A bill that would authorize the Attorney General to investigate price spikes above 10% over a period — described by authors as “price gouging” — of essential items cleared its first hurdle on Thursday, but critics raised worries about its vague definition of what qualifies as a necessity and what they described as an arbitrary threshold.

The proposal is among several measures that Democrats have pushed over the years that seek state government intervention in commodity pricing.  

House Bill 1010, sponsored by Reps. Yara Zokaie, D-Fort Collins, Kyle Brown, D-Louisville, and Sen. Mike Weissman, D-Aurora, would prohibit “price gouging” on necessities at any time, not just during declared disasters as delineated in current law. 

The bill defines necessities as “goods or services that are necessary for the health, safety, and welfare of consumers or of the general public.” It considers “price gouging” to be any price increase of 10% or more above the 90-day average price.

According to Zokaie, the Federal Trade Commission has issued warnings to consumers that some of the nation’s largest grocery store corporations are increasing their prices beyond what can be justified by inflation. 

“Our families are struggling,” said Zokaie. “We have bad actors that are exploiting their pain for profit. We have parents in our districts that are skipping meals so their kids can eat, and we have older adults that are choosing between groceries and making rent. I believe we have a duty to respond to the cost of living crisis, and preventing bad actors from taking advantage of consumers will save people money.”

“Most businesses and most suppliers are honest and great and do what they can to keep their costs low and don’t take advantage of particular situations,” added Brown. But the state, Brown said, needs to have more “protections” in place against “bad actors.” 

‘An over-interference in the free market’

Opponents argued the bill is too vague insofar as what qualifies as a “necessity,” which can vary from person to person.

Chris Howes of the Colorado Retail Council likened the debate to conversations he had during the pandemic when trying to determine which businesses were essential and which were not. 

While the bill seeks to protect small businesses, Devin Camacho of the Colorado Springs Chamber and Economic Development Corporation warned it could have the opposite effect. He was concerned about potential litigation that could arise from price gouging accusations, which could be costly and time-consuming for small business owners. Camacho also criticized the 10% benchmark, arguing that sometimes small businesses need to increase their prices over 10% in order to stay competitive with large corporations.

“We trust that small businesses, the backbone of our economy, are making the appropriate decisions when they decide they need to increase the cost of a good by 10%,” he said. “This bill, we believe, as written, is an over-interference in the free market. We believe that businesses, especially small businesses, are making the right decisions and listening to market demands when they set the price of market goods.”

While she commended the sponsors’ intent and agreed that action is needed to address affordability, Rachel Beck of the Colorado Competitive Council said the bill is not the right approach. 

Beck is particularly concerned by testimony from a representative of the Attorney General’s Office stating that one complaint is sufficient to launch an investigation. That’s problematic, she said, because some business owners may be unclear about the law’s requirements.

“I think it’s a pretty questionable policy approach to recognize that a definition proposed to be the law is unclear and then ask businesses to rely upon the government to not enforce it,” she said. “I think that we can do better, and businesses deserve that certainty of how to do the right thing that they can rely upon”

Several members of the House Business Affairs and Labor Committee echoed opponents’ worries, questioning whether this is really that much of a problem in Colorado. 

Rep. Ryan Armagost, R-Berthoud, questioned whether the bill is “a solution in search of a problem.” 

“I don’t feel comfortable making legislation that is restrictive and destructive on businesses, causing frivolous litigation for something that we believe could be a problem in the future or that other states may be experiencing,” he said, adding that he believes inflation is driven by fees and overregulation.

‘This intervention is necessary’

While inflation accounts for some of the price increases Coloradans have seen in grocery aisles, it’s not the whole story, insisted Joshua Mantell of the Bell Policy Center. He said “corporate greed” also plays a part, with profits driving 53% of inflation during the second and third quarters of 2023. 

“In a true free market, we would expect prices to reflect the price of the components of the product and the labor it takes to make it,” he said. “When corporate profits are the overriding factor in the price of a good, the market has broken, and consumers and everyday people are the ones that bear the brunt of the increase. This bill seeks to correct that imbalance and ensure that prices reflect the true cost of the good.”

“Price gouging” can create a ripple effect for consumers, he added. When families are forced to pay significantly more for essentials like milk or diapers, they’re cutting costs elsewhere or racking up credit card debt.

It can also harm small businesses, said Annie Martinez of the Colorado Center on Law and Policy, because they are often forced to pass on price increases from their wholesale suppliers to their customers. 

“This intervention is necessary because we cannot and should not rely on bad faith actors to do the right thing without being mandated to do so,” said Martinez. 

Federal Trade Commissioner Alvaro Bedoya had issued a memo to FTC Chair Andrew Ferguson on Wednesday, urging him to take action to confront affordability, specifically regarding egg prices, according to David Seligman, executive director of the nonprofit law firm Towards Justice.

Seligman said egg producers are using the recent avian flu outbreaks and inflation as excuses to jack up prices beyond what they should be.

Seligman said the bill would provide the Attorney General’s Office, the Division of Consumer Protection, and the state’s courts the necessary tools to step in and protect consumers when corporations take try to take advantage of them. 

Kevin Caffrey of the Northern Colorado Labor Council said the very same people who are complaining about inflation last year are now the ones saying they don’t feel that price gouging is an issue in Colorado. 

“This bill is totally necessary because, unlike some of the questions and the comments I’ve heard that say Colorado is overregulated, I would say Colorado is one of the least regulated states in the country, which is amazing,” he said. “We need to get back to some regulations, some law and order. This bill would make sure that that happens, because we have nothing right now for our Attorney General to sink his teeth into.”

The bill passed on a 7-6 vote, with the committee’s five Republicans and Democrat Bob Marshall of Highlands Ranch voting in opposition.