Thursday’s announcement by the Department of Justice indicated that companies will be investigated for making excessive profits amid a surge in inflation and continued supply chain problems.
According to a department press release, its antitrust section will “deterrence, detect, and prosecute” anyone who uses supply chain disruptions for illegal profit. According to the department’s press release, the goal is to stop companies “overcharging customers under cover of supply chain disruptions.”
The problem, of course, is that the supply chain disruptions are quite real—and inflation across the economy is the result of both those large-scale issues and government actions, including last year’s $1.9 trillion stimulus bill and protectionist policies. To the extent that private companies are raising prices, those things are the likely culprits—and higher prices are the market’s way of allocating scarce goods most efficiently, not evidence of price gouging.
Scott Lincicome is the director of economics for Cato Institute. He says that the FBI and DOJ would prefer to launch an investigation into ‘illicit supply chain profiteering rather than admit the inevitable results of decades of protectionism and regulatory sclerosis.
This announcement by the DOJ goes beyond a mere fishing expedition. The DOJ’s announcement suggests the powerful federal law enforcement apparatuses are following the Sens. Elizabeth Warren (D–Mass.) and Bernie Sanders (I–Vt.) Inflation is a fantasy where profit motives are the driving force. The cockamamie conspiracies become less hilarious when the FBI can charge businesses for illegal profits as they seek to preserve scarcity in an environment.
Warren is trying to blame the corporations for inflation since last year. She’s lobbed attacks at big oil companies and small grocery stores—a famously low-margin business—for trying to take advantage of supply chain issues to screw customers. You think businesses have suddenly become greedier in the last year, after prior not worrying about profits?
This week, Sanders climbed into the clown car too, tweeting that “Gas prices are at the highest level in 7 years” due to “corporate greed, collusion & profiteering.”
These are not uncommon economic takes but it isn’t surprising. Warren is a broken record when it comes to blaming billionaires and corporations for everything from high college costs to the lack of affordable housing to the current supply chain problems. Just as reliably, she ignores the role that government has played in creating or worsening those problems—by subsidizing student loans, imposing restrictive zoning laws, and implementing trade-limiting rules like tariffs and the Jones Act, for example.
One thing is for some senators to get their popular base excited with absurd tweets. It’s another thing to see that same nonsensical argument backed by the FBI and Department of Justice—and into the White House’s economic policies, as they already have.
In fact, rising prices are likely to be the only alternative. This would lead to more delays and empty shelves. Not the FBI threat, but praise for companies who are finding creative ways to manage the chaos of the moment and maintain supplies.