tv Hearing on Pandemic Price Gouging CSPAN March 3, 2022 1:44pm-4:28pm EST
>> the -- there we go. 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, the public health emergency, members can participate in today's hearing
either in person or remotely via online videoconferencing. 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 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 -- i'm sorry. i'm reading things -- for questions will be in the order of subcommittee seniority. documents for the record can be sent to kazmarik -- 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 five minutes. 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, 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 554 drugs with an average price hike of 6.3%. pfizer has raised prices on 125 drugs, more than any other
company. this came after pfizer reported record profits in 2021 from their 17%, to $21 million. johnson & johnson executives are no different. they raised prices according, across all consumer health products despite 13.6% increase in the, in revenues last year and projected three to $5 billion in revenue in 2022 from their covid-19 vaccine alone. instead of giving americans a break from sky-rocketing prices,
companies are pocketing these, this extra cash. last week, it was reported that united health 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 this, in its industry history. and, these trends aren't limited to health-related goods and services. s&p 500 companies 2001 earnings were up nearly 50% for the year
and profit margins reached a 70% year high, proctor & gamble has repeatedly raised prices on its u.s. products during the pandemic, while raking in $21 billion in profits in 2021, up 6% 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 workers by 8.1%, authorizing billions in stock buy-backs and its ceo
taking a $6.4 million raise. that's 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 corporations taking advantage of american consumers by price gouging, especially not during a pandemic. so the, this critical legislation needs to be heard and ultimately passed and i want to thank our witnesses for being here and i now recognize mr.
bilaracas for his opening statement. >> thank you, madam chair woman, and thank the witnesses as well. our constituents are facing a serious problem with inflation and as we have seen from recent mishaps, with the biden administration, we need to be smarter about our policy choices -- okay. first, i'd be remiss if i didn't express some disappointment that we're not joining in the theme of our friends in the infrastructure committee, chair, discussing your path forward on autonomous vehicles which will provide a true opportunity to transform or economy and thousands of lives, that said, i certainly don't want to miss the importance of our discussion today on how our constituents
are paying higher and higher prices. i greatly respect the work we task the ftc with executing. and as our comprehensive privacy and data security draft bill demonstrates, i also believe in working closer with the state attorney general to help enforce a preemptive law, but we must have a real discussion on the real challenge our country's constituents are facing rather than a bait and switch about where to push lane. 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're 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, meeting consumer demand and 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 wide-spread labor shortage and the revolving door of the pandemic, unquote. the legislation brought forth by the chair today, which would give, again, more new authorities, broaden 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's missing a full count for the supply and consumer demand of certain goods. the bottleneck of our ports and distribution centers, current labor shortages, or even the organized crime ripping goods right off freight rail like we're 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 overregulation that are crossing our economy and keeping it from fully recovering. the fact is, i'm not sure the american public buys 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% of respondents disapprove of how president biden is responding to the inflation crisis, with only 29% 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 out to covid-19 scams, but giving consumers false protection here without identifying actual harms will give the ftc chair more unchecked powers in a time when her actions should receive more sunshine. where is the sunshine in this
case? i'm hopeful this committee can get back to the business of how to grow our economy with innovations ranging from clear regulatory frame works 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. with that, our 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. >> i thank the gentlemen and want to point out, i think we're making real progress on the av issue and certainly agree we need to be working on that promptly, so yeah, it is good news. and at this point, i want to welcome the chair of the full committee, mr. palone for his
five minutes of opening statement. >> thank you, madam chair. look, certainly, we can work on avs but i got to be honest with you. i think avs are not the answer to inflation and price gouging and our economic problems. it's certainly something we can do but it's not something that's very, that's going to solve that problem, or any of those problems. my concern right now, i don't want to go -- i just get the impression more and more and i hope it doesn't continue to the end of the session that, you know, the answer to everything that we talk about is no. we talk about the competes act, were rules yesterday, i've been hearing for the last year or so from the republicans about china and the competition from china. 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'm wrong and we don't just get between now and the election nothing but we can't do this, can't do that. it's just sad, because i want to work in a bipartisan basis on everything, even avs, but we're just, you know, we're really not getting much cooperation from the other side and in all honestly. now let me just say, 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.senate%, highest annual rate in nearly four decades, economy had 6.4 million jobs, largest annual increase in american history. that historic job creation reduced unemployment 15% at the beginning of last year to just 3.9% today. wages are increasing. we did have the american rescue plan, the bipartisan infrastructure bill.
i say bipartisan but i think 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's true that american families still struggle to make ends meet, rising prices for food and other household necessities but many of these price increases are a result of the ongoing pandemic. that's why we're taking action later this week to pay us the american competes act. i do hope we get some republican support. that deals with the supply chain issue and shortages of critical goods and tries to have more goods made here 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's 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 disproportion ately harming the most vulnerable. on items like personal protective equipment and hand sanitize but more recently over priced covid test kits, face masks and covid profiteering expanded in all kinds of consumer goods and i think corporate greed is encouraging 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 on raising prices to consumers without consequences and executives saying they're going to continue to do so. legislation in discussion today is basically designed to bring this outrageous price gouging to an end. the act is a straightforward solution to the immediate problem, introduced by chair chekowsky, and myself, would give the ftc authority to seek
civil penalties from those price gouging during the covid-19 pandemic, states attorney generals able to enforce legislation without losing existing authority under state law and the fact of the matter is there is no federal price gouging law today. while most states have some kind of authorities, those laws are inconsistent and many fail to address the unique circumstances that covid-19 pandemic. so congress has to give the ftc and state the authority and enforcing tools they need to go after companies that are gouging consumers, mostly large companies. so i look forward to the discussion today, i hope we can find bipartisan agreement to act on this and find legislation that puts consumers first and with that, madam chair, i yield back. >> gentleman yields back, chair now recognizes the ranking member of the full committee, ms. rogers for five minutes. >> 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 hit a 40 year high. prices 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 and 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 being put together in the speakers office without input from the republicans and it is, the fact of the matter is the democrats have the votes. they're running the show. and we see record spending, we see top-down mandates, covid-19 restrictions, surging energy costs, they are making rising prices and empty shelves worse. it's 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 deliberate diversion on the root issues, on the issue of price gouging, standing up against those who have profiteered during the pandemic is a bipartisan issue, i joined with chair chikowsky along with ranking member walden to ftc including biweekly update on tracking of illegal behavior during the pandemic like price gouging and scams and i'll 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 was supposed to be targeting the goods and services during the public health emergency that are 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 work force, 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 work force shortages. the record spending by the redful government only exacerbates the inflationary death spiral. last congress we were able to act, bipartisan, for the first authority to tackle covid-19 scams. it's disappointing that that legislation failed to be included today. let's work together, let's work 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, the house science committee which has jurisdiction over, is holding a workshop on autonomous vehicles. we're talking about price gouging. i was pleased to hear the subcommittee chair say she's 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, frame work 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 frame work. 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's supply chains, innovation, let's win the future, work together. i yield back. >> gentlelady yields back and chair would remind members that pursuant to committee rules 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 harmon. competition policy advocate and public citizen who is here. remotely, we have sarah frash who is chief deputy attorney general and director for the bureau of consumer protection at the pennsylvania office attorney
general. we have dr. glen richy jr., harvard emminence scholar and chair for the department of supply chain management, at auburn university. and dr. rakeem -- let's see -- mamud, who is managing director of policy and research and chief economist at groundwork collaboration. at this time, the chair will recognize each of the witnesses
for five 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. at first, in front of you, will be, and you'll 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 five minutes have expired. for the witnesses testifying remotely, there is a time on your screen that will count down your remaining time.
so mr. harman, you are recognized now for five minutes. >> thank you, chairwoman, and other members of the subcommittee to for the opportunity to testify before you in person on corporate price gouging and profiteering during the covid-19 pandemic. i'm alex harman for the watch division, nonprofit division with over five thousand member and see supporters, for the past years we've supported the public on a broad range of issues including consolidation of corporate power. i think it's important to first explain what price gouging s for those of us who remember our basic economics classes, we learn supply and demand result in a market-based price consumers are willing to pay, when the price raises too high, a competitor responds with a lower price or consumers find alternative. price gouging is where that
supply and demand process is distorted by an emergency situation that puts the seller in a 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's specifically targets people in their most vulnerable, making conditions even worse for them. unfortunately, even before the country faced lockdowns and shortages of essential goods, price gouging was already under way. by the time the first u.s. death of covid-19 had been reported on covid, price gouging on sales to masks on amazon already resulted in a warning to third party sellers engaging in the practice. kroger, other companies began then putting quantity limits on toilet paper, disinfectants, but online sellers were charging normgs prices.
over two years, price gouging shifted to a broad array of products and unfortunately normalized. consumers and policy makers cannot be blamed for wondering if price increases on central products are in least in the part due to price gouging. many americans experience the pandemic facing financial hardship, or dangerous conditions on the front lines of healthcare and service industries, however for the biggest companies the pandemic proved to be a goldmine of increased profits and significant growth, amazon, walmart krogers and many others experienced profit increases in 2020 but in the second year, sales and profits continued to rise to record levels for retailers, true for consumer packaged goods and manufacturers as well. in addition, these companies have no shame about their plans to raise prices. in fact, have been bragging to investors how they have been able to raise prices without
bringing down sales. proctor & gamble's chief financial officer said the company hasn't seen any material reaction to price increases from consumers and kroger's ceo saying we are comfortable with the increases seen at this point. these companies only making more profit as they race prices opinion is it any wonder then why the companies are so eager to raise prices? in a recent piece, by former u.s. labor secretary, he argues these companies are exploiting higher cost as an excuse to make even bigger profits. it's hard to disagree, it should be stopped, unfortunately there is no federal price gouging law, so the subject of this hearing was introduced by chair to establish a price gouging law in response to the initial reports of price gouging. as members of congress consider efforts to stop price gouging it is worth examining state laws
where a statute would be used to protect consumers, unfortunately, where state laws to protect exist tlgs a wide different between existence and applicability. the lack of a federal law and inconsistency of laws in the states combined with onnal shopping that transcends state borders created gaps and led to a potential for state law to be ineffective with the practice online. price gouging is an exploitive practice that takes advantage of people at their most vulnerable and desperate, a federal statute is needed to address this problem. it should be in place as soon as possible to stop price gouging now so 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 in in need, price gouging is insidious exploitation of the most vulnerable, there is no excuse for preying on consumers. thank you for the opportunity to testify on this important topic.
>> thank you very much, and now, ms. rash, you are recognized for five minutes. >> good morning, chair shekowsky, members of the committee, thank you for inviting me to testify today. my name is ara frasch, i serve in the chief deputy for attorney general. in general, we work directly with consumers and businesses to both mediate disputes and 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 in pennsylvania passed in 2006,
given our office an important tool -- >> ms. frasch could you speak up a little more? >> sure. this act protects consumers from unconscionable price hikes in a disaster, emergency, and continuing through determination of the state of the emergency. generally unconsciousably excessive prices, the act includes price increases of 20% or more during the applicable time period when compared to the price seven days prior to the stay-at-home 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 its law is limited in scope, it does help us both combat and deter price gouging during disasterress 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 cover different consumer products but we found most prevalent were ppe equipment, hand sanitize, bottled water, things like that, face masks. one example of a tip we received was from husband of a nurse in bucks county, pennsylvania, he was concerned his wife and coworkers didn't have the appropriate access to ppe such as the n-95 masks during the first weeks of pandemic so one of his employees was in a local pharmacy, filling out prescriptions, saw the store had n-95 masks available and she purchased them. she was able to get five masks and was charged $20 per mask. for context, before the declaration was issued, n-95 masks could be obtained for less
than $1 and even factoring in the increase in cost and supply to pharmacy, that price to consumer was significantly increased, in clear violation of our statute, we were able to then contact that store and as a result, that buyer received a refund of full amount, she was overcharged and the store able to bring back the prices to reasonable levels, preventing other consumers from being harmed. so this declaration remained in effect for march, 2020, through june, 2021, and at that time, we received around 6,200 consumer complaints of price gouging from all over pennsylvania. some of these were actually mistaked by businesses. they didn't understand the law, perhaps, and 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 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 were able to issue 523 cease and desist letters, issued subpoenas for more information, filed two lawsuits for violations of the act, entered in 29 settlement experiments separate from any litigation and resolved those and ultimately, were able to return 73,000, $272 in consumer restitution to make those consumers hold. we also focused on a state effort to engage with major e-commerce platforms such as amazon and facebook and others
in order to enhance -- as a result of those efforts, we were able to identify additional price gouging, take appropriate action and obtain refunds, also have those platforms take down violations of the act. and we were able to present, presentations to trade groups, consumer advocates, retailers, to help educate and inform what violations may be. so as i mentioned, we have some limitations for acts. right now, it's not currently -- >> your time expired. so wrap up, right now. >> sure, thank you. we have no protection currently for price gounling in place in pennsylvania. >> okay, thank you so much. really appreciate your testimony. and now, let me welcome dr. ritchie for five minutes for his opening statement. >> thank you for being part of
this process, i'm dr. ritchie as mentioned, scholar of supply chain management at auburn university, host the number seven program in supply chain management in north america and a top 10 research program globally in supply chain management logistics, i'm also currently co-editor in chief of journal of medicine logistics largely concerned the top journal in supply chain management and logistics worldwide. my other hat i wear is in the research directorate position, can talk of issues of technology if you like. i have about a decade of experience in practice in wholesailing and manufacturing and have done now for about 20 years, research in international business supply chain management. and logistics in marketing. i should also add that i have experienced a lot of different
disasters over the course of my life, in different states in this country, tornados in ohio, and oklahoma, floods in tennessee, hurricanes in alabama, heat waves in maine, storms in texas, ice storms in texas. so you probably don't want to live next to me but i've experienced a lot of the post crisis behavior which seems to be what we're talking about in this resolution. the hr-675 resolution is interesting. i would say i got confused about it quickly because price gouging typically occurs at the retail level during these crises and tends to be relatively small players. corporate strategy level price gouging does not happen to the degree suggested in the document and that's because it's quite obvious to see, to government and business. i've dug a bit diaper 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
we have to deal with so i added a couple of comments in written testimony to flesh those things out and later if the committee would like more documentation, things that explain what we do i'd be happy to follow up. 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're 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'm here to address some of the big concerns on the list and i'll list those for you. there are eight. one is specificity of the document. i don't know what unconscionable, excessive or increased prices unreasonably or grossly exceeds is. there's no kind of barrier on what those things are. there's no emphasis facing what
contribution margin is which is really what companies make, the difference of their costs and what their prices are. i'm worried about the passage of time, february of 2022 is dramatically different than economic concerns of january of 2020. so that seems a bit strange to me. i'm concerned that similar products and substitute products in the legislation will be compared based on their pricing and not on their cost or quality or their value. i'm worried that the term corporate could be extended directly down to small businesses, local mom and pop grocery stores struggling mightily in this time period and would put them in a more difficult position than now. i'm concerned the government at the federal level will not be able to handle monitoring the supply chain because of the level of complexity and i'm 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 pan democrat,
just about everyone should be able to show additional cause, loss of control, negative impacts on profit, lost sales and additional risks that have been curved that will drive prices up naturally in a market economy. and the other thing is first responders are the ones that typically deal with these problems. it's the people within the states and within the communities and i'm not certain how d.c. handles that problem. finally, i'd like to say this, 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 cost, to add or replace a supplier, incorporate rising transportation costs, restarting sustainability programs if it's not during the pandemic, to respond to energy crisis, and maybe just to adjust to existing or new government replacements. so in summary, there are a lot of issues to worry about here, be concerned about here, but i thank you for having me and i'm happy to help the committee if i
can. >> thank you. and now, i invite dr. machbud to give his statement for five minutes. >> chair woman shekowsky, chairman pallone, members of the subcommittee, thank you for inviting me to testify today, my name is dr. mabud, you mean with ground work collaborative, managing director of policy and research. i'm glad to be with the committee on price gouging, my testimony will focus on three main points, first, pandemic profiteering is widespread and taking a massive toll on small
businesses all while executives are sharing record profits. second, the profiteering from a economy aim that allows mega companies to benefit from crises, third, wage increases are not the reason for price spikes. covid tests and masks, just last month, after the cdc updated guidance for the public to quote, wear the most protective masks you k producers critical ppe immediately cashed in. in early october, a 50 back of kimberly clark n-95 masks cost $15.19, later, the same box cost $50. i quote, while overall financial results rpz disappoint, we took decisive action to off set the impact of higher cost with significant pricing actions. on the same call, said kimberly clark would allocate more cash
to shareholders in dividends, in other words, even though the company was experiencing disappointing quarter, kimberly clark ceo continuously telling he would be able to cover the payouts all on the back of consumers paying more for essential items. unfortunately, profiteering is not due to pandemic specific goods. take proctor & gamble, more than a quarter of the global market on laundry products. january, 2019 call, saw increases in all categories in 2021, with more to come in 2022. he state, building on the strength of our brands, executing price increases. we see a lower reaction from the consumer than what we would have seen in the past. in other words, the consumer -- the company is taking advantage of consumer's basic needs because demand is relatively unresponsive to price hikes for goods like prices. the ability to raise prices
without consumer demand drop combined with market share gives companies like proctor & gamble reign over ever-increasing profit margins, especially when they can blame covid. this shortd term profitness that ushered in an economy that leaves consumers vulnerable to price gouging. the unending request for maximizing short term returns, resulted in maximizing everything from shipping to rail. as corporate executives prioritize the supply can system that eliminated resiliency and increasingly relied on precarious labor, economy left more vulnerable to price gouging and profiteering, corporations have been able to keep prices low and make profits at expense of 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 0 over a functioning system . finally, a common miss conception on the role of worker wages during price hikes. no correlation between price increases and wage increases since december, 2020. in short, absolutely no evidence to suggest wage increases for workers are to blame for the price increases today. there's a clee path forward for congress. first, congress should take up hr-675 the covid-19 price gouging prevention act. this legislation would create a clear framework to identify and prohibit profiteering and provide the federal trade commission and state attorney general to protect consumers from corporate price gouging. second, the committee can continue to ensure the ftc has anticompetitive and business practices to encourage competition. the best path toward inclusive resilient economy, is foster
competitive profits where working people and smaller competitors have equal bark power. safeguards, limiting prices in the long run, making sure no one is left behind during the recovery period and beyond. thank you and i look forward to your questions. >> thank you very much. we have now concluded with the witnesses' opening statements. at this time, we look to member questions. each member will have five minutes to question our witnesses and i will start by recognizing myself for five 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, quote, wage price spiral, unquote, where high prices cause higher wages while, which then leads to even higher prices from more, you know, continues the cycle. but others, like the federal chair, federal reserve chair powell disagrees.
so dr. mabud, in your research, have you found that rising wages are -- are troubling? do you believe that they are responsible at all for the price increases that we are seeing today? >> thank you, chair shekowsky. 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 rages and prices. while there has been a link historically, that's not the case today. in fact, sectors of the economy that saw the highest price increases are not correlated with where we're seeing significant wage growth. but other important things is too many workers have been facing rock bottom wages for decades, the secular decline has
armed many workers access to security, and the fact we're seeing wages in some of the lowest income families in the economy in the crisis is a testament to the importance of the federal investments congress made during the pandemic. >> so do you think then, there are any risks to working families from trying to combat rising prices by limiting wage growth? >> absolutely. tamping down on wage growth and demand is the last thing working families need in the midst of an unprecedented crisis. increased demand is a strong signal that families are weathering the storm and that we're going to come out of this crisis with a stronger foundation for our economy, one broad based and inclusive. other action that is would stifle demand or wage growth would hurt the people currently
bearing the brunt of increased prices, families and small businesses around the country. >> so let me ask you, finally, dr. mabud. in your research, what evidence have you found of corporate price gouging? >> 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 in sector after sector, company after company, corporations are jacking up prices on consumers and using concerns about inflation as cover to do so, we saw that in kimberly clark taking advantage of the pandemic to raise prices and masks, proctor & gamble using what they sell are essential family goods to are a raise prices in the crisis, and mcdonald's raising prices on consumers while they enjoy
higher sales. >> thank you. mr. harman, why is legislation to empower the ftc and states, state attorneys general critical to staff price gouging? >> thank you. well there's 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 state that is have no protections as well. and so there's a lack of overall protection and then there's this larger question of where there is price gouging online, and on national market places, whether the state laws can even cover those issues . >> thank you, we saw amazon raise prices at the beginning of the pandemic and, you know, really hurting consumers. so my five minutes have expired
and now i, i welcome the ranking member for his questions. for five minutes. >> thank you very much, appreciate it, madam chair. and i want to thanks the witnesses as well. our constituents are facing a serious problem with inflation and as we've seen in recent mishaps by the biden administration, we need to be smarter, folks, with our policy choices. so the situation does not worsen. one of the contributing factors to higher prices and fewer good as the bottleneck at our ports and distribution centers that are causing a delay in goods from reaching our constituents. that's why i was very glad to see our governor, governor desantez offer up the ports of florida to alleviate the
bottlenecking in california where cargo ships wade in the water, waiting to unload their cargo. i just want to reiterate his words and say florida is here to help. so i want everyone here to know, florida is here to help with this issue. sadly, it appears president biden is no closer to solving this problem. the transportation in association recently reported to 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, says dhs in supplying 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. ritchie. 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. could you explain how new technologies on the market may help alleviate these issues? and again, the question is for dr. ritchie. >> i'm not sure if he's able to communicate with us, madam chair. dr. richy? >> yes, sorry. thank you. thank you very much. yeah, it's a very interesting
question. we have the rfid lab here that does different activities around high level technologies and supply chain and business overall. certainly, we've had some advancements we're working on and with trucking there's still work to do in that arena to get the vehicles to 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 contingencies and differences. there are also other things that we could potentially do. automated material handling equipment is heavily used in international ports throughout europe and not used to the same degree in the united states. that would certainly by something we could work for and get into place, in the course of los angeles currently bringening about 40% of international inventory and supplies we see and potentially impacting every citizen in the united states. outside of that, there are
things we could 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's made it difficult to implement things that would help and also think about information technology, been doing tests with rfid to track products, tests with block chain policy, to track transactions, motivating those things to move forward may ensome with the crisis but certainly for us, the labor crisis is still an issue. we need people to go back to work. >> thank you, doctor. now, i'd like to read a quote from jason ferman, and enter the former chair of 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, unquote. dr. ritchie, according to ferman, 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's really going on here? how do we fix the problem? and i appreciate your testimony today and answering the first question. thank you. >> yeah, 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, economic policy, understanding theory, developed by oliver williamson. sorry -- so yeah, there are a number of different inputs,
rights that have to come into the process that drive up cost. and when we see scarcity in the supply chain, organizations obviously increase costs to cover fixed costs, make sure they can stay viable in the market. so that's why i earlier recommended to take a look specifically at contribution margin and what profit is for individual items. because it's very difficult to get -- >> dr. ritchie, i apologize, i'm way over my five minutes and i must yield back. but i appreciate it very much. >> no worries. . >> madam chair, can somebody check the microphones in the committee room? once in a while there's background noise coming in, it doesn't look like it's coming from the mics on the screen. sorry, can we get that fixed, it's hard to hear people.
>> yeah, please, stay muted if you're not being 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 five minutes of questions. mr. pallone. >> yeah, i have to say before the ask the question, i rektd mr. bilirakis, but the biggest problem we have now is covid, right, the reason people are afraid to go back to work is they're afraid they'll be in contact with people who don't have vaccines or people who don't have masks and covid continues to spread. i mean, talking about, you know, the answers 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'm not saying it's true for you guys but i see so many of my republican colleagues, you know, not, suggesting to people should even be vaccinated or not talking about it at all. i mean look, i'm not going to argue over the mandate, but the bottom line is we have to convince people to get vaccinated otherwise we're 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 the autonomous vehicles, particularly trucks is what does that mean? it displaced people? of course we have to move toward autonomous vehicles or even autonomous trucks, but we have to be very careful 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're ready to literally say we're going to have some major autonomous trucks right now. i mean that's something that has to be looked into and we can certainly work on it on a bipartisan basis but i'm 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 to get that under control. but the best way to do that is through vaccines. i just a want to say to the ranking member, when we talk about price gouging, remember, this this bill, legislative hearing is just the start today. you mentioned several things you would like to see in the legislation. we 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 bipartisan basis. the same is true for avs. we can do these things on a bipartisan basis, and i don't want to suggest that we can't. now, a couple questions, i want to ask dr. mabud, you invested some companies using the rising cost in pandemic supply chain issues to boost profits while consumers pay more, can you
expand on that and answer whether there are particular industries where profiteering is most prevalent, if you would? >> chairman, thank you, chair pallone. unfortunately for consumers, this is a deeply produced chain across a range of goods. it's not limited to a small corner of economy. and some of the most flagrant examples of profiteering is from companies like kroger and procter & gamble. that sell things that people can't go without. >> then i wanted to ask the doctor, again, do you agree that corporate price gouging is self reinforcing? in other words, how does it help to keep prices high when there's supply chain issues and the pandemic going in the right direction.
the issues are self reinforcing, if you will? >> yes. this is essentially the story of financial -- when one company is able to get away with adding profits to price gouging, companies across the board want in. and that's exactly what we have seen. companies with aggressive pricing strategies rewarded and those who are not taking the strategy on are seeing massive selloffs. in other words, investors, the prices are translating into higher returns for them. the other point to make sheer that this -- with the exception of volatile commodities, fairly sticky. the cost of a soda or a toothbrush didn't going to go down when supply chain issues ease. consumers will be stuck with higher prices over the long haul. >> let me just ask, either you or dr. harmon, are there incentives for these companies where congress could help to stop price gouging? or do you believe federal price
gouging legislation is necessary to stop pandemic profiteering? dr. mamouz? >> sure. i'm happy to jump in. absolutely. i mean, having a federal standard that is clear and widely applicable is critical to ensuring that price gougers are not able to get away with it later. >> you think the legislation is necessary? >> correct. >> thanks a lot. thank you, madam chair. >> the gentleman yields back. now i recognize the ranking member of the full committee, ms. rogers, for five minutes of questions. >> 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 on a majority the president, the administration is all in on electric vehicles, believing that's our future, and not as concerned about displaced workers.
i guess our question is why can't we move forward on autonomous vehicles? i just read the death rates have gone up dramatically in the last year, on average 37,000 on the roads, but i think we already reached 31 and are getting close to that number already. i believe autonomous vehicles have the opportunity to save lives. it's our future and we should move forward. when it comes to drafting, you know, to addressing solutions, whether it's solutions around rising costs on americans or any legislation -- >> if i could just comment on that. you know, in the infrastructure -- >> okay. okay. >> do you mind? >> well. >> go ahead. i can give you an update. >> i would love to hear what the update was on autonomous vehicles, because there was a bill we passed bipartisan four years ago, unanimously -- okay, and 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 talk about wanting to manufacture in the united states, and we're shutting down mining, an arizona mine -- is it a cobalt mine? minnesota, another mine being shutdown. i think -- i think when it comes to solutions -- i appreciate the chairman talking about want to go work together -- i would welcome working together but working together is not having the majority tell us here's the bill, will you support it. that's thousand it -- you know, this america competes act, our input has not been offered. it's, this is what we put together. we changed, you know, some of the bipartisan bills we did work on were changed when 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? okay.
so on to the issue of rising costs in the united states of america. dr. richey, i shared a story about the mom struggling to find formula for her newborn. can you -- i would like to start with dr. richey, and if anybody on the panel can tell me yes or no, does this legislation in front of us address her struggles? i would like to ask a quick yes or no of the panelists, starting with dr. richey. the panelists. dr. richie, would this legislation help the mom that is trying to find formula?
>> mr. harman. >> i don't know the situation, but i would say it's not a supply chain legislation. >> dr. mabud. >> yeah, part of what we're seeing here is really a need to address supply chain issues, which allow corporations to engage in profiteering and price gouging. this piece of legislation is one important piece of the puzzle in making sure that mother is able to provide formula for her child. >> so, okay. and ms. frasch. >> great. you know, we saw some supply chain issues in our local stores and part of the reason why the local stores were charging more money was because it was in harder to get the items.
so if the supply chain issue be corrected, then you may have the price increases which potentially could cause price gouging starting from the very beginning. >> 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. price of gas. and, you know, it's -- and then the oil and gas companies are accused of gouging consumers. and, you know, this isn't something new. 100 years ago -- i'd 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 1920s. they found no evidence of anticompetitive behavior then. guess what, i don't believe they'll find it now. an issue of supply and demand.
putting aside the fact that the president wrote to the ftc, an independent agency. not to be influenced by the white house. dr. richey, what do you think the administration should be focused on in terms of securing our energy supply and keeping prices down? oh. i'm over. dr. richey, i would appreciate you answering that question at a later time. madam chair, i'm sorry. i yield back. appreciate your indulgence. >> thank you very much. i will refrain from trying to respond. we can talk later. and let me now call on mr. rush, my colleague from illinois for five minutes for his questions. >> i want to thank you, madam chairwoman and the ranking member for this hearing.
at 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, quote, specifically targets people at their most vulnerable. end of quote. 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 action can we take today to stem this
abuse? >> so, short answer on the front end is, no, not specific. imperial 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. 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. >> thank you. ms. frasch, in your testimony you discussed how pennsylvania price gouging statute only applies to, quote, 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 my healthcare staffing agency. -- by health care staffing agencies. for example, certain hospitals in chicago report budgeting 130
-- another 30 to another 50 dollars on hour. another 30 to another 50 cents an hour for nurses where one hospital in my district paying $2 million per month. these agencies are pocketing a significant portion of what they charge for profits. unless things change, many hospitals serving underserved communities will have to reduce their services limiting access to merely to needed healthcare. 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? >> 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, 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 make sure that they didn't pay, you know, for things that they shouldn't have paid or paid extra money. for things that they shouldn't have paid. so, yes, this would address that shortfall. >> thank you very much. >> madam chair, i yield back.
>> the gentleman yields back. before i call the next member, let me just say i'm going to have to excuse myself for a few minutes. and in the meantime, the vice chair of the subcommittee mr. cardenas will chair the subcommittee virtually. i'll be back as soon as i can. but now let me call on mr. upton for his five minutes of questions. >> thank you, madam chair. i sort of wish that we had a witness from the administration here to answer some of our questions because i 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. it's 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 years, i travel around my district but i'm sure as everybody does on both sides of the aisle there's 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've got a lot of folks saying we want to build a new house, we want additions. they don't have the workers to help that. your restaurants, your hotels, your hotels don't. they're not offering daily cleaning if you're going to stay there for the weekend. they will clean up before the next guest comes if you're there for a couple days. but they don't have the staff. talk to the auto industry. they're looking for parts and i've got a company in my district that are looking for 200 auto workers just to make axles for autos. look at chips. you know they had a great announcement i talked to my
colleague here next to me and just did a huge chip thing in ohio last week with most of the delegation. you have people on both sides of the aisle from as far left as joyce beatty to 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 chip's bill on its own that we can all vote for here. talk about the autonomous vehicle legislation. we passed this in this committee under greg walden, chairman walden. every member voted for it here. maybe one, maybe justin voted against it in the senate but it passed with over 400 votes and four years later we're letting china run ford as we haven't come back with a bill. 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 last week. i can remember traveling in my district, little town of coloma, i think it has two traffic lights. across the street from the mcdonald's for the entire summer there's a yard sign there. truck washers wanted. $18 an hour. i mean, basically, you need a good pressure hose and maybe a couple 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. you know, i think just yesterday i saw fedex 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 just learned that the fmcsa, the federal motor service has a new regulation going into effect on friday, this friday. that's 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's going to increase the cost of earning a cdl from the current levels of $1,000 a driver to $15,000 a driver, including training costs and wages. it's going to be prohibitive for small businesses and individuals and exacerbate a serious shortage of the already limited supply of commercial drivers. businesses like mine can't afford it without a sharp and immediate price increase that the market won't bear and soon to come deeper later 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 at the pump is going to be four bucks by spring. we have this winter that's upon us now hitting the rest of the country as we see these storms the leading story on the news. gas prices. the natural gas prices are up 30%, 40% 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're going to shut off the pipelines and we're going to limit our efforts to identify and produce north american energy here instead of coming from overseas. all of those things tip the dominos the wrong way as it relates to inflation and trying to get our economy back on track.
so, i'm sorry i didn't get any questions here. i'd like to have all of you comment, but i can see my time is expired. so, with that, i'll wave the white flag for this hearing. just wish we had someone from the administration to help answer some of these questions instead the hearing that we have got today. with that, madam chair, i yield back. >> the gentleman yields back. next we recognize representative castor for five minutes. >> thank you, mr. chairman. thank you to all 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's double the going rate. unfortunately, the administration has addressed that with some of their free covid testing that consumers can order. you know, even the federal reserve chair said -- was asked recently why are companies raising prices? 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's not, it's not a new phenomenon, however. coming from the state of florida we see this time and time again
when a tropical storm or a 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 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 detailed a lot of this in your testimony occurrences of executives trying to explain away price increases. tell me, are these price increases you discussed related to underlying cost increases? can legitimate reasons beyond corporate greed explain all the price hikes we're seeing? and why did these companies believe they could raise prices without facing any consequences from customers or the law? >> thank you for that question.
i'll take your sort of last point first. you know, many, some of the most profiteering we're seeing are from companies who really sell essentials. 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 hold a lot of market share. so if procter & gamble has 15 different brands of detergent, they can jack up prices on all the different types of detergents and the consumers have no where to go. the question around input costs are also really important. input costs subject to the same brittle supply chain that is weakening our overall economic resiliency. we have a system where corporate executives have really prioritized a just in time system where there is really no resiliecy and redundancy built into our supply chain to help weather shocks and
we 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's happening, which is predominantly with large companies today and in other crises that you mentioned. >> 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? >> thank you for that question. so i think in terms of what we were seeing, you know, typically this, the statute that we have in pennsylvania is something that's very local and very geographic to a specific area. here we saw it across the entire commonwealth. we saw it occurring outside the commonwealth. so, we had to put a whole bunch of people on a task force where we typically maybe have one or two agents and a couple of attorneys working on it because
it's a specific area with limited, you know, consumers who are being harmed to the entire state of pennsylvania having, you know, these issues and we had to dedicate a lot of time and resources to investigate, learn and enforce our law. >> thank you very much. well, i want to urge my gop colleagues to join us. democrats have been taking action to lower cost for consumers whether that's the cost of prescription drugs, healthcare and build back better and the american rescue plan, or it's building up our domestic manufacturing base through american competes that's on the floor of the house this week. we're taking action. i really want to invite our gop colleagues to join us in doing that, as well. and i'll yield back with the time. thanks so much. >> thank you. the gentlewoman yields back. also members if you have your microphone on whether you're on zoom or in committee, can you please double check. i've got some background noise
right now. sounds like somebody is moving some stuff or coughing or what have you. somebody's mic is on. with that, we recognize congressman latta for five minutes. >> thank you very much. 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 the autonomous vehicles. just real briefly, again, this is legislation i sponsored back in 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 we got unanimous support as it left this committee. not only unanimous support when it left this committee but also voice voted on the floor. as we've seen since that time about bringing back this
legislation since it went over to the senate and unfortunately, we couldn't get it done there, that foreign entities across the world are out there being able to get ahead of this in this and we want to make sure the united states is the one bringing this forth as technology. it was also brought up about what's happening on our highways. the latest statistics, horrible statistics 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's going up. but with that, i think we need to be addressing it and getting it going again as soon as possible. dr. richy, if i could start my questioning with you, according to a december small business 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 as i was reading it you brought a couple 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 risks 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 the supply chain transactions. i realize that because i have 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 they need 80,000 truck drivers right now because of the shortage. so with that, dr. richey, you know, in your research, what is
the impact of the current supply chain crisis on small businesses? >> it is all 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've also had an issue with labor. certainly those inputs and getting people to the job and actually being able to drive the vehicles and do what's appropriate. a difficult thing to deal with, as well. all these inputs drive inflation up in this country. so price gouging could be a component. when you think about labor costs and think about inputs like parts being scarce or prices going up. when you think about business partners are 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.
obviously, it has the hardest impact on small business and so, you know, the legislation will have to be careful on uncovering what is really a price gouging situation and what is just a natural mean to increase prices to make sure small business can remain viable. >> you know, 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 my colleague mr. upton is bringing some of this up. you mention 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 and when on that? >> yeah, so, that type of discussion goes back to the work of the 1950s that showed the government intervention raised their prices when they get involved in business relationships. maybe the relationship between bringing your in-laws to come live in your home shows the
complexity that's created when that happens. the same thing happens in the supply chain. it can also drive trust out of relationships and cause relationships to dissolve. so, that's kind of what i'm getting at there and hopefully i cleared that up. >> thank you very much. and mr. chairman, my time is expired and i yield back. >> i just want to clarify for the record, i don't think the federal government has ever forced anybody -- [ indiscernible ] -- i hope people didn't misunderstand that comment. little levity, people. amongst all the noise. not the noise of the comment, but this background noise is driving me nuts. anyway, next the gentleman yields back. next we recognize congressman mcnerney for five minutes. >> i want to thank the chair, great witnesses. great hearing this morning. mr. harman, 39 states, including my state of california have the ability to enforce price gouging during emergencies or disasters. you state that most states have a law against price gouging
during the declared emergency, but laws very widely. -- vary widely. how do the differences in limitations and state authority hinder our recovery from the pandemic? >> i think the inability of the ftc to investigate nationwide and it's much easier to look at that and figure out where there is cost increase and versus where there is a price gouging. for a state, that is much harder to see. the state price gouging laws, as has been mentioned, were really focus on localized emergencies, and localized price gouging. and what we've seen in the pandemic is widespread national price gouging. while there are investigations and while there is enforcement,
as the other witnesses have detailed, you really can't get at the core problem which is now, as i mentioned, normalizing. we're seeing it in so many more sectors and categories than just the pandemic-related ppe things we saw initially. >> do you think that online price sellers and online sellers may take what they've learned from the pandemic price gouging on the consumers in the future after the pandemic ends? >> oh, 100%. and it is, it is a business practice that works and we're now seeing the other retailers and traditional retailers and manufacturers mirror it in their pricing. >> 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? >> we are suffering a crisis of
corporate concentration in every sector across the economy. dr. mabud mentioned procter & 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 handful of companies controlling what we buy and that affects consumers, obviously. and also affects the small businesses who are attempting to compete with them and also serving as their vendors. >> what is the solution? >> there's a lot of solutions. i think price gouging legislation is one of them 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. >> well, how do state laws fail to provide authority to police pandemic price gouging by online platforms? >> they're trying. right.
this is, 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, they 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. even if you're 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. >> well thank you. dr. mabud, each week i hear from small business in my district
that continue to face an uncertain future while corporate shareholders gouge and have record profits. how would a price gouging law benefit small business owners who are still overcoming losses incurred? >> it is absolutely critical to take on bad actors in the market to support small businesses. small businesses are often some of the entities in the market that are most hurt by price gouging, particularly up streams. consider u.s. steel, the third largest, excuse me, the third largest steel producer in the u.s. recently reported that they are raising prices that go beyond input costs. imagine the impact on your local bike shop, right? a small business owner who is facing higher input costs and seeing their profit margins decrease and all good companies even though they're not behaving badly having to pass it on to the consumer. so really small businesses are getting crushed by corporate price gouging the same way that consumers are. >> thank you.
i'll yield back. >> the gentleman yields back. thank you, mr. cardenas for chairing. and now mr. guthrie, it's yours for five minutes. >> thank you for holding this hearing. kentucky did have price gouging laws and successful and you've seen a lot of it with people hoarding products and you're 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 and then grocery stores will have more volume and make more money. so the question is, are they price gouging or profits have gone up or is it price gouging? one good example i remember i have a lot, they're 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, bringing to my
attention i want to get to the bottom of it and started asking around and the problem was most, a good portion of milk, i forget the percentages. i talked to people in the milk industry went to institutions. they went is to schools. they shut schools down and shut universities down and there weren't enough gallon jugs. that was the problem. the kind of things you sell at a grocery store. on the face of it you would see on the news people dumping milk because you can't store it long enough and it was a supply chain issue. it wasn't somebody trying to purposely gouge or move forward. those are the things we have to be careful of. when people go out and try to buy all the hand sanitizer they can buy and try to sell it to you online. that's one thing. but i would like to see an example since kroger has been brought up with price gouging. i have three in my town and i will certainly do whatever i can to point out where their price gouging where that is. not that they are just -- and the opposite side, i can show you a lot of restaurant owners who were not profitable in the last couple of years.
and so it moves forward. and i want to talk to dr. richey and one thing, you know, and i say i heard that kroger decreased wages. i think kroger, in my area, it's represented by a bargaining unit and i'll tell you they have signs up everywhere for work. so, i would like to see the data on that, if that's possible. dr. richey, you were talking about trying to find workers. i know the kroger i go to in my area, meijer and we have a meijer in my area and i go there, and a walmart. i will hit them all. they're all looking for workers. so the question is, dr. richey, several, i think some panelists here that talk about expanding and increasing benefits and how that affected the supply chain and what do you think would happen if we expanded the unemployment benefits which i -- with the federal bonuses
which i -- i think i voted for in the original, i did, because the whole economy was shut down. but now that we're looking for workers, how would that affect it? >> first, let me point out we're definitely looking for workers. it's a big problem and across the country people are saying where did the workers go? so we're 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 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 overall. at the same time, we had a lot of money dumped into the system to try to help people that were unable to make money. and we also had opportunities to encourage them to buy or purchase early or panic buy based on their concerns or on worry that they weren't going to get their holiday gifts. that combination of economic stimulus while the supply chain
was stopped created the dramatic disruption and we're 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. >> do you think that it would? i mean, you said ask the question. you think that it would? >> i would say until there's, 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. >> okay. related but just a little separate. you talked about ai on the blockchain committee. i know our committee is interested on that. block chain technology has many applications including increasing privacy and data security. would you highlight your conversations with ai on how block chains can insist supply chain management. about 30 seconds. can you elaborate on how this technology is beneficial for
supply chain? >> lets you diversify and move all of your information to a digital platform that makes it available to all 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'll be able to see it across the block chain. we're still in the early stages of implementing that. some companies are testing it out. it's a great opportunity. we'll see if we can get it moving as rapidly as we need it. >> thank you, my time is expired and i yield back. i appreciate your answer. >> okay. mr. cardenas, the next five minutes are yours. >> thank you. madam chairwoman, thank you for having this hearing, and also to the ranking member. i want to thank both of you. very important hearing and very informative for all of us. time and time again throughout this pandemic we've seen the most vulnerable communities among us suffer the most while
the wealthy find a way to make it through without the devastating fallout the 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 cleaning supplies even in the face of price hikes. these items are not luxuries. they're necessities. as an economist, can you speak to the impact that targeting basic products like these is having on americans in low-income communities? >> 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 all reduced household budgets. we know low-income communities are more likely to be communities of color and therefore 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 and facing discrimination or occupational segregation and other labor market entry. low-income folks and particularly low-income folks of color are hit from all sides. rising prices at the check-out line and have a harder time accessing good, well paid jobs. >> thank you. so right now during a pandemic we have some folks who are working two and three jobs and maybe a single parent needing to buy diapers. you mention 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 a larger profit margins. how do we reconcile that? is it really a supply chain issue or, as you mentioned, quote catered price increases which is what one of the executives was explaining was it during some kind of meeting of their shareholders or something? >> 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, have products that people need. the price elasticity and consumer respond to prices and when you have essential goods, consumers are not responsive because they are essential. so what we're seeing now is simply these big corporations taking advantage of the most
vulnerable at a point where they're at their most vulnerable. and padding their profits. that's the other point here. you know, these ceos and corporate executives and shareholders are raking it in all while they're paying for essential goods at the check-out line. >> thank you. and your testimony you also talk 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 his contracts for inventory were, quote, 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? >> yes. big businesses are able to negotiate prices better than small businesses, right. but 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 in the area. the local grocery store can only manage to squeeze out a seasonal discount that brings the price
down to 1.32. 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? it's really important to, in order to have a thriving small business community, we have to tackle the power that these mega corporations have over prices. >> dr. mabud, i only have 20 seconds. i have a question. has history born out 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? >> absolutely. and my colleague on the panel can speak to amazon, which does this frequently. >> thank you very much. my time is expired. i yield back, madam chair. thank you so much. >> thank you. and now mr. bucshon you're recognized for five minutes.
>> i don't support price gouging but finding it hard to point out the hypocrisy and hoosiers aren't paying more at the pump or groceries because of price gouging they're paying because of inflation. this legislation won't restock the barren grocery store shelves or car stocks. 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 that the biden administration continues to block creation of pipelines that would help lower energy prices and terminating well and gas leases on public lands in the u.s. ironically while asking opec to send us more oil and improperly tapping our strategic oil reserve because the american people are noticing the prices going up. you really can't make this stuff up. my point being, i wish we'd get serious and look at the real problems so that we can 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 and supporting policies that incentivizes 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's a good try by the majority to try to a change the narrative unfortunately, the american people, i think know the facts. dr. richey, a question for you. i do not believe that the legislation before us 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're 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? >> yeah, that's absolutely true. and it's absolutely something that should be considered. certainly, i would like to look
at research on labor costs that show they are not having an impact on price. i can tell you anecdotal evidence talking to truck driving companies, manufacturers, wholesalers and distribution businesses, their prices are being increasing because of the dollar figures they're 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 them. in that case the profit is not going to flow through the system. there are a number of different things that impact inoperation, and you touched on some of those things there. -- restriction on distribution causes scarcity. labor costs cause that issue as well. and even though it's nice to see the higher pay rate, we should expect to see prices increase as those pay scales go up. >> thank you. would the factors i laid out and you just talked about reference -- be referenced anywhere in
this legislation? >> i don't believe they are, sir. no, sir. >> do you think that leaving language vague for what grossly for example, would further enable the ftc to be used as a political tool that targets the administration's chosen enemy of the day, corporate america. >> well, yeah, that's tough to answer but i would say that there's a lot going on and a lot of dynamics here and i'm not certain this is the key issue. i try to get some students to focus encore issues, root causes of these things. and i feel like this is not a root cause, it's an effect with the other things we see out there on the marketplace. >> thank you very much. i recently was at the port of l.a. 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's 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. >> the gentleman yields back. now i invite congresswoman dingell for five minutes. >> thank you, madam chair, for holding this important hearing and for all the witnesses for testifying today. i do think 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 ten 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're struggling with rising prices for common household goods amidst a robust economic recovery and 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 down stream supply chain impacts. one of my concerns is the impact of price gouging within the supply chain and its impact on down stream prices, much of what falls ultimately on the consumer. dr. mabud, you highlight how price gouging further up in the supply chain could force small businesses to pass 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? >> yes, absolutely. i mean, given the extreme consolidation and product markets, bigger companies simply have power to set prices in a way that smaller businesses do not. that power is magnified when the big businesses are sitting up higher on the supply chain and passing the input costs down to smaller businesses. you know, the owner of country fresh farm markets, a local grocery store in cincinnati confirms that he was being able to force to sacrifice his own margins entirely because of the prices that big businesses like proctor & gamble were setting. as i said before, when we see the input cost good of things and things like steel go up, that has deep implications for small businesses across the country that rely on those inputs for their own goods and their own well being.
>> so, dr. mabud, would addressing supply chain bottle megs -- bottle necks such as emergency 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? >> short answer is yes. we are living in a world where we've turned our supply chains over to big corporations. you know, they have really maximized short-term returns. these companies have essentially carved away at our supply chains until what we're left with right now is this brittle knife edge system. 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. investing in our supply chain and ensuring that we have rebun can'tsy for key pieces of
our supply chain will help ease bottlenecks and create a more reliable system for small businesses which sets them up for success. >> i'm down to about a minute. so i'm going to ask dr. mabud, mr. harman and ms. frasch and ask you to be short. yes or no. would addressing supply chain vulnerabilities through the america completes act alleviate some of these issues? yes or no? start with ms. mabud. >> yes, it would alleviate some of these pressures. >> mr. harman? >> it likely would, yes. >> ms. frasch? >> yes, it likely would. >> so i want to thank you again for all the witnesses being here today and to chairwoman schakowsky for holding this important hearing. congress has to take action. in the case of the pandemic and emergencies, this has consequences and with that,
madam chair, i yield back the balance of my 19 seconds. thank you. >> thank you very much. and now mr. dunn, your opportunity to ask questions for five minutes. >> i appreciate the opportunity to talk about rising prices. across america today. my constituents constantly express how out of control inflation across all goods and services president successes is affecting their daily lives. it's 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 was 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 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 destroying the purchasing power of everyday americans. we can't allow uninformed policy to make this problem even worse. so, to 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. i want to focus on the other contributing factor here the pressure on the supply chains labor shortages. president biden's ineffective vaccine mandates have exacerbated the labor shortages, putting upward pressure on inflation. hurting our nation's suppliers just as they try to get back on track. so, dr. richey, could you briefly describe how a workforce which has been incentivized to not work and even highly skilled workers have being driven out of work.
how does that contribute to rising prices? dr. richey. >> certainly that's 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 here with undergraduates students, our students come back from their internship in the summertime before their senior year and 75% of them already have a job. those options are out there and they're everywhere. without people in those positions, you can't move product and you can't get enough supply to meet demand in those different marketplaces, so that's going to have a significant impact on price because those companies have to cover costs. >> you're right. so, i agree and i asked the question because so many other companies are, in fact, mandating their employees to get vaccinated to return to work or worse they're terminating them if they're not 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. war eagle, right. another question for you, though, we know short supply combined with increase demand contributes to inflation. but we're missing an opportunity this week to do something about that. china has this 2025 plan to grow industry, and we are pushing policies that restrict energy, transportation and labor sectors while simultaneously pushing enormous federal spending and easing monetary policies. do you believe reducing the federal spending and providing appropriate regulatory relief would help alleviate the strain on supply chains? >> i definitely think that regulatory relief would help. that's one of the things that makes it difficult for product to move and adds cost to our
system. certainly what we see going on in the port of l.a. and port of los angeles is an example of those restrictions that are making things difficult to move and if we could find some way to reduce those regulations, which to some degree those ports have, it will help things move in that direction. we see regulations around truck driving certainly in california it's quite difficult to get into that market if you're an independent contractor. independent contractors choose to be their own bosses and don't want to be part of major corporations and choosing not to go into california for that reason because of the laws that exist there. that takes about 20% of the truck drivers out of the picture to move product out of california. >> to that point, i think we all know that the producer price index, i want to focus on that. the producer price index, which is the wholesale version, full of the cpi, consumer price
index, is up almost 10% year on year. you know, this spells a structural inflation for our country that i think has nothing to do with price gouging nor transitory problem with inflation. i appreciate the time to look into this today, madam chair. thank you members of the hearing witnesses for joining us. >> gentlemen yields back. and now i recognize congresswoman kelly for five minutes. >> thank you, chair schakowsky, for holding this meeting. and to the witnesses for appearing today. it's hard to forget the beginning of the pandemic, when toilet paper were precious commodities. unfortunately, disasters often magnify social and equal inequality and disproportionately fall on minority communities as a 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? >> i mean simply put price gouging affects lower income communities disproportionately because it eats up a larger proportion of their budgets. families whether you're rich or poor, you need a diaper. but that diaper is a bigger part of your budget if you have a child. so, that's one of the key factors that is really harming communities, low-income communities right now. >> 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's why it's 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 brought price gouging cases during the covid-19 pandemic and
witness consumer harm up close, do you agree additional enforcement tools from federal gouging legislation would help your office protect the people of your state? >> 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. >> how would this ensure that existing state authorities are complemented and not weakened in any way? >> 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
authority, or at least to have it to be across the board for the states and the ftc. >> also your testimony highlighted some limitations of pennsylvania's existing price gouging law. can you cite specific examples of cases or types of cases that your office could not bring or could not consider bringing because of these limitations? >> so like i mentioned earlier, any time 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, you know, for their wellbeing, we were unable to apply our state price gouging law to that particular transaction. >> and then having the authority of this law, that would have changed your assessment of these matters? >> that's correct. >> and lastly, your testimony talks about how important it is to prevent price gouging before it occurs. in your experience, do you believe in the authority to seek
civil penalties in price gouging cases is an effective deterrent? >> yes. in most cases, we did not seek significant penalties. we believe that when we send out cease and desist letters and the threat of a penalty to continue price gouging deterred that continued conduct. so having a penalty 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. >> thank you so much. madam chair, i yield back. >> the gentlewoman yields back. and now, ms. lesko, i recognize you for five minutes. >> 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're 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. >> sure, absolutely i can. and thanks for that question. over the years, we have seen a transition to a more efficient system 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've been spending significant amount of time with accenture and other groups trying to put together education systems that will help managers understand risk of sourcing from a single location.
what i mean by that is that the tools that we've developed teach them to think about an international source of supply that can keep cost down, think about a near sourcing option, perhaps latin america, in that region, that could make the product nearer and be competitive, and also think about a domestic source of supply, setting up a three-set system so that you have the different suppliers competing against each other and a fallback. the reality is companies like toyota that instigate a just in time management system have stepped away from those things and the supply chain is naturally moving as a unit to more responsive approaches. that's what we should expect to see over the next few years. and it's already in play across a number of industries. >> thank you. and dr. richey, i have another question for you. can you give me any examples, you've mentioned some already, of how the biden administration's policies are
actually making it worse, supply chain issues, inflation, price increases, can you name any? i'm thinking one is maybe their energy policy and how they're so adversary to oil and gas and how that is increasing prices here in america. >> yes, certainly the energy policy has increased prices significantly. remember, manufacturing has to pay for energy. then the truck drivers have to pay increased energy prices. the customer has to pay for increased energy prices. if you think about companies like automotive, you think about tires, that product includes petroleum, and the product itself, it includes the energy related to manufacturing and the transportation. as those prices of oil and gas go up, it's a multilevel hit on these businesses. that is one of the key
components that's driving inflation in the marketplace today. and it was one of the first steps that the biden administration made. i've asked and been a proponent of saying we should be all in on energy, doing a lot of exploring with the fossil fuels, and trying to use that fossil fuel exploration to pay for these additional types of energy we're trying to find to move away from fossil fuels. >> thank you very much. and i'm 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 -- and that's 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's real. this is real. prices are going up. i don't know about my colleagues, but here in washington, dc, 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're very mysterious, like pasta, pasta was out of stock. this is some real problems. prices are going up. and it's not fearmongering. it's real. and with that i yield back. >> next is mr. soto, who has been here for the whole time of the subcommittee, which i appreciate. and it's five minutes for you. thank you. >> 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, our unemployment is under 4% now. and foreclosures just came in lower this year. our community was decimated by foreclosures because congress went too small 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 counterinflationary. and we're already seeing money coming down to our communities. i want to thank the members of this committee who voted for it. a few of you did, a lot of you didn't, i guess you'll have to explain that to your constituents. now i agree, we have a bipartisan agreement that we need to boost domestic
manufacturing. microchips, technology like telecommunications and others. we're going to 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'll get everybody come together to increase our domestic production. or maybe we won't. i guess we'll find out this week. today we're 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. so we have to look at grocery stores, oil companies, ppe manufacturers, which i appreciate our colleagues bringing that up, that's three examples of price gouging that we know is happening. so the covid-19 price gouging prevention act is before us today. we are act on inflation in this committee, when it is unconschennbly done by companies using public health emergencies to increase prices unreasonably. think about this, what are republicans for, what are they for, name me one thing they're for. we're hearing a lot about complaining about inflation on this committee. join us to help solve it. today we have legislation. today we have an opportunity to reduce inflation. we're asking you to join us and do something about it rather than hem and haw and nitpick. and so that's why we're here today.
it would be great to hear from you, mr. harman, we've heard the ftc is cracking down on oil and gas companies for illegally increasing their prices. president biden took the important step of announcing a 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? >> yes, the investigation that they are conducting or the president asked them to conduct give us the information about whether or not there's price gouging. but they don't have authority to do anything. and this legislation is necessary to give them that authority. >> what about the grocery stores? >> it's the same. it covers -- the ftc gives them power, and also gives the states the power whether they have a limited price gouging
statute or no price gouging statute. >> so this is the sword to do something about it, to actually cut inflation; is that correct? >> that is correct. >> thank you so much. i yield back. >> thank you. the gentleman yields back. and mr. pence, thank you for waiting, it is now your turn. >> thank you, chair schakowsky and ranking member bilirakis for holding this hearing today and the witnesses for being here. wow, we're attacking inflation by fixing prices, of all these american companies. you know, i spent over 30 years in the retail and wholesale distribution industry. level. in all my life, it's been my observation it always happens at the retail, small communities, done by small players. 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. in all my life, it's been my observation that it always happened at the retail, in small communities, done by small players. you know, hr 675 defies the economics of supply and demand. i've spent a lot of time in education, taking economics courses. there are some ph.d.'s 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've been dealing with during the pandemic. and what we're talking about today with 675 is an attempt to start fixing prices at retail and wholesale across this country from washington, dc because we know better here in washington, dc. since all of my economic classes discuss the principles of price elasticity, i'm 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. >> 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 a situation where there is a crisis and people are vulnerable to take advantage of
that and heighten prices on consumers. >> 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? >> well, we saw 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 -- >> so there was more demand and they could increase prices. of course as you well know, on amazon, there was a lot of wait time because they actually didn't have the supply. >> that was part of it, but -- >> part of it? no, we're talking about it's price gouging that has -- you're suggesting here today with hr 675 that it's price gouging alone that has caused inflation. >> amazon itself banned 6,000 users in march 2020 for price gouging.
they themselves identified it as the problem on their platform. >> okay, so actually companies regulate, manage that, because it's not very competitive when that happens, right? >> well, i -- >> supply and demand will regulate itself so they have more supply. dr. richey, how would you answer this? >> i think the way i would answer it is a little 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're mega corporations or multinationals, we're neglecting to look at the fact that these are the businesses that stayed open during the pandemic, unlike small businesses -- >> good point. >> -- that were required to shut down and they were also able to leverage e-commerce better than small business and mid-size business in this country. so you would expect their profitability would have improved and that's what we're seeing, not price gouging. >> right, and let me just close with this. 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 the inflation is roaring. it's not price gouging, folks, it's just inflation. thank you, madam chair, i yield back. >> the gentleman yields back. and last but certainly not least, for five minutes, i call on representative fletcher for five minutes of questions. >> thank you so much, chairwoman schakowsky and thanks to you and mr. 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're not finished with covid-19 yet. and the economic impacts are still being felt from shipping delays, increased costs of food and fuel and health care products, many of the things we've been discussing throughout this hearing. some of the covid essentials like tests and masks are prohibitively expensive for people nationwide. we're making strides with making 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've 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 rapid tests from some providers nearly doubled in price after a deal between the retailers and the biden administration expired in december of last year. we've also seen providers charging just a wide range of prices for covid tests. 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 higher and higher as we see these record case numbers. 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. 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 on pricing and testing may relate to that, if you could share your thoughts on that with us, that would be very helpful. >> 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 our best when we are at our best, right? that means addressing health concerns, that means addressing, you know, all the barriers that workers and families are facing in contributing to our economy, whether that's childcare 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 important backstops to prevent the spread of the virus and to
support an economy that supports all of us. >> thanks for that. i have about a minute and a half left. i would love to direct my next question to you and open it up to anyone else. if i run out of time, i would love to get any additional responses in the record. i think a good way to close this hearing in saying, 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? >> a clear federal standard that ensures that consumers across the country, no matter where they live or what state they live in, are able to be protected from price gouging, especially for essentials during a global pandemic, is a 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. >> thank you, doctor. thank you, dr. mabud. would anyone else like to weigh in on that question in the 30 seconds i have left? >> yes, i'll be happy to jump in. i think one of the things you see, you saw 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. 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 an increased demand. and this would stop that. >> thank you so much, mr. harman, for that. anyone else who wants to comment, i would be glad to see your responses in the record. but i have exceeded my time.
madam chairman, thank you so much. and i yield back. >> we have a waive-on to the committee, i would to welcome mr. carter and recognize you now for five minutes. >> thank you, madam chair, i appreciate the opportunity. madam chair, before i begin, i understand earlier this week representative soto had mentioned support for the america competes act earlier, as i say, on the floor this week. i would like entered into the record and i ask for unanimous consent to be entered into the record a letter to the congress from the u.s. chamber of commerce opposing the america competes act. >> without objection. >> thank you. madam chair, let me begin by saying that i applaud what you're 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's happening here is that we're doing everything to avoid the reality
and the simplest answer as to why we're seeing all these price increases and that is democratic policies. policies have consequences. and that's 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 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 the record testimony from the north american meat institute. >> without objection.
>> thank you. this letter 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 the increased prices. regardless, i think it would be eye-opening for my colleagues to hear a quote from larry summers, former secretary of the treasury under president obama, who said if they're using inflation to get a mechanism to go after genuine monopoly problems, as i said, a crisis is a terrible thing to waste, and it's all sort of fine. if they think this is a strategy for actually reducing inflation, they're badly wrong. you know, if you add in the new regulations or proposed regulations that will add more costs to the industry, you see why we're in this situation we're in now. look, i'm 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's the 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 sea ports, and we've seen the supply chain issues firsthand. but i'm pleased to share with you that everyone on the economy -- and everyone on the committee that unlike 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 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're doing it with a backlog.
and that's the only major port, the only major port in the country is in savannah that's doing this without a backlog. 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 innovative, for 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 areas like distribution centers? >> yeah, that's a great question, thank you very much for the question. i will say that the port of savannah has been a shining star in terms of innovation over the pandemic. so there's a lot we can learn at the ports
from what's happened there. when we think about distribution centers which is an area that is also [ inaudible ], there are lots of opportunities to use different types of automation facilities to move things along and assist with that movement. i've encouraged members of congress to [ inaudible ] conference which takes place once a year in atlanta, once a year in chicago, to look at the options that are out there. the other thing i would like to say quickly is that, you know, we don't see these innovations moving jobs for people. what we see is assistance and telling 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 [ inaudible ] truck driving by the year 2035 will still need another half million people to drive trucks in the united states. >> great. and again, madam chair, for allowing me to waive on and thank you for your indulgence. i'll yield back. >> the gentleman yields back.
and now i want to thank our -- there 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. 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 the following into the
record, 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 mcneary. a fact sheet from the food industry association. an article from "the washington post." a letter from the transportation intermediary association. a letter from the national retail federation. a letter to the ftc. and with that, with no objections -- any objections? -- so ordered.
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