If you’ve been slammed lately by higher prices on everything from groceries to rental cars and gas prices, you’re probably wondering what on earth is behind these skyrocketing costs.
Corporations are quick to blame this new reality on the pandemic, but another major culprit is hiding in plain sight: Their own profiteering.
Four times a year, corporations are required by law to update their investors on how they’re doing in terms of sales and profits. These are called “earnings reports,” and the companies will usually hold calls with the investors to walk them through the latest report.
My organization, Groundwork Collaborative, recently got our hands on the transcripts from hundreds of these earnings calls. And you won’t believe what CEOs are boasting about.
Knowing that the current inflation frenzy is a convenient scapegoat, these companies are charging customers even more to pad their profit margins. They are just admitting it — they’re openly bragging to investors about how well it’s working.
“I think we’ve done a great job with our pricing,” boasted the CFO of Hormel, a maker of popular grocery brands. “I think it’s been very effective.” As prices went up, the company improved its operating income by 19 percent in the first quarter of 2022 compared to 2021.
And now, the conflict in Ukraine is providing yet another opportunity for oil and gas companies to pad their bottom lines. “It’s tragic what’s going on in Eastern Europe,” said one oil executive in late February. “But if anything, these high prices, the volatility, drive even more energy security and long-term contracting.”
This pandemic profiteering is taking a massive toll on consumers, workers, and small businesses.
Low-income Americans are pinching pennies to feed their families and pay their bills. And while mega-companies can use their market power to raise prices and generate record profits, small businesses and independent retailers are struggling to keep their doors open.
[image_caption]Dr. Lindsay Owens[/image_caption]
But make no mistake: next time you experience sticker shock in the checkout line, it’s a safe bet that corporate executives and shareholders are reaping the rewards.
People are catching on. A new poll from Data for Progress and Groundwork finds that 63 percent of voters believe that “large corporations are taking advantage of the pandemic to raise prices unfairly on consumers and increase profits.”
Policy makers are taking notice, too. The New York Attorney General’s office just announced new price gouging rules, paving the way for other states to follow suit.
And days after President Biden promised action on pandemic price gouging, congressional oversight panels opened investigations into the three major ocean shipping alliances. These outfits control about 80 percent of seaborne cargo and have seen their profits increase seven-fold from the previous year.
Finally, a recently-introduced bill, the COVID-19 Price Gouging Prevention Act, would help the Federal Trade Commission and State Attorneys General protect people across the country from pandemic profiteering.
Without competition and robust regulation to keep them in check, big corporations have gotten away with using the pandemic to push up prices and fatten their profit margins — and if they aren’t reined in, high prices could be here to stay.
Lindsay Owens, PhD, is the Executive Director of Groundwork Collaborative. This op-ed was distributed by OtherWords.org
Oil companies are truly taking advantage of the public, and have been for years. I remember when gas was $0.75/gallon. Gas prices should have gone lower in the spring of 2020, but somehow managed to remain higher than they should have despite record low demand during the initial phases of the COVID pandemic. Gas prices dictates how much companies charge because of shipping/freight costs. While we shouldn’t dictate how much a company can or can’t profit, there should be some regulations about price gouging. Canceling Keystone XL didn’t help this.
Let’s not forget that the Biden Administration wants clean green energy. Those energies require precious metals for production of EV batteries, wind turbines and solar panels. Yet, the Biden Administration canceled Twin Metals lease in Ely. Where are we going to get these metals from? Let me guess – outsource them to be dependent on another country that has child labor and unsafe mining practices. Instead of American jobs! If those minerals can be extracted safely, there’s no reason why this project shouldn’t proceed. Meanwhile, Talon Metals in Tamarack signed a 5 year deal with Tesla to provide metals… Twin Metals has been trying to obtain their lease for 10 years so I’m curious to see how Talon’s deal will work out in 5 years. Here’s to hoping the Administration really puts policy behind their green energy wishes.
Even if the keystone pipeline was on schedule…it still wouldn’t be finished…but you should realize this tar sands oil isn’t meant for us. It’s to be refined and shipped to Asia…and don’t ignore Canada couldn’t/wouldn’t build the pipeline to their west coast to ship this dirty/almost impossible to clean up oil.
You also should be aware, the oil industry with their largest profits in years, still has active wells that could make up this difference, but they’re refusing.
The Boundary Waters is a beautiful and pristine area and mines, and especially the one you mention does not have a good record environmentally.
We were PROMISED during all these mergers in the past that companies would be more efficient, offer better pricing and wages. None of it came true…just the opposite.
There is no competition and despite reduced taxes, these firms continue to rip us off…and they’re usually big repub donors…the party that doesn’t care about us.
“PROMISED”
“they’re usually big repub donors”
Cites please.
See ” Conservative Revolution: History of, ” starting in about 1978 or so.
Lots of information about old Germans but I didn’t see anything about corporate mergers or big donor Republicans.
Apparently, Dr Owens has a problem reading financial statements or simply didn’t. Hormel’s revenue was up 24% in the first quarter of 2022 compared to 2021 and their operating income was up only 19%. Their operating income (profit) declined from 2021 (10.9% vs. 10.5%). Their costs as a per cent of revenue were higher in 2022 than 2021 (82.3 v 81.7). So their revenue and income is up but profit is down-they made less profit selling more. Hardly a compelling case for the alleged “price gouging” by Hormel specifically or American corporations generally. The generic comment by the CFO on pricing is hardly an indictment for price gouging and could simply be interpreted as they did a good job to cover increasing expenses. I’m surprised and disappointed that the Minn Post would publish this crap.
Dr. Owens has a PhD in sociology, not economics.
So you’re saying she’d be better suited as a conservative climate change skeptic? Perhaps foreign policy expert.
C’mon man! It’s gouging, Putin, Covid, transitory time until after the midterms. We also need to ignore the fact that the Producer Price Index is up 10% while the Consumer Price Index is up 7.9%. Evil corporations are apparently obligated to lose money so leftists can continue to print money.
So the budget was balanced from 2016-2020 (under Rightist leadership) and the Treasury did not need to issue any T-bills (print money)? Any wonder why its near impossible to believe you are fair and balanced.
I notice you didn’t mention the inflation numbers from those years. Or perhaps wage growth. Now why would that be?
So what is your point, you agree that your blame of leftists was out of bounds? Seems you would prefer to blame someone or party for inflationary pressures instead of taking the time to understand them. Econ/Inflation 101, is too many $ chasing to few goods. So, evidently in your mind the covid and supply chain issues have nothing to do with inflation, nor does the Fed, who admitted they were not hawkish enough when they first saw the numbers. Maybe some commentary from a significantly conservative publication (Forbes) might bring some light to the discussion.
https://www.forbes.com/advisor/investing/why-is-inflation-rising-right-now/
The budget was balanced? Dude Trump blew a much larger hole in the budget and deficit ballooned. The budget hasn’t been balanced since Clinton turned it over to Bush in 2000.
Couple of issues in assessing Hormel’s earnings report: 1) operating profits are easily manipulated depending on the message you want to convey (banks are particularly good at this); 2) I haven’t studied Hormel but a 19% operating profit for a consumer food company seems high (believe it or not) and may indicate prices rising with costs rising more slowly. And I can say, after listening to a few earnings calls, a CFO doesn’t say anything that isn’t vetted and planned.
As always, I do my best to absorb “fair and balanced” news coverage and watched “The Five” on FOX rail endlessly on how fuel prices are all Biden’s fault because of his war on energy companies, stopping them from expanding production.
And right after that read an article on oil production in North Dakota’s Bakken oil fields where wells are capped and idle because producers choose not to expand production despite record prices while simultaneously complaining about the inability to secure new federal land leases while refusing to use the ones they have.
As usual FOX is all emotion and speculation to fire up the base with no regard for actual truth.
https://www.startribune.com/north-dakota-producers-not-adding-investment-despite-high-oil-prices/600156306/
Couldn’t agree more. Oil companies have listened to investors who aren’t interested in mere growth but cash flow; they are reluctant to turn on the spigot. Besides, with the time it takes to drill a well (increased by supply chain problems) we’re a year away from band new oil coming online.
It was an interesting article. I can’t blame the producers for going more slowly this time around after having the rug pulled out from under them before. They know that the federal government is not on their side for the long term and is intent on keeping the oil in the ground.
The chief problem of the American economy over the past 30 years is that administrations of both parties have permitted fewer and fewer companies to have ever increasing market shares, until virtually all industries are now highly oligopolistic, with 3-5 chief “competitors”. It’s now difficult to even imagine an industry that now operates in a truly competitive market. And firms with market power end up destroying smaller firms and then gobbling up their assets, which is exactly what we have been observing for decades.
It’s quite obvious, for example, that the oil companies are now engaging in price gouging, simply because they (all) immediately raised prices in unison on gasoline which was refined from oil that was purchased at prices lower than the current per barrel price. That’s because the unregulated, uncompetitive market in which they operate allows them to simply declare their “price”, and that’s that. The same can be said for shipping (as the author notes) and meat processing, etc etc.
How did a country that used to have much more competitive markets with many more players across the board become so anti-competitive? The main reason is that the “conservative” movement, which has always been beholden to large corporate interests, began in the St Reagan years a campaign to undermine the antitrust laws. It both refused to enforce these laws and crammed the courts with judges that thought these laws were unnecessary, counterproductive and archaic. So instead of breaking up concentrated, monopolistic markets as used to be done, we allowed hundreds more to be created.
It’s unlikely at this stage of the game that the oil industry can be made “competitive”, in the sense that suppliers won’t have control over market price. Our oil companies/refiners simply declare the daily price they will charge, knowing that all other “competitors” will be doing the same thing. This means that the only answer for oil (and shipping and numerous other goods/services) is that oligoplistic companies will have be treated like public utilities, and be regulated as such. They need to have their proposed price increases approved by a public commission, based on demonstrations of actual cost increases. That’s now the only plausible answer to the price gouging we are now seeing.
The pandemic exposed the fact that the American economy is suffering from monopolistic/oligopolistic arteriosclerosis and heart disease. It can no longer respond to shocks in the system and its “prices” are not based on competitive markets. Imagining that they are is pious wishful thinking.
Bingo. Which is the point of Dr. Owens’s opinion piece. The lack of antitrust enforcement goes back more than 30 years. Non-enforcement of the antitrust laws started in 1981 with Reagan but that only was because of the takeover of the Antitrust Division by anti-antitrusters of the “law and economics” stripe. Antitrust has always been hated by the conservative business classes who could put enough political pressure on previous administrations to put a damper on enforcement. The “law and economics” came along to provide a convenient “rational” excuse to institutionalize antitrust non-enforcement.
“Price gouging” is a perfect explanation for the spikes in retail consumer prices and ongoing corporate profitability. Oligopolies can limit output and production and pass on their higher costs to consumers. According to wikipedia, Hormel closed a number of its plants in 2020 due to COVID. I expect it’s probably following the other members of the meat-packing oligopoly by delaying any return to pre-pandemic levels of output and production.
I certainly agree. Unfortunately, probably 90% of Americans are oblivious to the issue.
And if they were, half of them would likely agree with the Wal-Martization of America.
Wrong
The supply press of hogs force the plants to be oprn
I admit I am not an expert on the meat packing and the oil industry or how the price of gas is determined. I spent 35 years working for a large $30+ billion diversified global manufacturer in the consumer products segment of the business. At no time did I ever see or even hear it discussed that we should restrict output and production so we could pass on higher costs to consumers.
Supply chain disruptions were costly and disruptive in achieving financial goals. I saw tremendous resources going towards increasing productivity and efforts to offset raw material price increases so we could maintain our margins while not increasing our prices.
Many of our major product categories had 3-5 or less competitors. We could never take them or our customers for granted and pass on price increases due to our own actions of limiting output. The marketplace just didn’t work that way.
Well you would be wrong. Those plants needed to be open for ongoing supply that needs to be processed. Pigs keep coming.
If the ex-Hormel dude
Can flip the First into blue,
Then ain’t it worth addin’
a few more cents to the stew?
A lot of garbage always flies around in the comment threads whenever we see article like this… so be it. All I’ll say is that the fatal flaw in Dr. Owen’s analysis or claim is the idea that we can somehow control price gouging without limiting profits, this is a logical non-sequitur. We have some ani-gouging laws on the books but they’re almost impossible to enforce because they require forensic accounting of some kind and we our government doesn’t even have the resources to collect the taxes it’s supposed to be collecting every year… the IRS can’t even answer the phone.
Meanwhile, when everyone become such a big group of cry-babies? So we have some inflation for the first time in decades… cry me a river eh? Inflation is NOT an uncommon feature of capitalist economies and frankly the absence of any real inflation to speak of for the last several decades is atypical, although obviously everyone’s gotten used to it.
Of course businesses are “gouging”… that’s what they do. The only really durable principle in a capitalist economy is that everyone tries to make as mush money as they can. Shareholders will sue any CEO that fails to pursue as much profit as possible so what does everyone expect?
Which brings us to the logical non-sequitur of suggesting we can impose lower prices without imposing limits on profits. We have to remember that corporate charters and their conditions are our own creations, WE decide what they look like and how they work. We’re not LOCKED into charters that damage and threaten society and the general welfare, we CAN consider different conditions and priorities. There is actually no reason that we couldn’t place limits on profit margins, or sociopathic behavior. There’s no reason we couldn’t have different types of corporations that recognize some that provide essential goods and services (like public utilities) and others that simply enrich owners (like sports franchises). I’m not saying how “realistic” it is but we’re kidding ourselves if think we can control gouging without limiting profits.
So you want to essentially nationalize private companies, like what Putin is doing now, China sort of does and North Korea has been doing forever.
Got it.