President Biden has created a 'strike force' to combat high prices. Experts wonder whether it will work.

By Bill Peters

'This is an exercise in marketing, not competition promotion.'

After President Biden on Tuesday announced a "strike force" intended to combat unfair and illegal price hikes amid a two-year inflation spell, experts wondered: How would it actually work, and would it actually work?

They also had other questions: How much funding would it have? How was it different from the work those agencies already do?

According to a White House fact sheet on that announcement, the strike force would "strengthen interagency efforts to root out and stop illegal corporate behavior" that unfairly or fraudulently raises prices on consumers. An administration official said those interagency efforts included increasing information-sharing and encouraging greater engagement with state and local governments.

Tuesday's statement added that the Justice Department and the Federal Trade Commission - the two agencies tasked with overseeing the segment - along with others would focus on "key sectors where corporations may be violating the law and keeping prices high, including prescription drugs and healthcare, food and grocery, housing, financial services, and more."

And according to a readout on Wednesday, the strike force would "work together to share information and data, explore ways to cooperate with state and local governments and other third-party actors, identify new resources in partnership with other federal agencies, and produce a biannual report highlighting the Strike Force's priority areas."

The U.S. Chamber of Commerce, in a statement, called the strike force "an attempt to return to government price controls" that would damage the economy. A Wall Street Journal editorial headline read: "The Biden 'Strike Force' Is Coming for You."

But others saw the Biden administration's announcement as something a little more along the lines of a symbolic gesture.

"It wanted a new, bold, dare I say 'Trump-like' term to catch the public's attention," Stephen Calkins, a law professor at Wayne State University and a general counsel of the FTC from 1995 to 1997, told MarketWatch.

"This is an exercise in marketing, not competition promotion - and, again, I say that as someone who thinks the White House deserves praise for the competition council it formed a while ago," he continued.

The announcement came ahead of Biden's State of the Union address on Thursday, as polling shows doubts among voters over his ability to handle an economy marked by prices that are still far higher than before the pandemic. The Justice Department did not respond to a request for comment. The FTC referred back to the White House and Biden's announcement on Tuesday.

The Biden administration has tried to take a tougher stance on corporate price hikes and consolidation. Also Tuesday, Consumer Financial Protection Bureau finalized a rule to cut the average credit-card late fees to $8 from $32. And the FTC, Justice Department and the Department of Health and Human Services launched an inquiry seeking more insight on how private-equity and corporate control in the healthcare sector affects profits and patients.

Over nearly four years, trillions of dollars in pandemic aid, supply-chain convulsions and Russia's invasion of Ukraine initially drove costs for labor, shipping and food higher - expenses companies passed on to consumers in the form of higher prices. But profit margins for corporate America surged overall, and economists believed companies, seeking to test consumer demand and guard profits, took advantage of the supply upheaval to keep prices higher.

Mark Whitener, a Georgetown University professor who worked as deputy director for the FTC's bureau of competition during the first Bush administration and the Clinton administration, said the new strike force and any accompanying chest-thumping from the president could still be somewhat effective - albeit perhaps not through direct legal means.

"That wouldn't surprise me if some industries took note of the fact that they're under the microscope and acted a little differently," he said.

"But that won't be because of any sort of clear law enforcement, at least not in the FTC and DOJ world that I am familiar with," he added. "Regulating pricing is not their responsibility and not their job."

The Justice Department and the FTC enforce laws surrounding competition and deceptive practices, and their actions can indirectly keep a lid on what businesses overall charge their customers.

The Justice Department can bring criminal cases, while the FTC can't. Both use lawsuits to block mergers, which give the combined business more command over the market and more flexibility to hike prices. The DOJ often takes on cases related to price-fixing, in which companies agree on what they'll charge consumers, usually with the effect of raising prices, while the FTC also works to take on deceptive practices.

Christine Bartholomew, a law professor at the University of Buffalo, said price hikes can become a potential legal issue - particularly for larger companies in industries dominated by only a few players - when prices no longer respond to market forces. That can happen via schemes to fix prices or keep rivals from accessing a type of item or raw material, thereby allowing the people doing the manipulating to raise prices with lower risk of a competitive response.

She said the strike force's success would come down to judges and money.

"It's really going to depend on if this is funded, and how the judicial branch decides to respond to litigation that's brought by this task force," she said.

"We can investigate, we can look at things, we can file suit," she continued. "But if you can't actually prosecute, or if you can't actually reach resolutions on some of the types of anticompetitive conduct, that investigatory time isn't really going to get you any change."

Consumer prices overall ticked 0.3% higher month over month in January, according to government data. Over the past 12 months, prices were still up 3.1%. Food prices were up 2.6% over that time, while energy costs were down 4.6%.

From company to company, the figures are mixed. During their most recent quarters, Conagra Brands Inc. (CAG), the maker of Healthy Choice and Slim Jims, charged a bit less during their most recent quarter, while meat producer Tyson Foods Inc. (TSN) charged a bit more overall, led by a sharp increase in beef prices. Among big producers of consumer goods, Procter & Gamble Co. (PG) pushed its prices 4% higher in its most recent reported quarter.

And while price increases may be easing, they're still hurting shoppers overall.

"While we're happy to see inflation rates moderating this year, if you compare industry pricing in key categories back to 2020, food at home pricing for families has increased 25% overall, and in some areas, up to 30%," Target Corp. Chief Executive Brian Cornell said on the retailer's earnings call in November.

"And if you're a parent raising a baby, you're facing increases of more than 30% on baby food and formula too, and that's in addition to persistent increases in a variety of other categories," he added.

An analysis last year by Accountable.US, a liberal advocacy group, found that S&P 500 companies, broadly, were able to push their margins higher after the end of 2022, while still spending $922.7 billion on buybacks and $564.6 billion on dividends - both records. That analysis found that companies like Huggies and Kleenex maker Kimberly Clark Corp., (KMB) PepsiCo. (PEP) and General Mills Inc. (GIS) openly touted the financial benefits of raising their prices.

The group said it was "very encouraged" by the strike force. And it questioned whether big pharma, grocery, oil and other companies really needed to raise prices so much.

"Any given week, some corporate CEO boasts of huge profit increases or investor payouts after swearing they had no choice but to inflate prices for everyday consumers," Liz Zelnick, the director of Accountable's economic security and corporate power program, said via email. "No one is buying it."

-Bill Peters

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03-08-24 1115ET

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