What the Price Gouging Prevention Act Says

The newsletter linked here says that Kamala “was not specific on what [price gouging] meant”. There's a bill currently in the Senate called the Price Gouging Prevention Act of 2024, which lays out these details. Is it possible that this bill’s contents are what Kamala is referring to?

Here's a quick summary:

• The specific language used for price gouging is the following: “It shall be unlawful for a person to sell or offer for sale a good or service at a grossly excessive price, regardless of the person's position in a supply chain or distribution network.”
• Small businesses with less than $100,000,000 in gross revenue are exempted from this.
• Businesses can make an affirmative defense to the accusation of price gouging by a preponderance of the evidence (i.e. more likely than not) that the increase in price was both not in their control and incurred in the process of procurement, acquisition, distribution, or provision of the good or service.

There are also more specific rules in the case of an exceptional market shock, defined as “any change or imminently threatened change in the market for a good or service resulting from [any] cause of an atypical disruption in such market; or any period of time during which the President has declared a major disaster or emergency”.

If businesses offer goods at an excessive price compared to what they did before the shock or competing sellers, they cannot have unfair leverage, defined as either being large (>$1,000,000 gross revenue/yr), being a critical trading partner, discriminating between equal trading partners, engaging in deceptive practices, or having a dominant position in any market i.e. they have no competition or greater than 30-40 percent of a relevant market.

The punishment for price gouging is civil penalties, which for businesses without unfair leverage is a small amount, at most $25,000. For businesses with unfair leverage, the penalty is 5% of their revenues for the previous year.

Bottom line:

The bill targets large businesses that sell goods or services at grossly excessive prices without the affirmative defense that the price increase was not within their control. In addition, during exceptional market shocks, the bill focuses on companies with unfair leverage raising prices relative to other companies, with harsher penalties for those companies as well. Unlike what some critics have said, this is not a price control. It is intended to prevent larger players from using their market share during exceptional market shocks to gouge consumers.

The linked discussion: Monopoly Round-Up: Price Gouging vs. Price Fixing vs. Price Controls.