Biden’s Pricing Strike Force Is Poorly Equipped for a Tough Task

This week, the Biden administration announced a new strike force against unfair and illegal pricing that will corral multiple federal agencies around “key sectors where corporations may be violating the law and keeping prices high, including prescription drugs and health care, food and grocery, housing, financial services, and more.”

The initiative, to be co-chaired by the Department of Justice and Federal Trade Commission, has an aggressive ring to it. But it’s questionable whether such an effort can yield significant results across broad sectors of the economy. The government has a robust set of tools to combat practices that reduce competition, but there’s no clear mechanism for deploying those tools against prices that are deemed too high.

Sections 1 and 2 of the Sherman Antitrust Act contain the primary federal antitrust restrictions. Those laws prohibit conduct that limits competition itself—usually through some form of an agreement among competitors or exclusionary conduct by a dominant company.

But they don’t directly address concerns about high prices. Although some regulated industries have specific agency oversight on pricing—such as the Federal Maritime Commission’s authority to regulate certain surcharges and rate increases under the Ocean Shipping Reform Act—those are by far the exception, not the rule.

The focus on pricing issues isn’t new for the Biden administration. For example, in November 2021, the FTC announced an investigation into supply chain disruptions that were supposedly causing higher prices during Covid-19. In February 2022, the DOJ followed suit, announcing an initiative involving the Antitrust Division and the FBI to target companies that might be “exploiting supply chain disruptions for illicit profit.” Like the March 5 announcement, the DOJ and FTC in their previous statements highlighted aims to protect consumers from illegally high prices.

The new announcement could be read to suggest that prior DOJ and FTC initiatives weren’t particularly effective at addressing consumers’ concerns about high prices. This is partly because inflation, rather than profiteering, has driven much of the rise in pricing on staples such as groceries during this administration.

Also, federal antitrust laws generally weren’t designed to curb unilateral pricing behavior. The US Supreme Court and lower federal courts have upheld the right of companies to charge high prices, which the Supreme Court even called “an important element of the free-market system” in its decision in Verizon Comm’ns v. Law Offices of Curtis V. Trinko.

Courts and prior DOJ and FTC officials commonly understood that courts and agencies aren’t well-equipped to target prices for being “excessive,” without more detail, as there is no objective standard for when a price is fair, appropriate, and reasonable. Instead, the historical approach has been to let the free market decide the price based on supply and demand factors.

What does this all mean for the pricing strike force? At best, it might only produce a mild deterrent effect, causing some companies to think twice before maximizing the prices they charge. Perhaps this effect will be pronounced in industries highlighted in the announcement, such as food and grocery, housing, and financial services. However, many companies in these industries are sophisticated actors that understand what the law allows and where the antitrust agencies’ authority extends.

Outside of this deterrence, it’s difficult to see how focusing greater agency resources on pricing behavior will be fruitful, especially when the DOJ and FTC are already facing some criticism for their enforcement more generally, as antitrust cases against many of the largest technology companies soak up limited resources.

Effective action by the federal government to address unilateral pricing would likely require Congress’ involvement—something that doesn’t appear probable in the immediate future.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Michael S. Wise is partner in Paul Hastings’ antitrust and competition practice, with focus on antitrust, competition laws, merger clearance, and conduct investigations.

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