvania the Office of the Attorney General.
We have Dr. Glenn Richey, Jr., Harbert Eminent Scholar and
Chair for the Department of Supply Chain Management at Auburn
University.
And Dr. Rakeen--let's see--Mabud, who is Managing Director
of the--of Policy and Research, and Chief Economist at
Groundwork Collaborative.
At this time the Chair will recognize each of the witnesses
for 5 minutes to provide their opening statement.
Before we begin I would just like to explain the light
system for those who don't know it. And for those who are
watching, who are participating remotely, as well. The--at
first, the--in front of you will be--and you will see on the
screen a series of lights. The light will initially be green.
The light will turn yellow when you have one minute remaining,
and please begin to wrap up your testimony. And at that point
the light will turn red when those 5 minutes have expired.
For the witnesses testifying remotely, there is a timer on
your screen that will count down your remaining time.
So, Mr. Harman, you are recognized now for 5 minutes.
STATEMENT OF ALEX HARMAN, COMPETITION POLICY ADVOCATE, PUBLIC
CITIZEN; RAKEEN MABUD, PH.D., MANAGING DIRECTOR OF POLICY AND
RESEARCH AND CHIEF ECONOMIST, GROUNDWORK COLLABORATIVE; SARAH
FRASCH, CHIEF DEPUTY ATTORNEY GENERAL AND DIRECTOR, BUREAU OF
CONSUMER PROTECTION, PENNSYLVANIA OFFICE OF THE ATTORNEY
GENERAL; AND GLENN RICHEY, PH.D., HARBERT EMINENT SCHOLAR AND
CHAIR, DEPARTMENT OF SUPPLY CHAIN MANAGEMENT, AUBURN UNIVERSITY
HARBERT COLLEGE OF BUSINESS
STATEMENT OF ALEX HARMAN
Mr. Harman. Thank you, Chairwoman Schakowsky, Ranking
Member Bilirakis, and other members of the subcommittee, for
the opportunity to testify before you in person on corporate
price gouging and profiteering during the coronavirus pandemic.
I am Alex Harman, Competition Policy Advocate for Public
Citizen's Congress Watch Division.
We are a national nonprofit organization with more than
500,000 members and supporters. For the past 50 years we have
represented the public interest on a broad range of issues,
including consumer protection and consolidation of corporate
power.
I think it is important to first explain what price gouging
is. For those of us who remember our basic economics classes,
we learn that supply and demand are supposed to result in a
market-based price that reflects what consumers are willing to
pay. When that price rises too high, a competitor will respond
with a lower price, or consumers will find an alternative.
Price gouging is where that supply and demand process is
distorted by an emergency situation that puts the seller in the
position of dictating a price above market because consumers
have no other choice but to pay.
At its best, it is exploitive of consumers across the
board. But at its worst, it specifically targets people in
their most vulnerable, making conditions even worse for them.
Unfortunately, even before the country faced lockdowns,
closures, and shortages of essential goods due to the
coronavirus pandemic, price gouging was already underway.
In fact, by the time the first U.S. death of--from COVID-19
had been reported, price gouging on sales of protective masks
on Amazon had already resulted in warnings to third-party
sellers against engaging in the practice. Then brick and mortar
retail stores such as Target, Costco, and Kroger began to
impose quantity limits on products such as toilet paper, hand
sanitizer, and disinfectants. But where physical stores had
empty shelves, online sellers charge excessive prices.
As the pandemic worsened, so too did price gouging. Over
nearly two years, price gouging has shifted to a broad array of
products and, unfortunately, normalized. Consumers and
policymakers cannot be blamed for wondering if price increases
on essential products are at least in part due to price
gouging.
Many Americans experience the pandemic facing unemployment,
financial hardship, or in dangerous conditions on the front
lines of the health care and service industries. However, for
the biggest companies, the pandemic proved to be a goldmine of
increased profits and significant growth. Amazon, Walmart,
Kroger, and many others experienced significant price increases
or profit increases in 2020. But in the second year of the
pandemic, sales and profits continue to rise to record levels
for retailers. This reality of massive corporate profits has
been true for consumer packaged goods and food manufacturers,
as well.
In addition to record sales and profits, these companies
have no shame about their plans to raise prices. In fact, they
have been bragging to investors about how they are able to
raise prices without driving down sales. Procter & Gamble's
Chief Financial Officer told investors that the company has not
seen any material reaction to price increases from consumers,
and Kroger's CFO told the their investors, ``We have been very
comfortable with our ability to pass on the increases that we
have seen to this point.''
These companies are only making more profit as they raise
prices in the face of higher costs. Is it any wonder, then,
that the companies are so eager to raise prices?
In a recent piece by former U.S. Labor Secretary Robert
Reich, he argues that these companies are exploiting higher
costs as an excuse to make even bigger profits. It is hard to
disagree.
Corporate price gouging is unacceptable, and should be
stopped. Unfortunately, there is no Federal price gouging law.
So H.R. 675, the COVID Price Gouging Prevention Act, the
subject of this hearing, was introduced by Chairwoman
Schakowsky to establish a Federal price gouging law in response
to the initial reports of pandemic profiteering and price
gouging.
As Members of Congress consider efforts to stop price
gouging, it is worth examining state laws and where a Federal
statute would be useful to protect consumers. Unfortunately,
where state laws prohibiting price gouging exist, there is a
wide variance between definitions and applicability. The lack
of a Federal law, the inconsistency or absence of laws in the
states, combined with online shopping that transcends state
borders has created gaps in protection from price gouging, and
has led to a potential for state laws to be ineffective at
addressing the practice online.
Price gouging is an exploitive business practice that
manipulates markets and takes advantage of people at their most
vulnerable and desperate. A Federal statute that augments state
laws is needed to address this problem. It should be in place
as soon as possible to help stop price gouging now, and so that
the next emergency, big or small, does not result in the
exploitation we have seen in the last two years.
During emergencies people are scared, desperate, and in
need. Price gouging is an insidious exploitation of the most
vulnerable. There is no excuse for the most profitable
countries--companies preying on consumers.
Thank you again for this opportunity to testify on this
important topic.
[The prepared statement of Mr. Harman follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. Thank you very much.
And now, Ms. Frasch, you are recognized for 5 minutes.
STATEMENT OF SARAH FRASCH
Ms. Frasch. Good morning, Chair Schakowsky, Ranking Member
Bilirakis, members of the committee. Thank you for inviting me
to testify today. My name is Sarah Frasch, and I serve as the
director of the Bureau of Consumer Protection for the
Pennsylvania Office of Attorney General.
Our section is charged with civil enforcement of
Pennsylvania's consumer protection laws, including
Pennsylvania's Price Gouging Act. In general, we work directly
with consumers and businesses to both mediate disputes and to
bring legal actions, when necessary, to stop unfair and
deceptive business practices. We obtain restitution and other
relief for consumers, and appropriate civil penalties.
So turning specifically to price gouging, we have our own
Price Gouging Act in Pennsylvania, which was passed in 2006. It
has given our office an important tool in our toolbox to help
protect consumers when disasters strike.
Ms. Schakowsky. Ms. Frasch, could you speak up just a
little bit more?
Ms. Frasch. Sure.
This Act protects consumers from unconscionably excessive
price hikes, beginning when the governor declares a state of
disaster emergency, and then continuing through 30 days after
the termination of the state of emergency. Generally,
unconscionably excessive prices in violation of the Act include
price increases of 20 percent or more during the applicable
time period, when compared to the price 7 days prior to the
state of emergency declaration.
Our Act in Pennsylvania gives our office the responsibility
to enforce the law with civil penalties of up to $10,000 per
violation. While this law is limited in scope, it does help us
both combat and deter price gouging during disaster situations,
including during the pandemic.
In March of 2020, immediately following our governor's
declaration of the state of emergency due to the pandemic, we
set up a task force within our bureau to accept, investigate,
and act on the tips and complaints of price gouging made by the
public. Most of those tips covered different consumer products,
but we found most prevalent were PPE equipment, hand sanitizer,
bottled water, things like that--face masks.
One example of a tip we received was from the husband of a
nurse in Bucks County, Pennsylvania. He was concerned that his
wife and her coworkers didn't have the appropriate access to
PPE, such as N95 masks, during the first weeks of the pandemic.
And so one of his employees was in a local pharmacy filling a
prescription, saw that the store had N95 masks available, and
she purchased them. She was able to get 5 masks and was charged
$20 per mask.
For context, before the declaration was issued, N95 masks
could be obtained for less than $1. And even factoring in the
increase of the cost and the supply incurred by the pharmacy,
that price to the consumer was significantly increased, in
clear violation of our statute. And we were able to contact
that store and, as a result, that buyer received a refund of
the full amount that she was overcharged, and the store was
able to bring back the prices to reasonable levels, preventing
other consumers from being harmed.
So this--the declaration remained in effect from March 2020
through June 2021. And at that time we received between--or
around 6,200 consumer complaints of price gouging from all over
Pennsylvania.
You know, some of these were actually mistakes by
businesses. They didn't understand the law, perhaps, and they
corrected their action after we approached them. Others fell
outside the scope of our statute because maybe they were
business-to-business transactions that didn't cover household
use goods. Many of these cases also involved increased costs to
the local stores that they themselves passed on to the
consumers, which is actually legal under our statute.
But we did not hesitate to use our enforcement under the
Act, and we were able to issue 523 cease and desist letters to
individuals and entities. We issued 241 subpoenas to gather
more information. We filed two lawsuits for violations of the
Act. We also entered into 29 settlement agreements, separate
from any litigation, and we resolved those, and ultimately we
were able to return $73,272 in consumer restitution to make
those consumers whole.
We also focused on a multi-state effort to engage with
major e-commerce platforms such as eBay, Amazon, and Facebook,
and others in order to enhance [inaudible]. As a result of
those efforts, we were able to identify additional price
gouging, took appropriate action, and obtained refunds for
consumers, and also had those platforms take down violations of
the Act. And we were able to present presentations to trade
groups, consumer advocates, and other retailers to help educate
and inform what violations may be.
So as I mentioned, we have some limitations to our Act.
Right now it is not currently----
Ms. Schakowsky. Your time has expired, so wrap up right
now.
Ms. Frasch. Sure, thank you. We have no protection
currently for price gouging in place in Pennsylvania.
[The prepared statement of Ms. Frasch follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. OK, thank you so much. I really appreciate
your testimony.
And now let me welcome Dr. Richey for 5 minutes for his
opening statement.
STATEMENT OF GLENN RICHEY, Ph.D.
Dr. Richey. To be part of this process. My name is Glenn
Richey. As mentioned, I am the Harbert Eminent Scholar and
Chair of the Department of Supply Chain Management at Auburn
University, where we host the--or hold the number seven
undergraduate program in supply chain management in North
America, and also have a top ten research program globally in
supply chain management logistics.
I am also currently the Editor in Chief, or Co-Editor in
Chief, of the Journal of Business Logistics, which is largely
considered the top journal in supply chain management and
logistics worldwide.
My other hat that I wear is in the Research Director
position of the Center for Supply Chain Innovation. And so I
can talk to issues with technology, if you like.
I have about a decade of experience in practice in
wholesaling and manufacturing, and have done now, for about 20
years, research in international business, supply chain
management, and logistics and marketing.
I should also add that I have experienced a lot of
different disasters over the course of my life, living in a lot
of states around this country, and that includes tornadoes in
Ohio and Oklahoma, floods in Tennessee, hurricanes in Alabama,
the heat waves in Maine, and storms in Texas, ice storms in
Texas. So you probably don't want to live next to me, but I
have experienced a lot of the post-crisis behavior which seems
to be what we are talking about in this resolution.
The H.R. 675 resolution is interesting. I will say that I
got confused about it quickly, because price gouging typically
occurs at the retail level during these crises, and it tends to
be relatively small players. Corporate strategy level price
gouging does not happen to the degree that has been suggested
in the document, and that is because it is quite obvious to
see, it is obvious to see to government and to business.
I dug a bit deeper, as well, to look into the America
COMPETES Act. And in reading that Act I was concerned that
Congress may not understand the complexities of supply chains
and the things that we have to deal with. So I have added a
couple of comments in my written testimony to kind of flesh
those things out. And later on, if the committee would like
more documentation or things that, like, explain what we do, I
would be happy to get into that and follow up with those
materials.
There are several specific issues that concern me about the
current legislation, the current discussion, and that has to do
with a couple of different things, one being the local level
concern. And we are talking about corporate level. The other
being that I took some time last night to look at the supply
chain management publications that are out there, and found
almost no discussion of price gouging over the years of 2020
and 2021.
So I am here to address some of the big concerns on the
list, and I will list those for you. There are eight.
One is specificity in the document. I don't know what
``unconscionable,'' ``excessive,'' or ``increased prices,''
``unreasonably,'' or ``grossly exceeds'' is. There is no kind
of barrier on what those things are.
There is no emphasis in facing what contribution margin is,
which really defines what companies make. It is the difference
between what their costs and what their prices are.
I am worried about the passage of time. February of 2022 is
dramatically different than the economic concerns of January of
2020, and so that seems a bit strange to me.
I am concerned that the similar products and substitute
products in the legislation will be compared based on their
pricing, and not on their cost or their quality or their value.
I am worried that the term ``corporate'' could be extended
directly down to small businesses, local mom-and-pop grocery
stores that are struggling mightily in this time period, and
would even put them in a difficult--more difficult position
than they are now.
I am concerned that the government at the Federal level
will not be able to handle monitoring the supply chain because
of the level of complexity, and I am happy to talk about that.
I also think that there are a number of things in this
legislation that would be unenforceable. When we talk about
companies that have raised prices during the pandemic, just
about everyone should be able to show additional cost, loss of
control, negative impacts on profit, lost sales, and additional
risks that have been incurred that will drive prices up
naturally in the market economy.
And the other thing is first responders are the ones that
typically deal with these problems. It is the people that are
within the states and within the communities, and I am not
certain how D.C. handles that problem.
Finally, I would like to say that, you know, we have a
number of movements in price that happen in the supply chain
and across the economy. Companies may raise prices to cover
fixed costs or to add a replacement supplier, incorporate
rising transportation costs--sustainability program that was
stopped during the pandemic, to respond to energy crisis, and
maybe just to adjust to existing or new government
replacements.
So in summary, there is a lot of issues to worry about
here, to be concerned about here. But I thank you for having
me, and I am happy to help the committee if I can.
[The prepared statement of Dr. Richey follows:]
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Ms. Schakowsky. Thank you.
And now I invite Dr. Mabud to give his statement for 5
minutes.
STATEMENT OF RAKEEN MABUD
Dr. Mabud. Chairwoman Schakowsky, Ranking Member Bilirakis,
Chairman Pallone, Ranking Member McMorris Rodgers, and members
of the subcommittee, thank you for inviting me to testify
today. My name is Rakeen Mabud, and I am the chief economist
and managing director of policy and research at the Groundwork
Collaborative.
Groundwork is an economic policy think tank based in
Washington, DC., dedicated to advancing a coherent economic
world view that produces broadly shared prosperity and
abundance for all.
I am grateful to the subcommittee for holding this hearing
about the critical issues of pandemic profiteering and price
gouging. My testimony will focus on three key points.
First, pandemic profiteering is widespread, and is taking a
massive toll on consumers, workers, and small businesses, all
while corporate executives and shareholders are enjoying record
profits.
Second, today's profiteering is the direct result of
decades of policy choices, resulting in an imbalanced and
brittle economy that allows mega-corporations to profit from
crises.
Third, wage increases for workers are not a driver of
current price spikes.
Big corporations have taken advantage of shifting demand to
raise prices on essentials like COVID tests and masks. Just
last month, after the CDC updated its guidance for the public
to ``wear the most protective masks you can,'' producers of
critical PPE immediately cashed in.
In early October a 50-pack of Kimberly-Clark N95 masks cost
$23.19. By mid-January, the same box costs $57.15. In Kimberly-
Clark's earnings call last week, the CEO noted that ``While our
overall financial results were disappointing, we took decisive
action to offset the impact of higher costs with significant
pricing actions.'' On the same call, he said that Kimberly
Clark would allocate more cash to shareholders through
dividends and buybacks. In other words, even though the company
was experiencing a disappointing quarter, Kimberly-Clark CEO
was confidently telling shareholders that he would be able to
deliver their payouts, all on the backs of consumers paying
higher prices for essential items.
Unfortunately, profiteering is not limited to pandemic-
specific goods. Take Procter and Gamble, a Fortune 500 company
with a chokehold on diaper production and more than a quarter
of the global market on laundry products. In the company's
January 19th earnings call, their CFO announced price increases
in all ten of their product categories in 2021, with more to
come in 2022. He stated, ``Building on the strength of our
brands, we are thoughtfully executing tailored price increases.
We see a lower reaction from the consumer in terms of price
elasticity than what we would have seen in the past.'' In other
words, the consumer is--the company is taking advantage of
consumers' basic needs because demand is relatively
unresponsive to price hikes for goods like diapers.
The ability for--to raise prices without seeing consumer
demand drop, combined with significant market share, gives
companies like Procter and Gamble free rein over price
increases and ever-increasing profit margins, especially when
they can blame inflation for the rising prices.
Corporations have this kind of power because of Wall
Street's ruthless pursuit of efficiency and short-term profits
that ushered in a deeply concentrated economy that leaves
consumers vulnerable to profiteering and price gouging. The
unending quest for maximizing short-term returns has resulted
in deregulation of everything from shipping to rail. As
corporate executives prioritize a lean, just-in-time supply
system that eliminated resiliency and increasingly relied on
precarious labor, our economy was left more vulnerable to price
gouging and pandemic profiteering.
Corporations have been able to keep costs low and reap
profits without any risk of being undercut by competition, all
at the expense of stability and reliability for consumers and
small businesses. While concentrated market power isn't the
only reason for our current plight, it plays a critical role in
propping up an imbalanced economy that prioritizes profits over
a functioning system.
Finally, I would like to address a common misperception
about the role of worker wages on the price hikes. Recent
research demonstrates that there has been no correlation
between price increases and wage increases just since December
2020. In short, there is absolutely no evidence to suggest wage
increases for workers are to blame for the price increases we
are seeing today.
There is a clear path forward for Congress.
First, Congress should take up H.R. 675, the COVID-19 Price
Gouging Prevention Act. This legislation would provide--would
create a clear framework to identify and prohibit profiteering,
and provide the Federal Trade Commission, as well as state
attorneys general, the power to protect consumers from
corporate price gouging.
Second, the committee can continue to ensure that the FTC
investigates anti-competitive, deceptive, and unfair business
practices to protect consumers and encourage competition.
The best path towards an inclusive, resilient economy is to
support policies that foster competitive markets, where
consumers, working people, and smaller competitors all have
meaningful bargaining power. Smart investments, coupled with
regulatory safeguards will reduce costs and prices in the long-
run to ensure that no one is left behind during the recovery
period and beyond.
Thank you, and I look forward to your questions.
[The prepared statement of Dr. Mabud follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Schakowsky. Thank you very much. We have now concluded
with the witnesses' opening statements. At this time we will
move to member questions.
Each member will have 5 minutes to question our witnesses,
and I will start by recognizing myself for 5 minutes.
The effect of COVID-19 pandemic, of course, has hurt and--
felt especially hard on those people who are low-income and
working people. Corporate price increases are no exception.
Thankfully, we are seeing long-overdue wage growth in our
country, and increased worker bargaining power. But these gains
are threatened by rising prices.
Some of my colleagues on the other side of the aisle have
argued that increased wages could produce a ``wave--wage price
spiral,'' where high prices cause higher wages, while then--
which then leads to even higher prices from--for--from more--
you know, for--continues the cycle. But others, like the
Federal Trade Chair--Federal Reserve Chair Powell, disagrees.
So Dr. Mabud, in your research, have you found that rising
wages to--are a--to--are troubling?
Do you believe that they are responsible at all for the
price increases that we are seeing today?
Dr. Mabud. Thank you, Chair Schakowsky. It is crystal clear
that wages are not the main driver of rising prices right now.
Since the start of the pandemic there has been absolutely
no relationship between rising wages and rising prices. While
there has been a link historically, that is not the case today.
In fact, the sectors of the economy that saw the highest price
increases are not correlated with where we've been seeing
significant wage growth.
But the other important thing is that too many workers have
been facing rock-bottom wages for decades. The secular decline
in unionization has really harmed many workers' access to
economic mobility and security, and the fact that we are seeing
an increase in wages for especially the lowest income in our
economy in the midst of a crisis is, frankly, a real testament
to the importance of the Federal investments that Congress made
throughout the pandemic.
Ms. Schakowsky. Thank you. So do you think, then, there are
any risks to working families from trying to combat rising
prices by limiting wage growth?
Dr. Mabud. Absolutely. Tamping down on wage growth and
demand is the last thing that working families need in the
midst of an unprecedented health and economic crisis.
Increased demand is actually a really strong signal that
families are weathering the storm, and it suggests that we are
going to come out of this crisis with a stronger foundation for
our economy, one that is broad-based and inclusive.
Raising interest rates or other actions that will stifle
demand or wage growth would harm exactly the people who are
currently bearing the brunt of rising prices: families and
small businesses around the country.
Ms. Schakowsky. So let me ask you, finally, Dr. Mabud, in
your research what evidence have you found of corporate price
gouging?
Dr. Mabud. So my team and I have combed through hundreds of
earnings calls across a broad range of sectors, which has
really given us a window into what CEOs across the economy are
thinking. And what we are seeing is that, in sector after
sector, in company after company, corporations are jacking up
prices on consumers and using concerns about inflation as cover
to do so.
We see that in Kimberly-Clark taking advantage of the
pandemic to raise prices on masks. We see Procter and Gamble
using the fact that they sell essential goods that families
depend on, like diapers, to raise prices in this moment of
crisis. And we even see companies like McDonald's raising
prices on consumers, even as they enjoy massive increases in
sales.
So in short, this is a really broad-based problem. It is,
unfortunately, not limited to a specific sector of the economy.
Ms. Schakowsky. Thank you.
Mr. Harman, why is legislation to empower the FTC and
states--state attorneys general critical to stop price gouging?
Mr. Harman. Thank you. Well, there is no Federal law, so
the FTC has no authority to take any action. It is not
considered illegal. They can collect information, but they
can't take action.
And in--there are states that have no protections, as well.
And so there is a lack of overall protection.
And then there is this larger question of where there is
price gouging online, and on national marketplaces, the--
whether the state laws can even cover those issues.
Ms. Schakowsky. Thank you. We saw Amazon raise prices at
the beginning of the pandemic and, you know, really hurting
consumers.
So my 5 minutes have expired. And now I welcome the ranking
member for his questions for 5 minutes.
Mr. Bilirakis. Thank you very much, I appreciate it, Madam
Chair. Thank you, and I want to thank the witnesses, as well.
Our constituents are facing a serious problem with
inflation. And as we have seen in recent mishaps by the Biden
Administration, we need to be smarter, folks, about our policy
choices, so the situation does not worsen.
One of the contributing factors to higher prices and fewer
goods is the bottleneck at our ports and distribution centers
that are causing a delay in goods from reaching our
constituents. That is why I was very glad to see our governor,
Governor DeSantis, offer up the ports of Florida to alleviate
the bottlenecking in California, where cargo ships wait in the
water, they are waiting to unload their cargo.
I just want to reiterate his words, and say Florida is here
to help. So I want everyone to know Florida is here to help
with this issue.
Sadly, it appears that President Biden is no closer to
solving this problem. The Transportation Intermediaries
Association recently quoted to Homeland Security Secretary
Mayorkas regarding their dire concern about the vaccine
mandates, which recently were ruled, as you know,
unconstitutional. But they will still take their toll, since
DHS is applying the mandate to international truckers--
hopefully, not for long--even after U.S. truckers were deemed
exempt because of the nature of their work.
So my question is to Dr. Richey.
Dr. Richey, if the Administration is going to limit the
truck drivers available for transport, and we already have a
truck driver shortage here in the United States, shouldn't the
White House set up some sort of framework, such as autonomous
systems--that I understand are available--that will keep these
products moving?
In addition to the effect on consumers, this could also
greatly impact suppliers, and cause them to go bankrupt. Can
you explain how new technologies on the market may help
alleviate these issues?
Again, the question is for Dr. Richey.
[Pause.]
Mr. Bilirakis. I am not sure if he is able to communicate
with us, Madam Chair.
Dr. Richey?
Dr. Richey. I am here. Yes, sorry.
Mr. Bilirakis. Oh, there he is. OK. Very good.
Dr. Richey. Yes, thank you. Thank you very much.
Mr. Bilirakis. Thank you.
Dr. Richey. It is a very interesting question. We have the
RFID lab here at Auburn University that does a number of
different research activities around high-level technologies in
the supply chain, and business overall.
Certainly, we have some advancements that we are working on
in over-the-road trucking. There is still work to do in that
arena to get those vehicles to where they do what we want them
to do.
And as you know, every intersection in this country is
different, and so the vehicles have to be able to handle those
contiguous [inaudible] and differences.
There are also other things that we can potentially do.
Automated material handling equipment is heavily used in
international ports, and it is not used to the same degree in
the United States. That would certainly be something that we
could work for and get into place in the Ports of Los Angeles
[inaudible] that currently are bringing in about 40 percent of
all the international inventory and supplies that we
[inaudible], and are potentially impacting every citizen in the
United States.
Outside of that, there are things that we can do with
drones related to nearby delivery. But currently those
situations are restricted by both state and Federal law. So
freeing up some of the legislation that has made it difficult
to implement these things would help.
And then we can also think about information technology. We
have been doing tests with RFID to track--we have been doing
tests with blockchain technology that allows us to track
transactions [inaudible], and motivating those things to move
forward may help some with the crisis.
But, certainly for us, the labor crisis is still the issue.
We need people to go back to work.
Mr. Bilirakis. Thank you, Doctor.
Now I would like to read a quote from Jason Furman, and--
the former chair of the Council of Economic Advisers under
President Obama. He states, and I quote, ``The current
inflation has many causes, including a post-pandemic
reallocation of labor, a spending shift from services to goods,
lingering supply chain disruptions, and rising global oil and
gas prices.''
Dr. Richey, according to Furman, there are many factors to
the increased costs consumers are currently facing. But one
reason he doesn't include, in this particular case, is price
gouging. So can you elaborate on what is really going on here?
How do we fix the problem?
And I appreciate your testimony today in answering the
first question. Thank you.
Dr. Richey. Yes, the--you know, there are a number of
issues that all contribute to the increase in prices in this
country, and they have a lot to do with what we call
transaction costs. It is economic [inaudible]----
Ms. Schakowsky. You are way----
Dr. Richey [continue]. Understanding and theory developed
by Oliver Williamson.
Ms. Schakowsky. You are way over.
Mr. Bilirakis. I am over? Yes.
Dr. Richey. Sorry. So----
Mr. Bilirakis. Yes----
Dr. Richey [continue]. There are a number of different
inputs, right, that have to come into the process that drive up
costs.
So when we see scarcity in the supply chain, organizations,
obviously, increase costs to cover fixed costs to make sure
they can stay viable in the market. So that is why I earlier
recommended that we take a look specifically at contribution
margin, and what the profit is [inaudible] item, because it is
very difficult to----
Mr. Bilirakis. Dr. Richey?
Dr. Richey. Yes?
Mr. Bilirakis. I apologize.
Dr. Richey. Oh, yes.
Mr. Bilirakis. I am way over my 5 minutes, and I must yield
back.
Dr. Richey. OK.
Mr. Bilirakis. But I appreciate it very much.
Dr. Richey. No worries.
Ms. Schakowsky. Yes, OK.
Mr. Cardenas. Madam Chair, can somebody check the
microphones in the committee room or something? Once in a while
there is background noise coming in. It doesn't look like it is
coming from the mics on the screen. Sorry, I just--can we get
that fixed? It is hard to hear people.
Ms. Schakowsky. I am sorry, what did he----
[Pause.]
Ms. Schakowsky. Yes, please stay muted if you are not
being--speaking, if you are not speaking. You know, we don't
want that inadvertent background noise.
And now let me call on the chairman of the full committee
for his 5 minutes of questioning.
Mr. Pallone?
Mr. Pallone. Yes, I just have to say, before I ask a
question, you know, I respect Mr. Bilirakis, but I just don't
understand.
I mean, the problem, the biggest problem we have right now,
is COVID, right? The reason people are afraid to go back to
work is because they are afraid they are going to be in contact
with people that don't have vaccines, or people that don't have
masks, and the COVID continues to spread.
I mean, talking about, you know--the answer is to try to
get as many people vaccinated as possible, to try to get COVID
ended, so that people aren't afraid to go back to work.
But I mean, you know, I see some--I am not saying it is
true for you, Gus, but I see so many of my Republican
colleagues, you know, not--suggesting that people should even
be vaccinated, or not talking about it at all.
I mean, look, I am not going to argue over the mandate. But
the bottom line is we have to convince people to get
vaccinated. Otherwise, we are never going to get over this
COVID problem.
And then, when you talk about autonomous trucks, I mean, I
don't want--I mean, part of the problem is--with autonomous
vehicles, or particularly trucks, is that--what does that mean?
It displaces people. Of course we have to move towards
autonomous vehicles, or even autonomous trucks. We have to be
very careful that we don't do this in a way that displaces
truck drivers and they don't have a job. And, you know, I don't
think we are ready to literally say we are going to have some
major autonomous trucks right now.
I mean, that is something that has to be looked into, and
we can certainly work on it on a bipartisan basis. But, you
know, I am very afraid of the fact that, you know, people who
are driving trucks are going to be displaced. I don't want that
to happen today.
The problems here have to do with COVID, and we have got to
get that under control. But the best way to do that is through
vaccines.
And I just wanted to say to the ranking member, when we
talked about price gouging, remember, this bill is--a
legislative hearing is just a start today. You mentioned
several things that you would like to see in the legislation.
We are certainly--would like to sit down with you over the next
few days or next few weeks and figure out what those things
are, so we can have a bill on a bipartisan basis.
The same is true for the AVS. We can do these things on a
bipartisan basis. But--and I don't want to suggest that we
can't.
Now, let me just ask a couple of questions. I wanted to ask
Dr. Mabud.
In your testimony you suggest that some companies are using
the cover of rising costs in pandemic-related supply chain
issues to boost profits, while consumers pay more. Can you just
expand on that, and ask--and answer whether there are
particular industries where profiteering is most prevalent, if
you would?
Dr. Mabud. Sure, thank you, Chair Pallone.
Unfortunately, for consumers this is a really deeply
pervasive problem. You know, the earnings call data that we dug
into suggests that this kind of profiteering is happening up
and down supply chains and across a range of goods. Pandemic
profiteering is not limited to a small corner of the economy.
And some of the most flagrant examples of profiteering are
big companies like Kroger and Procter and Gamble, that sell
products that people can't do without. And that is why H.R. 675
is so critical, you know, it really takes on what has become
rampant pricing gouging of consumers across the country.
Mr. Pallone. All right. And then I wanted to ask that Dr.
Mabud again.
Do you agree that corporate price gouging is self-
reinforcing?
In other words, how does it help keep prices high, even
when the broader underlying price forces, like supply chain
disruptions and the pandemic, appear to be heading in the right
direction? The issue is self-reinforcing, if you will.
Dr. Mabud. Yes. I mean, this is essentially the story of
financialization, when one company is able to get away with
padding their profits with price gouging shareholders from
across the board want in. And that is exactly what we've seen.
Companies with aggressive pricing strategies--rewarded, and
those who are not taking the strategy on have seen massive
sell-offs.
In other words, investors come to expect these higher
prices, and these prices are translating into higher returns
for them.
The other point to make here is that this is, with the
exception of volatile commodities, fairly sticky [inaudible]
just going to go down, just when supply chain pressures ease.
Consumers will be stuck with higher prices over the long haul.
Mr. Pallone. All right. Let me just ask either you or Dr.
Harman, are there particular incentives for these companies
that Congress should be considering when working to stop price
gouging?
Or are they--do you believe Federal price gouging
legislation is necessary to stop pandemic profiteering?
Dr. Mabud?
Dr. Mabud. Sure, I am happy to jump in. Absolutely.
I mean, having a Federal standard that is clear and widely
applicable is absolutely critical to ensuring that price
gougers are not able to get away with that behavior.
Mr. Pallone. So you think the legislation is necessary?
Dr. Mabud. Correct.
Mr. Pallone. All right, thanks a lot.
Thank you, Madam Chair.
Ms. Schakowsky. The gentleman yields back, and now I
recognize the ranking member of the full committee, Mrs.
Rodgers, for 5 minutes of questions.
Mrs. Rodgers. Thank you, Madam Chair. Let me start with
autonomous vehicles.
We hear a lot about electric vehicles in this hearing, or
in this hearing room, in this committee. The majority, the
President, the Administration is all in on electric vehicles,
believing that that is our future. Not as concerned about
displaced workers. I guess our question is why can't we move
forward on autonomous vehicles?
I just read that the death rates have gone up pretty
dramatically in the last year. On average it is 37,000 on the
roads. But I think we have already reached 31, we are getting
close to that number already. So I believe that autonomous
vehicles have the opportunity to save lives. It is our future.
We should move forward.
When it comes to drafting--you know, to addressing
solutions, whether it is solutions around rising costs on
Americans, or any legislation--
Ms. Schakowsky. If I could just comment on that, you know,
in the infrastructure--
Mrs. Rodgers. OK, OK.
Ms. Schakowsky. Do you mind?
Mrs. Rodgers. Well----
Ms. Schakowsky. OK, go ahead. Go ahead.
Mrs. Rodgers. Well----
Ms. Schakowsky. I can give you----
Mrs. Rodgers. OK, I would love to hear what the update is
on autonomous vehicles, because there was a bill that we passed
bipartisan four years ago, and----
Ms. Schakowsky. Unanimously.
Mrs. Rodgers. Unanimously, OK.
And then, on just jobs that are being displaced, right now
jobs are being shut down in the energy sector all across this
country. Day one it was the Keystone Pipeline. Now we are--you
know, we talk about wanting to manufacturing in the United
States. We are shutting down mining. An Arizona mine--was it a
cobalt mine? Minnesota, another mine being shut down.
I think, when it comes to solutions--and I appreciate the
chairman talking about wanting to work together--I would
welcome working together, but working together is not having
the majority tell us, ``Oh, here is a bill, will you support
it?'' And that is how--you know, this American COMPETES Act,
our input has not been offered. It is, ``This is what we put
together. We have changed''--you know, some of the bipartisan
bills that we did work on were changed when they were included
in the draft. We are ready to come to the table. We need to be
included earlier on in the process, not just told, ``This is
our solution, will you join us?''
OK, so on to the issue of rising costs in the United States
of America. Dr. Richey, I shared a story about the mom that is
struggling to find formula for a newborn. Can any--can you--so
I would like to start with Dr. Richey, and if anyone on the
panel can tell me yes or no, does this legislation in front of
us address her struggles?
And I just would like to ask a quick yes-or-no of the
panel, starting with Dr. Richey--the panelists.
[Pause.]
Mrs. Rodgers. Dr. Richey, would this legislation help the
mom that is trying to find formula?
Dr. Richey. Yes, so I would say that it doesn't.
Unfortunately, it does not address the supply chain crises and
disruptions. Those disruptions create scarcity in the
marketplace, and scarcity is what allows for price gouging and
it creates opportunities for increases in prices.
Mrs. Rodgers. OK, OK. Mr. Harman?
Mr. Harman. I mean, I don't know the situation, but I would
say it is not a supply chain legislation.
Mrs. Rodgers. Mr.--Doctor, I am sorry, Dr. Mabud?
Dr. Mabud. Yes. Part of what we are seeing here is really a
need to address supply chain issues, which allow corporations
to engage in profiteering and price gouging. And so this is--
this piece of legislation is one piece of the puzzle in making
sure that mother is able to provide formula for her child.
Mrs. Rodgers. So--OK. And Mr. Frasch? Ms. Frasch, I am
sorry.
Ms. Frasch. Right. You know, we have seen some supply chain
issues in our local stores. And part of the reason why the
local stores were charging more money was because [inaudible]
in order to get the items. So if the supply chain issue
[inaudible] be corrected, then you [inaudible] have the price
increases, which potentially could be caused by price gouging,
starting from the----
Mrs. Rodgers. OK, right. So I appreciate that. I appreciate
you highlighting that, when supplies are not available, prices
go up. And right now, in the energy--you know, we see our gas
prices going up, nearly doubling the price of gas. And you
know, it is--and then the oil and gas companies are accused of
gouging consumers.
And you know, this isn't something new. One hundred years
ago--I would like to submit for the record a tweet from the
former White House official, Bob McNally. He shows a newspaper
reporting that--one of the earliest FTC investigations of
illegal market manipulation in the gasoline market dating back
to 1920. They found no evidence of anti-competitive behavior
then. And guess what? I don't believe they are going to find it
now. It is an issue of supply and demand.
Putting aside the fact that the President wrote to the FTC,
which is supposed to be an independent agency, and not to be
influenced by the White House, Dr. Richey, what do you think
of--the Administration should be focused on, in terms of
securing our energy supply and keeping prices down?
Oh, and I am over. OK. Dr. Richey, I would appreciate you
answering that question at a later time.
Madam Chair, I am sorry. I yield back. I appreciate your
indulgence.
Ms. Schakowsky. Thank you very much. I will refrain from
trying to respond. We can talk later, and let me now call on
Mr. Rush, Bobby Rush, my colleague from Illinois, for 5 minutes
for his questions.
Mr. Rush. I want to thank you, Madam Chair and the Ranking
Member for this hearing. And on the onset, Madam Chair, I
wanted to let you know that I am writing a letter to you
requesting a hearing to address the allegations of racism that
have been leveled against the National Football League by Brian
Flores.
That said, Madam Chair--Mr. Harman, in your testimony you
mentioned how price gouging ``specifically targets people at
their most vulnerable--and their most vulnerable.'' Have you
seen any evidence to suggest that racial minorities or low-
income people are more likely to be subject to price gouging?
If so, what specific actions can we take today to stem this
abuse?
Mr. Harman. So the short answer on the front end is no, not
specific empirical evidence of racial discrimination in price
gouging.
However, price gouging is primarily on items that are
essential items, staples, things that people need now. And the
people who tend to be faced with price gouging are people in
emergencies--with the economic crisis, with economic hardship--
and people who are able, with means, to accommodate increased
costs in their monthly budget are less affected by those
increases.
And people who are on fixed incomes and limited budgets, or
are suffering unemployment or economic hardship due to the
emergency are going to be affected more directly and,
therefore, disproportionately impacted. And so that tends to be
people at the lower end of the economic scale, and people in
poverty, and that disproportionately, unfortunately, affects
people of color.
Mr. Rush. Thank you.
Ms. Frasch, in your testimony you discuss how
Pennsylvania's price gouging statute only applies to
``personal, family, or household purposes,'' and therefore
excludes the business sector. I am deeply concerned about the
real-world impact of this type of limitation, including reports
of price gouging by health care staffing agencies.
For example, Safety Net Hospital in Chicago reports
budgeting 130 to--$1.30 to $1.50 an hour for agency nurses,
where one hospital in my district--paid $2 million per month.
These agencies are pocketing a significant portion of what they
charge for profits. Under--unless things change, many hospitals
serving underserved communities will have to reduce their
services, limiting access severely to needed health care. This
is just one example of how price gouging in the business sector
has a direct impact on consumers.
With that in mind, do you believe that the Federal price
gouging legislation should address the business sector?
Ms. Frasch. Yes, I share your concern deeply on the issue
that you just raised. And yes, we did see issues where the
government, where schools, hospitals, you know, fire stations
were trying to protect themselves by getting PPE, and even
cleaning services to try to mitigate any spread of the virus.
And because our statute did not apply to those types of goods
or services, we were unable to, you know, make sure that they
didn't pay, you know, for things that they shouldn't have paid,
or paid extra money for things they shouldn't have. But this--
yes, this bill would address that shortfall.
Mr. Rush. Thank you very much.
Madam Chair, I yield back.
Ms. Schakowsky. The gentleman yields back. Before I call on
the next member, let me just say I am going to have to excuse
myself for a few minutes. And in the meantime, the vice chair
of the subcommittee, Mr. Cardenas, who is--will chair the
subcommittee virtually, and I will be back as soon as I can.
But now let me call on Mr. Upton for his 5 minutes of
questions.
Mr. Upton. Well, thank you, Madam Chair, and I sort of wish
that we had a witness from the Administration here to answer
some of our questions, because I have got to say--and I think
many of us, certainly on this side of the aisle, would agree
that our economy is in a world of hurt, and it has not been
overnight. And I would also say that inflation is at the very
top of the list.
For more than a year--actually, a couple of years--as I
travel around my district, but I am sure as everybody does on
both sides of the aisle, there is not an employer out there
that isn't looking for more people to work.
I met with my home builders last week in Michigan. They
have got a lot of folks in, ``We want to build a new house, we
want additions.'' They don't have the workers to help that.
You know, your restaurants, your hotels--your hotels
don't--they are not offering daily cleaning if you are going to
stay there for the weekend. They will clean it before the next
guest comes if you are there for a couple of days, but they
don't have the staff.
Talk to the auto industry. They are looking for parts. You
know, I have got a company in my district, they are looking for
200 auto workers just to make axles for autos.
You look at chips. You know, they had a great announcement.
I talked to my colleague, Mr. Latta next to me here, and just
did a huge chip thing in Ohio last week with most of the
delegation. You have got people on both sides of the aisle,
from as far left as Joyce Beatty to as far right as Jim Jordan.
I mean, there is nobody on the outside of that flank, I don't
think. The Senate passed a bill last year in June with nearly
70 votes, and we can't get a chips bill on its own that we can
all vote for here.
Talk about the autonomous vehicle legislation. We passed
that in this committee under Greg Walden, Chairman Walden.
Every member voted for it here. Maybe one, maybe Justin Amash
voted against it in the Senate, but he was--you know, it passed
with over 400 votes. And four years later we are letting China
run forward, as we haven't come back with a bill. And we had--
despite our vote, we couldn't get it done in the Senate.
Even the IRS is looking for thousands of people to process
these returns, and people can start sending in this --last
week.
I could remember in my district the little town of Coloma.
I think it has got two traffic lights. And across the street
from the McDonald's, for the entire summer, there is a yard
sign there: ``Truck washers wanted, $18.00 an hour.'' I mean,
basically, you need a good pressure hose and maybe a couple of
brushes to do something like that.
So inflation is a big issue. And you can't drive on the
highway if you pass a truck or if a truck passes you without a
sign on the back of it that says, ``We need you.'' We know
about those truck-driving shortages. We--you know, I think just
yesterday I saw FedEx was going to limit their priority
deliveries because they don't have drivers.
And this morning I got an email from a guy that I don't
know, but he said we have just learned that the FMCSA--that is
the Federal Motor Service--has a new regulation going into
effect on Friday, this Friday, that is going to limit the ways
in which employees can earn a commercial driver's license. The
new rules require all drivers to attend a three-week or seven-
weekend course. And it is going to increase the cost of earning
a CDL from the current levels of $1,000 a driver to $15,00 a
driver, including training costs and wages. It is going to be
prohibitive for small businesses and individuals. It is going
to exacerbate a serious shortage of the already severely
limited supply of commercial drivers. ``Businesses like mine
simply can't afford it without a sharp and immediate price
increase that the market won't bear. And soon to come, deeper
labor shortage will limit our capacity to conduct crucial
infrastructure work.''
Those are the stories that we need to be addressing here.
You can't--and we know about energy costs. Good grief, the
price of the pump is going to be four bucks by spring. We have
this winter that is upon us now. It is hitting the rest of the
country. As we see these storms, it is the leading story on the
news.
Gas prices, the natural gas prices are up 30, 40 percent
from where they were before. So our farmers need that, but so
do our workers and families struggling to make ends meet. So
you know, the idea that we are going to shut off the pipelines,
that we are going to--we are going to limit our efforts to
identify and produce North American energy here, instead of
coming from overseas, all of those things tip the dominoes the
wrong way, as it relates to inflation and trying to get our
economy back on track.
So I am sorry I didn't get any questions here. I would like
to have all of you comment, but I can see that my time has
expired. So with that I will wave the white flag for this
hearing, and I just wish we had someone from the Administration
that could help answer some of these questions, instead of----
Mr. Cardenas. [Presiding] Thank----
Mr. Upton. --got today. And with that----
Mr. Cardenas. Thank you.
Mr. Upton [contoinue]. Madam Chair, I yield back.
Mr. Cardenas. The gentleman yields back. Next we recognize
Representative Castor for 5 minutes.
Ms. Castor. Thank you, Mr. Chairman, and thank you to all
of the witnesses who have appeared today. This is a very
important hearing on how we can address price gouging.
Price gouging is so maddening for everyone, and I hear it
from my neighbors back home in the Tampa Bay Area and in the
State of Florida. You know, from the beginning of the pandemic
in 2020 we saw these unconscionable price spikes for masks and
other PPE for medical supplies, toiletries, rapid tests, and
drugs, as well. In fact, a local TV station, WFTS, had a recent
report of a local business selling at-home COVID tests for $50.
That is double the going rate. And fortunately, the
Administration has addressed that with some of their free COVID
testing that consumers can order.
It is--you know, even the Federal Reserve chair said --was
asked recently why are companies raising prices, and he said,
``Because they can.'' And this practice is harmful and wrong.
So I am all in on giving our consumer protection agencies the
tools they need to help stop it.
You know, it is not an--it is not a new phenomenon,
however. Coming from the State of Florida, we see this time and
time again when a tropical storm or hurricane is approaching,
where scam artists pop up and they charge consumers exorbitant
prices for basic goods. And the same thing is happening now
during this pandemic. But it is some--it seems like even those
scam artists just aren't as brazen as some of the stuff that is
going on right now.
And Dr. Mabud, you have detailed a lot of this in your
testimony, occurrences of executives trying to explain away
price increases. Tell me, are these price increases you discuss
related to underlying cost increases?
Can legitimate reasons beyond corporate greed explain all
of the price hikes we are seeing?
And why do these companies believe they can raise prices
without facing any consequences from customers or the law?
Dr. Mabud. Thank you for that question. I will take your
sort of last point first.
You know, many--some of the most flagrant profiteering we
are seeing is by companies who really sell essentials, right?
These are goods that families need every single day: diapers,
cleaning supplies. And frankly, they can raise prices because
people need these goods, regardless of what the price is and
because these companies are--hold a lot of market share. So if
Procter and Gamble has, say, 15 different brands of detergent,
you know, they can jack up prices on all of those different
brands of detergent, and consumers have nowhere to go.
But I think the question around input costs is also really
important. You know, input costs are subject to the same
brittle supply chain that is weakening our overall economic
resiliency. We have a system that--where corporate executives
have really prioritized a just-in-time system, where there is
no resiliency and redundancy built into our supply chain to
help our economy weather shocks.
And so we really need to invest in a system that allows
companies to get input costs--inputs to their goods
appropriately. We also need to stem pandemic profiteering where
it is happening, which is predominantly with large companies
today and in other crises that you mentioned.
Ms. Castor. Yes, thank you very much.
Ms. Frasch, how has the pandemic caused you all to look at
different approaches to stem the price gouging that is going on
right now?
Ms. Frasch. Thank you for that question. So I think, in
terms of what we were seeing, you know, typically, this--the
statue that we have in Pennsylvania is something that is very
local and very geographic to a specific area. Here we saw it
across the entire commonwealth, we saw it occurring outside the
commonwealth. And so we had to put a whole bunch of people on a
task force, where we typically maybe have, you know, one or two
agents and a couple of attorneys working on it because it is a
specific area with limited, you know, consumers who are being
harmed, to the entire state of Pennsylvania having, you know,
these issues. And you know, we had to dedicate a lot of time
and resources to investigate, learn, and enforce our law.
Ms. Castor. Thank you very much.
Well, I want to urge my GOP colleagues to join us in taking
actions to lower costs for consumers, whether that is the cost
of prescription drugs, healthcare in Build Back Better and the
American Rescue Plan, or it is building up our domestic
manufacturing base through America COMPETES that is on the
floor of the House this week. We are taking action. I really
want to invite our GOP colleagues to join us in doing that, as
well.
And I will yield back my time. Thanks so much.
Mr. Cardenas. Thank you. The gentlewoman yields back.
Also, members, if you have your microphone on, whether you
are on Zoom or in committee, can you please double check? We
have got some tremendous background noise going on right now.
It sounds like somebody is moving some stuff, or coughing, or
what have you. So somebody's mike is on.
So with that, we recognize Congressman Latta for 5 minutes.
Mr. Latta. Well, thank you very much, and thanks for our
witnesses for being with us today.
First, I want to thank the ranking member of the
subcommittee, and also the ranking member of our full
committee, for bringing up AV, autonomous vehicles. Just real
briefly again, this is legislation I sponsored back in the
115th Congress. We had over 300 meetings in this committee
alone with our staff. We talked to people across the spectrum.
We brought out a very good bill. We worked across the aisle,
and it got unanimous support as it left this committee. Not
only did it get unanimous support when it left this committee,
but it was also voice-voted on the floor.
And as we have seen since that time--bringing back this
legislation since it went over to the Senate and,
unfortunately, we couldn't get it over--get it done there, that
foreign entities across the world are out there, being able to
get ahead of us in this, and we want to make sure the United
States is the one bringing this forth, this technology.
It was also brought up about what is happening on our
highways. You know, the latest statistic, that horrible
statistic that just came out, 31,720 people were killed through
the third quarter of this past year. And this number is not
going down, it is going up.
But with that, I think we need to be addressing it and
getting it going again as soon as possible.
Dr. Richey, if I could start my questioning with you,
according to a December small business Optum survey, almost a
quarter of small businesses said that inflation is the greatest
problem in operating their business. Small businesses, in
particular, are not able to absorb supply chain disruptions, as
well as causing them to charge higher prices to their consumers
and customers.
And you know, in your testimony, which I found interesting
when I was reading it, you brought up a couple of points here.
You say, ``My concern is that, coming out of the pandemic,
nearly every company in the country will be able to show
additional costs, loss of control, negative impacts on profit,
lost sales, and/or other types of risk incurred through the
supply chain, including acquisition, production, distribution,
and sales.''
You go on to say, ``It is important to remember that prices
move with the market and across supply chain transactions,''
and I realize that because I have got over 80,000--according to
the national manufacturers--over 80,000 manufacturing jobs in
my district, and over the last week-and-a-half, when I was back
in Ohio, going in and out of businesses everywhere, I heard the
same thing: can't find employees, energy costs going up,
transportation costs going up, material costs going up.
The American Truckers Association put out their survey
saying that they need 80,000 truck drivers right now because of
the shortage.
So with that, Dr. Richey, you know, what--in your research,
what is the impact of the current supply chain crisis on small
businesses?
Dr. Richey. Yes, it is all of those different things, which
are quite dramatic and quite difficult on small business,
starting with the scarcity that has been created by supply
chain issues, and trying to get the product into the country.
But we have also had an issue with labor, certain
[inaudible] inputs, getting people to the job, and actually
paying them to drive the vehicles. [Inaudible] difficult thing
to deal with, as well.
All of these inputs drive inflation up in this country,
right? And so price gouging could be a component. But if you
think about labor costs, when you think about [inaudible] parts
being scarce, prices going up, when you think about business
partners having to raise prices to some degree to cover fixed
costs that they have invested in already, it is, unfortunately,
kind of natural to see these prices increase.
Now, obviously, it has the hardest impact on small
business. And so, you know, the legislation will have to be
quite careful uncovering, you know, what is really a price
gouging situation and what is just a natural need to increase
prices to make sure that a small business can remain viable.
Mr. Latta. Well, and with my last 58 seconds, let me follow
up with something else you have in your testimony, which I
found rather interesting, and I think the--my colleague, Mr.
Upton from Michigan, was bringing some of this up.
You mentioned on page three of your testimony adding the
government to supply chains is highly likely to add touches,
processes, time, and costs. What is the who, what, where, when,
and how on that?
Dr. Richey. Yes. So that type of discussion goes back to
the von Mises work of the 1950s that shows that government
intervention raises prices when they get involved in business
relationships. You know, maybe the relationship between
bringing your in-laws to come live at your home shows the
complexity that is created when that happens, and the same type
thing happens in the supply chain.
It also can drive trust out of relationships and cause
relationships to dissolve. So that is kind of what I am getting
out there, and hopefully I cleared that up a little.
Mr. Latta. Well, thank you very much.
And Mr. Chairman, my time has expired and I yield back.
Mr. Cardenas. I just want to clarify for the record I don't
think the Federal Government has ever forced anybody to have
their in-laws [inaudible]. I just want to--hope people didn't
misunderstand that comment.
A little levity, people, amongst all the noise. Not the
noise of the comment, but this background noise is driving me
nuts.
Voice. Yes, what is that?
Mr. Cardenas. Anyway, next--the gentleman yields back. Next
we recognize Congressman McNerney for 5 minutes.
Mr. McNerney. Well, I thank the chair, thank the witnesses.
Great hearing this morning.
Mr. Harman, currently 39 states, including my state of
California, have authority to enforce against price gouging
during emergencies or disasters. You state that most states
have a law against price gouging during the declared emergency,
but laws vary very widely. How do different--the differences
and limitations in state authority hinder our recovery from the
pandemic?
Mr. Harman. So I think the inability of the FTC to
investigate nationwide price gouging, so when you have a
manufacturer raising prices across the country, it is much
easier to look at that and figure out where there is cost
increase, where there is--versus where there is price gouging.
And for a state that is much harder to see.
The state price gouging laws, as has been mentioned, were
really focused on localized emergencies and localized price
gouging. And what we have seen in the pandemic is widespread
national price gouging. And while there are investigations, and
while there is enforcement, as the other witnesses have
detailed, you really can't get at the core problem that is now,
as I mentioned, normalizing. And we are seeing it in so many
more sectors and categories than just, you know, the pandemic-
related PPE-type things we saw initially.
Mr. McNerney. Well, do you think that online price sellers,
online sellers, may take what they have learned from the
pandemic price gouging on the consumers in the future, after
the pandemic ends?
Mr. Harman. Oh, 100 percent. And it is a business practice
that works, and we are now seeing the, you know, the other
retailers and--traditional retailers and manufacturers mirror
it in their in their pricing.
Mr. McNerney. Well, you know, it could be argued that
corporations are just doing their job to maximize profits by
price gouging. You could make that argument, right? So what
does that tell you about the current corporate structure, about
the current corporate model we have in this country?
Mr. Harman. We are suffering a crisis of corporate
concentration in every sector across the economy.
Dr. Mabud mentioned Procter and Gamble having 15 different
detergents, and in every sector you find that there are--even
when there are multiple brands and names, it is really just a
few--a handful of companies controlling what we buy, and that
affects consumers, obviously. It also affects the small
businesses who are attempting to compete with them, but also
serving as their vendors.
Mr. McNerney. But what is the solution?
Mr. Harman. There is a lot of solutions. I think price
gouging legislation is one of them.
Mr. McNerney. Right.
Mr. Harman. So we can investigate where this particular
harm is.
But, you know, we really need to focus on where there is
consolidation that shouldn't be happening, and that is also
work the FTC needs to do.
Mr. McNerney. Well, how do state laws fail to provide
authority to police pandemic price gouging by online platforms?
Mr. Harman. They are trying, right? And this is a new type
of price gouging, in the sense that we have a national
emergency, and that is fairly novel.
Early on in the pandemic, Kentucky brought a case against
online sellers, and they ultimately prevailed. But the
challenge against--what really challenged the core of state law
was can a state price gouging law dictate the prices,
nationally? And that is how online sales work, right? Even if
you are in the state setting the price, it is a national price.
And again, they ultimately prevailed, but that really cast
doubt on how state laws, in the absence of a Federal law, can
address this problem.
Mr. McNerney. Well, thank you.
Dr. Mabud, each week I hear from small businesses in my
district that continue to face an uncertain future, how
corporate executives and shareholders enjoy record profits. How
would a Federal price gouging law benefit small business owners
who are still fighting to overcome losses incurred?
Dr. Mabud. Yes, I mean, it is absolutely critical to take
on bad actors in the market to support small businesses. You
know, small businesses are often--some of the entities in the
market that are most effected price gouging, particularly
upstream.
Consider U.S. Steel, the third largest steel producers --
excuse me, the third largest steel producer in the U.S.,
recently reported that they are raising prices that go beyond
their input costs, right? Imagine the impact of that on your
local bike shop, someone--a small business owner who is, you
know, facing higher input costs, who has seen their profit
margins decrease, and all--you know, in good conscious, even
though they are not behaving badly, having to pass those hikes
onto the consumer.
And so really, businesses are getting crushed by corporate
price gouging the same way that consumers are.
Mr. McNerney. Thank you. I yield back.
Ms. Schakowsky. [presiding] The gentleman yields back.
Thank you, Mr. Cardenas, for chairing.
And now, Mr. Guthrie, you are--it is yours for 5 minutes.
Mr. Guthrie. Thank you, Madam Chair, and thank you for
holding this hearing.
And you know, Kentucky did have price gouging laws, and
successful. And you have seen a lot of it where people are
hoarding products and selling on the internet.
And, you know, looking at the corporate side, I know Kroger
has been brought up, and the profits from Kroger. But if you
tell people they can't go out to eat, the grocery stores are
going to have more volume and make more money. So the question
is, are they price gouging or are they just--I know their
profits have gone up--or is it price gouging?
And one good example I remember, I have a lot of--there are
fewer now--but dairies in my district, and dairies were pouring
out milk while you couldn't get milk at the grocery store. And
of course, as they are bringing it to my attention, I wanted to
get to the bottom of it, and started asking around and finding
out around, and the problem was most--a good portion of milk, I
forget the percentages, but I talked to people in the milk
industry--went to institutions, so they went to schools. We
shut schools down. They went to universities, we shut
universities down. And there weren't enough gallon jugs. That
was the problem, the kind of things that you sell at a grocery
store.
So on the face of it, you would see on the news people
dumping milk because it didn't--you can't store it long enough.
And it was a supply chain issue, it wasn't somebody purposely
trying to gouge or move forward--and so those are the things
that we have to be careful of.
When people go out and buy all the hand sanitizer they can
buy, and try to corner the market on the hand sanitizer, and
then sell it to you online, that is one thing. But I would just
like to see the example--since Kroger has been brought up with
them price gouging. I have three in my town, and I will
certainly do whatever I can to point out where they are price
gouging, where that is, not just that they are--and the
opposite side, I can show you a lot of restaurant owners who
are--were not profitable in the last couple of years. And so it
moves forward.
I want to talk to Dr. Richey.
And one thing, you know--and I said I heard that Kroger
decreased wages, I think that was--I think Kroger is--in my
area it is represented by a bargaining unit, and I will tell
you they have signs up everywhere for work. So I am--I would
like to see the data on that, if that is possible.
But Dr. Richey, you were talking about just trying to find
workers. I know the Kroger that I go to in our area, Meijer's--
Peter Meijer is in Congress--we have a Meijer, I go there as
well, and Walmarts--I will just hit them all--and they are all
looking for workers.
And so the question is, Dr. Richey, there has been
several--I think some panelists here that talk about expanding
and increasing unemployment benefits. How has that affected the
supply chain, the increased unemployment benefits, and what
would happen if--you think--if we expanded the unemployment
benefits with the bonus--Federal bonuses of which--I think I
voted for it in the original because of the--I did, because
of--the whole economy was shut down. And--but now that we are
looking for workers, how would that affect it?
Dr. Richey. Yes. Well, first let me point out that we are
definitely looking for workers, and it is a big problem. And,
you know, across the country people are saying, ``Where did the
workers go?'' And so we are hopeful to see those folks come
back.
We had an interesting situation going on around the
holidays this year, right, where we had a number of vehicles
that were trapped off the coast. We had poor flow of product
across the United States. We had truck drivers that weren't
able to come to work and move that product, and we had already
had a problem with that level of capacity [inaudible].
At the same time we had a lot of money dumped into the
system, right, to try to help people that were unable to make
money. And we also have opportunities to encourage them to buy
or purchase early, or panic-buy based on their concerns or on
worrying that they weren't going to get their holiday gifts.
That combination of economic stimulus, while the supply chain
was stopped, that created a dramatic disruption, and we are
still shaking that out today.
So we need to really ask questions about whether or not
doing something like that would exacerbate the situation and
make it even worse.
Mr. Guthrie. Do you think that it would? I mean [inaudible]
ask the question, do you think that it would?
Dr. Richey. I would say until there is, you know, a break
in some of these different points where, you know, ports or the
trucks, I think that adding--increasing demand would make it
worse.
Mr. Guthrie. OK. Just on a--related, but just a little
separate, I know you talked to AEI on the blockchain
technology, so it is--I know our committee is interested in
that.
So blockchain technology has many applications, including
increasing privacy and data security. Would you highlight your
conversations with AEI on how blockchains can assist supply
chain management?
And I have about 30 seconds. Can you elaborate on how this
technology can be beneficial for supply chain management?
Dr. Richey. Yes----
Mr. Guthrie. In 30 seconds.
Dr. Richey [continue]. It lets you, you know, diversify and
move all of your information to a digital platform that makes
it available to all of the members of the supply chain.
It also allows those transactions to be governed by the
members of the supply chain. So if something nefarious happens,
like price gouging, you would be able to see it across the
blockchain.
So we are still in the early stages of implementing that.
Some companies are testing it out, but it is a great
opportunity. We will see if we can get it moving as rapidly as
we need it.
Mr. Guthrie. Thank you. My time has expired, and I yield
back. I appreciate your answer.
Ms. Schakowsky. OK, Mr. Cardenas, the next 5 minutes are
yours.
Mr. Cardenas. Thank you very much, Madam Chairwoman, thank
you so much for having this hearing, and also to the Ranking
Member Bilirakis. I want to thank both of you. This is a very
important hearing, and very informative for all of us.
Time and time again, throughout this pandemic we have seen
the most vulnerable communities among us suffer the most, while
the wealthy find a way to make it through without the
devastating fallout that others receive. COVID-19 has
highlighted glaring inequalities in our society. And when the
wealthy exploit that for profit, we in Congress cannot turn a
blind eye.
I want to thank you, Madam Chairwoman, again for
introducing this legislation. No legislation is perfect, but we
shouldn't wait for the perfect to make sure that we protect the
American people from exploitation.
Dr. Mabud, in your testimony you described the willingness
of some corporations to take advantage of the steady demand for
basic household items like diapers and household cleaning
supplies, even in the face of price hikes. These items are not
luxuries, they are necessities. As an economist, can you speak
to the impact that targeting basic products like these is
having on Americans in low-income communities?
Dr. Mabud. Yes, thank you for that really important
question. Low-income communities, especially communities of
color, are disproportionately affected by price gouging. Higher
prices, particularly on essentials, just simply eat up a bigger
proportion of already strapped household budgets. We know that
low-income communities are more likely to be communities of
color and, therefore, are feeling the effects of price gouging
more acutely.
The other thing to remember is that these workers, by
definition, are low income, right? They are having a hard time
accessing good jobs in the labor market. They might be facing
discrimination, or occupational segregation, and other barriers
to labor market entry. So low-income folks, particularly low-
income folks of color, are really hit from all sides. They have
rising prices at the checkout line and they have a higher,
harder time accessing good, well-paid jobs.
Mr. Cardenas. Well, thank you. So right now, during a
pandemic, we have some folks who are working two and three
jobs, maybe a single parent, and needing to buy diapers. You
mentioned that being one of the products that seem to have gone
up in price, while it appears that some of the companies that
actually provide those essential products are actually making
larger profit margins. How do we reconcile that?
Is it really a supply chain issue, or is it, as you
mentioned, ``tailored price increases,'' which is what one of
the C-suite executives was explaining--was it during some kind
of meeting of their shareholders or something?
Dr. Mabud. I mean, simply put, this is corporate greed,
right? These companies have enormous market power. They have
the dominance to set prices on goods across the market because
they are so big. And the companies like, you know, the ones
that sell diapers, you know, are selling products that people
need, and they know that, right?
The point about price elasticity essentially refers to a
consumer's responsiveness to prices. And when you have
essential goods, consumers are not responsive to price
increases because they are essential. And so what we are seeing
now is simply these big corporations taking advantage of the
most vulnerable at a point where they are at their most
vulnerable, and padding their profits.
I mean, that is the other point here. Like, you know, these
CEOs, these executives, these shareholders are just raking it
in, all while consumers are paying more for essential goods at
the checkout line.
Mr. Cardenas. Thank you. In your testimony you also touch
on the pain being felt by small business owners who must
compete with giant companies like Walmart and Amazon for
inventory. You reference a quote by one small business owner
who said that his contracts for inventory were ``not worth the
paper they were written on.'' Can you describe how these large
firms are using their size to crowd out small businesses when
it comes to getting their products to their shelves?
Dr. Mabud. Yes. Big businesses are able to negotiate prices
better than small businesses, right? That is simply because of
their market power.
So one example from the latest issue of the American
Prospect is Walmart in town is able to negotiate $1 boxes of
Duncan Hines cake mix, which is the most popular cake mix in
the area. The local grocery store, on the other hand, can only
manage to squeeze out a seasonal discount that brings the price
of these cake mixes down to 1.32. So in that case, when that
small business can't, you know, push around using its power,
the prices that it can sell its products for in the store, you
know, how can you expect that small business to compete?
So it is really important to--you know, in order to have a
thriving small business community we have to tackle the power
that these mega-corporations have over prices.
Mr. Cardenas. Thank--Dr. Mabud, I only have 20 seconds.
So I have a question. Does--has history borne out that,
when larger companies squeeze out smaller competitors, that,
once the smaller competitors are off the playing field, that
the larger companies tend to increase their prices, regardless
of what the market can bear?
Dr. Mabud. Absolutely, and my colleague on the panel can
speak to Amazon, which does this frequently.
Mr. Cardenas. Thank you very much.
My time has expired. I yield back, Madam Chair, thank you
so much.
Ms. Schakowsky. Thank you.
And now, Mr. Bucshon, you are recognized for 5 minutes.
Mr. Bucshon. Thanks, Madam Chair. I don't support price
gouging. However, I am finding it hard not to point out the
hypocrisy in front of us today. The Hoosiers I represent aren't
paying more at the pump or more in their everyday groceries
because of price gouging. They are paying more because of
inflation.
This legislation won't restock the bare grocery store
shelves or car lots scattered throughout my district and the
country. These problems originate from larger market factors,
and COVID, of course. And the Biden Administration's failure to
address these problems is only adding fuel to the fire.
Indiana is currently bracing for a heavy snowstorm today,
with temperatures dropping rapidly, and most Hoosiers are going
to be left wondering how they will pay for their heating bill.
But instead of looking at solutions that will help lower energy
costs, Democrats in Washington are attempting to add even more
taxation in their massive Build Back Better bill that would
increase each household's heating bill by $242 a year, not to
mention the fact the Biden Administration continues to block
the creation of pipelines that would help lower energy prices,
and terminating oil and gas leases on public lands in the U.S.,
ironically, while asking OPEC to send more oil and then
improperly tapping our Strategic Oil Reserve because the
American people are noticing the price is going up. You really
can't make this stuff up.
My point being I wish we could get serious and look at the
real problems, so that we could come up with real solutions.
Running to the FTC to investigate gas prices every time they go
up isn't a serious exercise, and it only ignores the real
problem. Advancing policies that promote energy independence
and production at home is a real solution. Supporting policies
that incentivize people to get back to work is a real solution.
I hope this committee doesn't get too distracted by today's
hearing that it forgets to pay attention to the real issue of
why our constituents are paying more for everyday items, and
that is inflation. It is a good try by the majority to try to
change the narrative. Unfortunately, the American people, I
think, know the facts.
Dr. Richey, a question for you. I didn't--I do not believe
that the legislation before us today adequately factors in the
effects that overly burdensome government regulations and
policies have on price increases. This is something the FTC and
state AGs must adequately consider when determining if price
gouging has occurred. Because again, what we are seeing today
is in response to inflation, not price gouging.
Dr. Richey, do you believe it is important to consider key
factors such as labor shortages, government interference, and
other market factors when determining if price gouging is
occurring or not?
Dr. Richey. Yes, that is absolutely true, and it is
absolutely something that should be considered. Certainly, I
would like to look at research on labor costs that show that
they are not having an impact on price. I can tell you the
anecdotal evidence, in talking to truck driving companies,
manufacturers, [inaudible], and distribution businesses, their
prices are being increased because of the dollar figures that
they are placing on labor.
Now, in some places you may see that reduced, because they
can't get the people to come to work and pay [inaudible]. And
in that instance, the product is not going to flow through the
system.
There are a number of different things that impact
inflation, and you touched on some of those things [inaudible]
money into the economy [inaudible], which doesn't. Restriction
on distribution causes scarcity, which doesn't. The labor costs
cause that issue, as well. And even though it is nice to
receive a higher pay rate, we should expect to see prices
increase as those pay scales go up.
Mr. Bucshon. Thank you. Were the factors I laid out and
we--and you just talked about referenced anywhere in this
legislation?
Dr. Richey. I don't believe they are, sir. No, sir.
Mr. Bucshon. Do you think that leaving language vague for
what qualifies as grossly [inaudible] would further enable the
FTC to be used as a political tool that targets the
Administration's chosen enemy of the day?
Dr. Richey. Well----
Mr. Bucshon [continue]. America?
Dr. Richey. Yes, yes. That is tough to answer, but I would
say that there is a lot going on. There are a lot of dynamics
here, and I am not certain this is the key issue.
I try to get executives and students to focus on core
issues, root causes of these things, and I feel like this is
not a root cause. It is an effect of the other things that we
see out there in the marketplace.
Mr. Bucshon. Thank you very much. I recently was at the
Port of LA and saw some of the problems there. In fairness,
there is a labor shortage there for a variety of reasons. And
COVID is still a factor, no doubt. But it is a difficult
problem, but we certainly need to be offering real solutions,
and not having hearings trying to cast blame at our free market
economy.
Thank you, I yield back.
Ms. Schakowsky. The gentleman yields back, and I invite
Congresswoman Dingell for 5 minutes.
Mrs. Dingell. Thank you, Madam Chair, for holding this
important hearing, all the witnesses for testifying today.
I do think that this is an important hearing because we all
remember how, early in the pandemic, toilet paper, hand
sanitizer, PPE, and other essentials saw skyrocketing prices
amid consumers' immediate panic in preventing the spread of
COVID-19. In 2020 the Michigan Attorney General's Office
received 4,522 price gouging complaints, and this was the first
time price gouging made the top 10 of the most frequent
consumer complaints in the state.
As we continue to grapple with the impacts of the pandemic,
consumers and their families are still struggling. I agree that
inflation is real, with my colleague, but they are struggling
with rising prices for common household goods amidst a robust
economic recovery. And you--corporations are posting record
profits.
It is the responsibility of Congress to ensure that
corporations are not taking advantage of consumers during this
emergency to increase their profit margins through price
gouging. So I want to talk about the downstream supply chain
impacts.
One of my concerns is the impact of price gouging within
the supply chain, and its impact on downstream prices, much of
what falls ultimately on the consumer. Dr. Mabud, in your
testimony you highlight how price gouging further up in the
supply chain can force small businesses to pass on price
increases to the consumer due to higher production or other
input costs. Can you go into the additional details on how this
practice disproportionately hurts smaller businesses?
Dr. Mabud. Yes, absolutely. I mean, given the extreme
consolidation in product markets, bigger companies simply have
power to set prices in a way that smaller businesses don't. And
that power is, in many ways, magnified when those big
businesses are sitting higher up on the supply chain and
passing those prices, those input costs, down to smaller
businesses.
You know, the owner of Country Fresh Farm Markets, a local
grocery store in Cincinnati, you know, confirmed that he was
being able to--forced to sacrifice his own margins entirely
because of the prices that big businesses like Procter and
Gamble are setting.
And as mentioned before, you know, when we see the input
costs of things--goods like, you know--as input costs of things
like steel go up, that has deep implications for small
businesses across the country that rely on those inputs to for
their own goods and their own well-being.
Mrs. Dingell. So Dr. Mabud, again, would addressing supply
chain bottlenecks such as critical funding for semiconductors,
and increasing domestic manufacturing capacity help to prevent
price increases further up in the supply chain from translating
into higher costs for small businesses and consumers?
Dr. Mabud. The short answer is yes. We are living in a
world where we have turned our supply chains over to big
corporations. You know, they have really maximized short-term
returns. They--these companies have essentially carved away at
our supply chains until what we are left with right now is this
brittle knife-edge system. And so small businesses are
completely at the mercy of a system that can be thrown out of
whack by something as simple as a storm halfway across the
world, or a COVID outbreak in a factory.
So investing in our supply chain, ensuring that we have
redundancy and domestic capacity for certain--for key pieces of
our supply chain will help ease bottlenecks and create a more
predictable and reliable system for small businesses, which
sets them up for success.
Mrs. Dingell. So I am down to about a minute, so I am going
to ask Dr. Mabud, Mr. Harman, Mr. Frasch, would--and ask you to
be short, yes or no--would addressing supply chain
vulnerabilities through the America COMPETES Act alleviate some
of these issues, yes or no?
Start with Dr. Mabud.
Dr. Mabud. Yes, it would alleviate some of these pressures.
Mrs. Dingell. Mr. Harman?
Mr. Harman. It likely would, yes.
Mrs. Dingell. Ms. Frasch?
Ms. Frasch. Yes, it likely would.
Mrs. Dingell. So I want to thank you again for all of the
witnesses being here today, and to Chairwoman Schakowsky for
holding this important hearing. Congress has to take immediate
action to address gaps in our supply chain that are having a
crippling effect on our economy and leave consumers vulnerable
to predatory [inaudible]. In the face of the COVID-19 pandemic
and future emergencies, this have life consequences.
And with that, Madam Chair, I yield back the balance of my
19 seconds. Thank you.
Ms. Schakowsky. Thank you very much.
And now, Mr. Dunn, it is your opportunity to ask questions
for 5 minutes.
Mr. Dunn. Thank you very much, Madam Chair. I appreciate
the opportunity to discuss the important issue of rising prices
across America today.
You know, my constituents constantly express how out of
control inflation across all goods and all services is
affecting their daily lives. It is clear that all of our
members hear the same thing from their districts, as well. As
Members of Congress we have a responsibility to address and
reverse the economic trend which is caused, frankly, by this
Administration's failed policies.
We all know price gouging can be a serious issue,
especially during states of emergency. However, when we study
the issues facing today's economy, we must consider all of the
factors that are contributing to the price increases in our
nation over the last 12 to 18 months. We have the worst
inflation in nearly 40 years. It is destroying the purchasing
power of everyday Americans. We can't allow uninformed policy
to make this problem even worse.
So, Dr. Richey, you described our supply chain as
struggling to meet demand. Yet the Biden Administration
continues to push more Federal spending, which leads to
increased demand.
And I want to focus on the other contributing factor here:
the pressure on the supply chains and labor shortages.
President Biden's ineffective vaccine mandates have exacerbated
the labor shortages, putting upward pressure on inflation. Our
Federal Government is hurting our nation's suppliers, just as
they try to get back on track.
So Dr. Richey, can you briefly describe how a workforce
which has been incentivized to not work, and even highly-
skilled workers are being driven out of work, how does that
contribute to rising prices?
Dr. Richey. Yes, certainly that is a major issue. Getting
labor back to work has been a problem, of course, over the
entire pandemic.
I can tell you in our scenario, even with undergraduate
students, our students are back from their internship in the
summertime before their senior year, and 75 percent of them
already have a job. Those options are out there, and they are
everywhere. Without people in those positions, you can't move
product, you can't get enough supply to meet demand in those
different marketplaces, and that is going to have a significant
impact on price, because those companies have to cover costs.
Mr. Dunn. You are right, so I agree with you. I asked the
question because so many other companies are, in fact,
mandating their employees to get vaccinated in order to return
to work. Or worse, they are terminating them if they aren't
vaccinated. So labor shortages do affect supply chains and
cause prices to rise.
Let me just, on a side note, say I have a fondness for
Auburn in my heart there, Dr. Richey. I have a son who is a
physicist, graduated from there, and so War Eagle, right?
Dr. Richey. Yes.
Mr. Dunn. Another question for you, though. We know short
supply, combined with the increased demand, contributes to
inflation. But we are missing an opportunity this week to do
something about that. China has this 2025 plan to grow
industry, but we are pushing policies that restrict production
in energy, transportation, and labor sectors, while
simultaneously pushing enormous Federal spending and easy
monetary policies.
Do you believe reducing the Federal spending and providing
appropriate regulatory relief would help alleviate the ongoing
strain on supply chains?
Dr. Richey. Yes, I definitely think that regulatory relief
will help. That is one of the things that makes it difficult
for product to move and [inaudible].
Certainly what we see going on in the Port of LA and Port
of Los Angeles is an example of those restrictions that are
making things difficult to move. And if we can find some way to
reduce those regulations, which to some degree those ports
have, it will help things move in that direction.
We also see regulations around truck driving. Certainly in
California it is quite difficult to get into that market if you
are an independent contractor. Independent contractors choose
to be their own bosses. They don't want to be part of major
corporations. They are choosing not to go into California for
that reason, because of the laws that exist there. That takes
about 20 percent of the truck drivers out of the picture to
move product out of California.
And so----
Mr. Dunn. So to your point, I think we all know that the
Producer Price Index--I want to focus on that just for the last
few seconds--the Producer Price Index, which is the wholesale
version, if you will, of the CPI, Consumer Price Index, it is
up almost ten percent year on year. You know, this spells a
structural inflation for our country that I think has nothing
to do with price gouging, and nor is it a transitory problem
with inflation.
I appreciate the time to get--look into this today, Madam
Chair, and thank you, members of the hearing, witnesses, to--
for joining us.
Ms. Schakowsky. The gentleman yields back, and now I
recognize Congressman Kelly for 5 minutes.
Ms. Kelly. Thank you, Chair Schakowsky, for holding this
hearing, and to the witnesses for appearing today.
It is [inaudible] at the beginning of the pandemic, when
toilet paper and hand sanitizer were precious commodities.
Shelves were cleared out, and purchases were limited.
Unfortunately, disasters often magnify social inequality, and
disproportionately fall on minority communities, as the
Department of Consumer and Worker Protections in New York City
found last year in their report on price gouging.
Dr. Mabud, what are some underlying economic conditions
that make some communities more vulnerable to price gouging?
Dr. Mabud. I mean, simply put, price gouging affects lower-
income communities disproportionately, because it eats up a
larger proportion of their budgets. You know, families, whether
you are rich or poor, you need a diaper. But that diaper is a
bigger part of your budget if, you know, you have a child. And
so that is one of the key factors that is really harming
communities, low-income communities, right now.
Ms. Kelly. And thank you for that. Price gouging after
emergencies is often a local problem where local enforcement
agencies are best suited to address it. That is why it is
critical that Federal price gouging legislation serves as a
baseline of protection for people, while allowing states to
keep their existing authority to go after profiteers.
Ms. Frasch, as someone who has brought price gouging cases
during the COVID-19 pandemic and witnessed consumer harm up
close, do you agree that additional enforcement tools from
Federal gouging legislation would help your office protect the
people of your state?
Ms. Frasch. Yes. Currently, our price gouging act doesn't
even have protection over Pennsylvania, and so any Federal
legislation to give us authority to enforce would certainly
bring more protection to Pennsylvania, and then also having the
FTC as a partner would be helpful, as well.
Ms. Kelly. And how would this ensure that existing state
authorities are complemented, but not weakened in any way?
Ms. Frasch. I believe the way the bill is proposed allows
for both the state enforcement tool to continue, while having
this additional tool for those states who don't have
enforcement authority, or at least to have a floor that would
be across the board for all the states and the FTC.
Ms. Kelly. Also, your testimony highlighted some
limitations of Pennsylvania's existing price gouging law. Can
you cite some specific examples of cases or types of cases your
office could not bring or could not consider bringing because
of these limitations?
Ms. Frasch. Correct. So like I mentioned earlier, you know,
any time that we receive tips from a fire company, or from a
hospital, or from a school, or a government agency who is
trying to get PPE for their staff, or to supply for, you know,
for their well-being, we were unable to apply our state price
gouging law to that particular transaction.
Ms. Kelly. And then having the authority of this law, that
would have changed your assessment of these matters?
Ms. Frasch. That is correct.
Ms. Kelly. And lastly, your testimony talks about how
important it is to prevent price gouging before it occurs. In
your experience, do you believe an authority--in the authority
to seek civil penalties in price gouging cases is an effective
deterrent?
Ms. Frasch. Yes. In most cases we did not seek significant
penalties. We believe that, you know, when we sent out cease
and desist letters and the threat of a penalty to continue
price gouging, it deterred that continued conduct. So having a
penalty at our--in our toolbox certainly is helpful, but it
doesn't mean that it necessarily will apply. And I do believe
that it did deter quite a lot of price gouging in Pennsylvania.
Ms. Kelly. Thank you so much.
And Madam Chair, I yield back.
Ms. Schakowsky. The gentlewoman yields back, and now Mrs.
Lesko.
I recognize you for 5 minutes.
Mrs. Lesko. Thank you, Madam Chairman. This mask that I was
just wearing was made in China. This is the mask that was
provided to us from the U.S. House of Representatives. And then
the test kits, the COVID home test kits that taxpayers paid
for, and are given--shipped out to Americans, is also made in
China.
And so, Dr. Richey, since you are an expert on supply chain
issues, I was hoping you could tell me if you have any ideas of
how America can be less reliant on China.
Dr. Richey. Oh, sure, absolutely, I can. And thanks for
that question.
You know, over the years we have seen a transition to a
more efficient system. It is based on low cost. And that system
definitely moved a healthy amount of manufacturing to China. I
can tell you, over the last year or so, we have been spending a
significant amount of time with [inaudible] and other groups,
trying to put together educational systems that will help
managers understand risk of sourcing from a single location.
So what I mean by that is that the tools that we have
developed teach them to think about an international source of
supply that can keep costs down, think about a near sourcing
option, perhaps Latin America and that region, that could make
the product cheaper and be competitive, and then also think
about a domestic source of supply, setting up a three-set
system, so that you have suppliers competing against each other
and a fallback on much different players.
The reality is companies like Toyota, that instigated the
just-in-time management system have now stepped away from those
things, and the supply chain is naturally moving as a unit to
more responsive approaches. So that is what we should expect to
see over the next few years, and it is already in play across a
number of industries.
Mrs. Lesko. Thank you.
And Dr. Richey, I have another question for you. Can you
give me any examples--you have mentioned some already--of how
the Biden Administration's policies are actually, you know,
making it worse, the supply chain issues, inflation, price
increases. Can you name any?
I am thinking one is maybe their energy policy, and how
they are so adversary to oil and gas, and how that is
increasing prices here in America.
Dr. Richey. Yes, certainly the energy policy has increased
prices significantly.
Remember, manufacturing has to pay for energy. Then the
truck drivers have to pay for increased energy prices. The
customer has to pay for increased energy prices. And if you
think about companies like in automotive, you think about the
tires, that product includes petroleum in the product itself,
and then it includes petroleum in the manufacturing, and the
energy related to the manufacturing, and in the transportation.
So as many--as the price of oil and gas go up, it is a
multilevel hit on these businesses. That is one of the key
components [inaudible] inflation in the marketplace today, and
it was one of the first steps that the Biden Administration
made.
I have asked and been a proponent of saying we should get
all in on energy. We should be doing a lot of exploring with
the fossil fuels, be trying to use that fossil fuel exploration
to pay for these additional types of energy that [inaudible] to
move away from fossil fuels.
Mrs. Lesko. Thank you very much. And I am just going to
conclude with, I guess, a statement.
I know that one of our witnesses is Dr. Mabud, and I read
an article in the New York Times that quoted her, and it said
something about why the--and that is exactly why this
fearmongering around inflation is proving so effective, as if
people are using--fearmongering inflation. And maybe I
interpreted it wrong, but it doesn't seem to me that our
constituents are fearmongering inflation. It is real. This is
real. Prices are going up.
I don't know about my colleagues, but here in Washington,
D.C., when I went to the Whole Foods in the Navy Yard, the
shelves were empty, some of the shelves were empty. There was
no milk. And when I went back home to Arizona, certain items,
they are very mysterious, like pasta. Pasta was out of stock. I
mean, this is some real problems. Prices are going up, and it
is not fearmongering, it is real.
And with that I yield back.
Ms. Schakowsky. And next is Mr. Soto, who has been here for
the whole time of the subcommittee, which I appreciate.
And it is 5 minutes for you. Thank you.
Mr. Soto. Thank you, Madam Chair.
Earlier this term, we passed the American Rescue Plan to
put shots in arms, money in pockets, and it stopped another
great recession. In Florida alone, unemployment is under four
percent now, and foreclosures just came in lower this year. Our
community was decimated by foreclosures because Congress went
too small with the--during the great recession with the
American Reinvestment Act. We went big, and we stopped
devastation from happening in our community.
And then we passed the bipartisan infrastructure framework,
which, according to Republican Senator Rob Portman, is counter-
inflationary. And we are already seeing money coming down to
our communities. I want to thank the members on this committee
who voted for it. A few of you did. A lot of you didn't. And
you know, I guess you will have to explain that to your
constituents.
And now I agree we have a bipartisan agreement that we need
to boost domestic manufacturing, microchips, technology like
telecommunications, and others. We are going have this great
bill called the COMPETES Act up. The AFL-CIO and the U.S.
Chamber of Commerce support it. I hope you do, too. We had
nearly 20 Republicans supporting it in the Senate. So maybe we
will get everybody coming together to increase our domestic
production, or maybe we won't. I guess we will find out this
week.
Today we are here to discuss COVID-caused inflation due to
price gouging. Inflation is happening across the world.
Factories, transportation, raw materials--workers are getting
sick. They go home, and everything becomes slower, less
efficient, because of this pandemic. Some price increases are
related to this. Still, others--other companies didn't have
major increases, and they used the pandemic as an opportunity
to raise prices. You don't have to take my word for it. CEOs
across the nation have literally said this to shareholders.
And so we have to look at grocery stores, oil companies,
PPE manufacturers, which--I appreciate our colleagues bringing
that up--as three examples of price gouging that we know is
happening.
So the COVID-19 Price Gouging Prevention Act is before us
today. We are acting on inflation in this committee when it is
unconscionably excessive, price gouging, and using public
health emergencies to increase prices unreasonably.
You know, President Biden had mentioned--think about this.
What are Republicans for? What are they for? Name me one thing
they are for.
We are hearing a lot of complaining about inflation in this
committee. Join us to help solve it. Today we have legislation.
Today we have an opportunity to reduce inflation, and we are
asking you to join us and actually do something about it,
rather than hem and haw and nitpick. And so that is why we are
here today.
And it would be great to hear from you, Mr. Harman. You
know, we have heard the FTC is cracking down on oil and gas
companies for illegally increasing their prices. President
Biden took the important step of announcing the release of 50
million barrels of oil, increasing production. Would the COVID-
19 Price Gouging Prevention Act help us reduce price gouging at
the pump, Mr. Harman?
Mr. Harman. Yes. The investigation that they are conducting
gives--or the President asked them to conduct--gives us the
information about whether or not there is price gouging. But
they don't have any authority to do anything, and this
legislation is necessary to give them that authority.
Mr. Soto. And what about at the grocery stores?
Mr. Harman. It is the same. It covers the FTC, gives them
that power, and it also gives states that power, where they
either have a limited price gouging statute or have no price
gouging statute.
Mr. Soto. So they are gathering the information, but the
COVID-19 Price Gouging Prevention Act is the sword to actually
do something about it, to actually cut inflation. Isn't that
correct?
Mr. Harman. That is correct.
Mr. Soto. Thank you so much, and I yield back.
Ms. Schakowsky. Thank you. The gentleman yields back.
And Mr. Pence, thank you for waiting, and it is now your
turn.
Mr. Pence. Thank you----
Ms. Schakowsky. Five minutes.
Mr. Pence [continue]. Chair Schakowsky and Ranking Member
Bilirakis, for holding this hearing today, and the witnesses
for being here.
Wow. We are attacking inflation by fixing prices of all
these American companies.
You know, I spent over 30 years in the retail and wholesale
distribution industry, and my state of Indiana has had price
gouging legislature. And as Dr. Richey stated in his opening
remarks, price gouging happens at the local level. And all my
life, it has been my observation that it always happened at the
retail, in small communities, done by small players.
You know, H.R. 675 defies the economics of supply and
demand. I have spent a lot of time in education, taking
economics courses. There are some PhDs here that seem to be
disregarding what I learned at school.
I believe this bill is an attempt by the Democrats to
deflect their responsibility for aggravating the inflation that
we have been dealing with during the pandemic. And what we are
talking about today with 675 is an attempt to start fixing
prices at retail and wholesale across this country from
Washington, D.C., because we know better here in Washington,
D.C.
Since all of my economic classes discuss the principles of
price elasticity, I am disappointed how this bill is seen as a
solution. Price elasticity is ultimately a result of supply and
demand, and a number of you witnesses know that very well.
Having said that, can each of you answer a question for me?
If the prices have been going up by the control of the
companies, and not inflation, why have these companies that
have been accused of price gouging not raised prices before the
pandemic?
Why didn't they raise them before, if they can just do it
right now?
Dr. Mabud, you first, quickly.
Dr. Mabud. Yes, companies have power to hike prices in a
crisis precisely because they have so much control over the
system, and they are able to exploit the situation where there
is a crisis, and people are vulnerable to take advantage of
that and [inaudible] consumers.
Mr. Pence. So the grocery store or the gas station across
the street or across town can't kind of lower it if their
competitor is just being opportunistic.
Mr. Harman, what do you think?
Mr. Harman. Well, we saw it with online sellers, Amazon in
particular. Prices were--went up with price gouging because
they could, because people were buying online and not going to
the local store.
Mr. Pence. So there was more demand, and they could
increase the price.
Of course, as you well know, on Amazon there was a lot of
wait time because they actually didn't have the supply.
Mr. Harman. Yes, that was part of it, but they----
Mr. Pence. Part of it? No, we are talking about----
Mr. Harman. No, no, no----
Mr. Pence [continue]. That it is price gouging----
Mr. Harman. Right.
Mr. Pence [continue]. That has increased--you are
suggesting here today with H.R. 675 that it is price gouging
alone that has caused inflation.
Mr. Harman. Amazon itself banned 6,000 users in March of
2020 for price gouging. I mean, they themselves identified it
as the problem on their platform.
Mr. Pence. OK, so actually, companies regulate and manage
that because it is not very competitive when that happens,
right?
Mr. Harman. Well----
Mr. Pence. Supply and demand will regulate itself, so they
have more supply.
Dr. Richey, how would you answer this?
Dr. Richey. I think the way I would answer it is a little
bit differently.
I think, when we look at the different companies that have
been discussed today in this hearing, and we talk about them as
price gougers, whether they are mega-corporations or
multinationals, we are neglecting to look at the fact that
these are the businesses that stayed open during the pandemic,
unlike small businesses, the competitors----
Mr. Pence. Good point.
Dr. Richey [continue]. That were required to shut down, and
that they were also able to leverage e-commerce better than the
small business and mid-sized businesses in the country. So you
would expect that the [inaudible] profitability would have
improved, and that is what we are seeing, not price gouging.
Mr. Pence. Right. And let me just close with this. So, back
home, my manufacturers and retailers are saying they no longer
have the ability--since the PPI, which was mentioned earlier,
is outstripping the CPI, they no longer have the ability to
pass on prices, and their profits are going down rapidly in the
last two months. We saw retail went down in December, and we
saw in Europe today that inflation is roaring. It is not price
gouging, folks. It is just inflation.
Thank you, Madam Chair, I yield back.
Ms. Schakowsky. The gentleman yields back. And last, but
certainly not least, for 5 minutes I call on Representative
Fletcher for 5 minutes of questions.
Mrs. Fletcher. Thank you so much, Chairwoman Schakowsky,
and thanks to you and Ranking Member Bilirakis for organizing
today's hearing. Thank you to all of our witnesses for offering
your expertise, and spending your time with us today. This
hearing has been very illuminating, as well as your written
testimony, and I want to follow up on a couple of things.
I think it is important to note at the end of this hearing
that this Congress and the last Congress have taken a number of
steps to mitigate the damages of the COVID-19 pandemic,
including the health and economic impacts. And today's focus on
the impacts on consumers is another really important effort in
addressing the challenges that people are facing across the
country. And we have come a long way since March of 2020, but
we also know we are not finished with COVID-19 yet. And the
economic impacts are still being felt, from shipping delays, to
increased costs of food, and fuel, and health care products,
many of the things we have been discussing throughout this
hearing.
Some of the COVID essentials, like tests and masks, are
prohibitively expensive for people nationwide, and we are
making great strides, right, with the recent efforts to make
them available, sending test kits out, delivering masks across
the country. These efforts from the Administration are hugely
important. But one of the things that I have been focused on
since the pandemic began is access to and the cost of testing,
and the importance of testing.
And Dr. Mabud, in your written testimony you mentioned that
the BinaxNOW COVID-19 at-home rapid tests at some providers
nearly doubled in price after a deal between those retailers
and the Biden Administration expired in December of last year.
We have also seen providers charging a wide range of prices
for COVID tests, and I know this is something my constituents
are focused on, concerned about.
We also know that the highly contagious Omicron variant has
spread across the U.S., and that the demand for testing is
getting, you know, higher and higher, as we see these record
case numbers.
So in this Congress and in the last Congress I introduced
the Stop COVID-19 Surprise Medical Bills Act to better
understand the widely varying costs of COVID-19 tests by
different providers by requiring HHS to survey and report on
the prices of testing services in order to help identify
outliers. And Dr. Mabud, I was hoping you could explain why
free or low-price COVID tests are necessary for a strong
economic recovery, and how understanding the challenges that we
see and the disparity in pricing and testing may relate to
that. If you could share your thoughts with that--thoughts on
that with us, that would be very helpful.
Dr. Mabud. Sure. I mean, in the midst of a global,
unprecedented pandemic, ensuring access to affordable or free
testing and PPE is absolutely vital to keep our economy going,
because our economy is fundamentally at its best when we are at
our best, right? And that means addressing health concerns, and
that means addressing, you know, all the barriers that workers
and families are facing in contributing to our economy, whether
that is child care or testing.
And so, for essential workers putting their health at risk
every day, or for parents who have children in school and are
worried about transmission, masks and at-home tests are an
important backstop to prevent the spread of the virus. And in
doing so they are an important backstop to a healthy economy
that really supports all of us.
Mrs. Fletcher. Thanks for that, and I have got about a
minute-and-a-half left, so I want to direct my next question to
you, and then open it up to anyone else. And if I run out of
time, I would love to get any additional responses in the
record.
But I think it is a good way to close this hearing in
saying, you know, how would empowering Federal and state
agencies to enforce against pandemic price gouging ensure that
those crucial COVID-related supplies, like masks and tests that
you were just talking about that are so necessary to our
economic recovery, how would empowering them ensure that those
supplies are available to all Americans?
Dr. Mabud. A clear, Federal standard that ensures that
consumers across the country, no matter where they live, no
matter what state they live in, are able to be protected from
price gouging, especially for essentials in a global pandemic,
is a really clear and straightforward way of ensuring that we
do have a healthy economy, and that people are able to access
the goods that they need.
Mrs. Fletcher. Thank you, Doctor. Thank you, Dr. Mabud.
Would anyone else like to weigh in on that question in the
30 seconds I have left?
Dr. Richey. Yes, I----
Mr. Harman. I would be happy to jump in.
Mrs. Fletcher. Dr. Richey?
Mr. Harman. I think the--one of the things you see--you saw
it very publicly, but would also be happening in a less public
way now, is when there is an increase in demand there is a
hoarding by suppliers so that they can price gouge. And I think
we saw this with testing a few months ago, where suddenly
people were trying to sell tests for hundreds or even $1,000
because they knew there was increased demand. And this would
stop that.
Mrs. Fletcher. Well, thank you so much, Mr. Harman, for
that. And anyone else who wants to comment, I will be glad to
see your responses in the record. But I have exceeded my time.
And so, Madam Chairman, thank you so much, and I yield
back.
Ms. Schakowsky. Thank you. And we have a waive-on on the
committee.
And I want to welcome Mr. Carter, and recognize you now for
5 minutes.
Mr. Carter. Thank you, Madam Chair. I appreciate the
opportunity to be with you. Madam Chair, before I begin, I
understand that earlier this week Mr. Soto, Representative
Soto, had mentioned support for the America COMPETES Act
earlier, as I say, on the floor this week. And I would like
entered into the record--and I ask for unanimous consent to be
entered into the record--a letter to Congress from the U.S.
Chamber of Commerce opposing the America COMPETES Act.
Ms. Schakowsky. Oh, yes, without objection.
[The information appears at the conclusion of the hearing.]
Mr. Carter. OK, thank you.
Ms. Schakowsky. Without objection.
Mr. Carter. Madam Chair, let me begin by saying that I
applaud what you are doing here today, calling for a hearing to
protect Americans from steep price increases. This is
important, and I commend you for doing that.
But I fear that what is happening here is that we are doing
everything to avoid the reality and the simplest answer as to
why we are seeing all these price increases, and that is
Democratic policies. Policies have consequences. And that is
what we need to understand. President Biden, Speaker Pelosi,
and Leader Schumer forced through some of the largest spending
packages our country has ever seen, with policies that
discourage work, that ended energy projects, and bottlenecked
our ports and distribution centers.
Yet we act as we--as if we are surprised that this has
resulted in record inflation, the highest in nearly 40 years.
Instead, we find the Administration picking winners and losers
by targeting industries that it disagrees with, and attempting
to weaponize the FTC, and doing so in a way that is not within
the jurisdiction of this subcommittee.
In light of these actions, I would like to ask unanimous
consent to submit into record testimony from the North American
Meat Institute.
Ms. Schakowsky. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Carter. Thank you. This letter that I am--that was just
allowed--and thank you again, Madam Chair--it describes how the
meat industry has been affected by COVID-19. It addresses
claims of consolidation within the industry, and it explains
the market forces behind increased prices.
Regardless, I think it would be eye-opening for my
colleagues to hear a quote from Larry Summers, the former
Secretary of the Treasury under President Obama, who said, ``If
they are using inflation to get a mechanism to go after genuine
monopoly problems, as I said, a crisis is a terrible thing to
waste, and that is all sort of fine. If they think this is a
strategy for actually reducing inflation, they are badly
wrong.''
You know, if you add in the new regulations, or the
proposed regulations that will add more costs to the industry,
you see why we are in the situation we are in right now.
Look, I am not an economist. However, I did run a small
business for 32 years, and I know that when the cost of inputs
goes up, so does the cost of goods and services. It is just
simple, basic economy.
I wanted to ask Dr. Richey, supply chain issues at ports--I
have the honor and privilege of representing two major
seaports, the Port of Brunswick and the Port of Savannah, and
we have seen the supply chain issues firsthand. But I am
pleased to share with you that everyone on the committee--and
everyone on the committee that, unlike many ports across the
country, the Port of Savannah no longer has a backlog. At one
time we had 31 ships offshore, but now we have zero. Now we are
accommodating all of those ships. And this comes at a time as--
when this port moved a record 5.6 million containers in 2021,
more than a million than the year before, making it the third
busiest port in the nation.
And I believe that--and I know that they are doing it with
(sic) a backlog. And that is the only major port, the only
major port in the country is in Savannah that is doing this
without a backlog. And I want to credit the common sense and
innovative approaches that the State of Georgia and the Ports
Authority have taken to ensure that this happened. They have
been very innovative. In fact, an example, last year the
Georgia Ports Authority was allowed to reallocate $8 million of
their funding to convert inland facilities into pop-up
container ports. And this is important.
My question for you, Dr. Richey, what are some similar
actions or innovations that states and industries can take to
overcome the supply chain challenges we see in other areas like
distribution centers?
Dr. Richey. Yes, that is a great question, thank you very
much for the question.
I will say that the Port of Savannah has been a shining
star in [inaudible] over the pandemic, and so there is a lot
that we can learn at other ports from what has happened there.
When you think about distribution [inaudible], which are an
area that is also kind of [inaudible], there are lots of
opportunities to use different types of automation to move
things along and assist with that movement. And I would
encourage Members of Congress to take [inaudible] this at the
MODEX Conference, which takes place once a year in Atlanta and
once a year in Chicago, to look at the options that are out
there.
The other thing I want to say quickly is that, you know, we
don't see these innovations moving jobs for people. What we see
is assistance and [inaudible] them to work jobs that are easier
to deal with. We don't expect to see automotive or truck AVs
end up being something that drives people out of business in
terms of truck driving. By the year 2035 we will still need
another half million people to drive trucks in the U.S.
Mr. Carter. Great. And again, thank you, Madam Chair, for
allowing me to waive on, and thank you for your indulgence, and
I will yield back.
Ms. Schakowsky. The gentleman yields back. And now I want
to thank our--here we go--I really want to thank all of our
witnesses that are here today for their participation and for
being here, remotely or in person.
[The information appears at the conclusion of the hearing.]
I remind members that, pursuant to the committee rules,
that they have ten business days to submit additional questions
for the record to be answered by the witnesses who have
appeared. We certainly encourage each witness to respond
promptly to any questions that are sent your way. We would
appreciate it very much.
Before we are adjourning, I request unanimous consent to
enter into--the following into the record. We find these
documents: a letter from Consumer Reports; a letter from the
American Hospital Association; a letter from the National
Association of Convenience Stores; a tweet from Bob McNally; a
fact sheet from the Food Industry Association; an article from
The Washington Post; a letter from the Transportation--what is
that?
Voice. Intermediaries.
Ms. Schakowsky. Intermediate?
Voice. Intermediaries.
Ms. Schakowsky. Intermediary (sic) Association; a letter
from the National Retail Federation; a letter to the FTC.
And with that, with no objections--any objections?
So ordered.
At this time, the subcommittee, with my gratitude again to
the witnesses, is adjourned.
[Whereupon, at 1:20 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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