In February 2022, I wrote a piece in The American Prospect advocating for antitrust enforcement as a means to combat inflation. I wasn’t totally wrong. In light of personal experience in price-fixing litigation and the fate of the Biden administration, however, my perspective has shifted. Antitrust can be part of the solution, but it can’t be the entirety. (And neither can Fed rate hikes.) As spelled out below, the scope of antitrust is too narrow to combat many forms of profiteering that drive inflation. And even where inflationary conduct is cognizable by antitrust law, antitrust moves too slowly to make a meaningful difference in the short run, especially over the four-year term of a president.
By several accounts, profiteering was a significant contributor to post-Covid inflation. A 2022 study by the Economic Policy Institute documented that 54 percent of the increase in prices from the trough of the Covid-19 recession in the second quarter of 2020 to the fourth quarter of 2021 was attributed to larger profit margins. A 2023 study by the Federal Reserve Bank of Kansas City found that growth in markups accounted for more than half of inflation for 2021. A 2023 study by the Institute for Public Policy Research concluded that business profits rose by 30 percent among UK listed firms post-pandemic, driven by a small number of firms. And a 2023 study by Groundwork Collaborate found that corporate profits fueled 53 percent of inflation during the second and third quarters of 2023. Per a 2025 BIS Working Paper, during the 2021–22 post-Covid period, one third of the price surge was traceable just to the largest firms in an industry. And a recent paper from the Federal Reserve Bank of St. Louis estimated that non-financial corporate profits, as a share of total economic output, increased from 13.9 percent in the years prior to Covid to 16.2 percent in the years after.
There are several mechanisms by which a firm’s margin—the difference between its price and its marginal costs and a measure of market power—can increase. One mechanism, as explained by Isabella Webber in her writings and on The Slingshot—is that a systemic cost shock can be used as a coordination device among sellers, which allows prices to rise beyond any true increase in marginal cost. A related mechanism is that companies have superior information about their costs compared to their customers. For example, when a tariff is applied to an input in a firm’s production process, it is impossible for a customer to know what portion of the cost is affected by the tariff, let alone the amount of the ever-shifting tariff. An entirely unrelated mechanism for profiteering is that companies can communicate their intentions to raise prices or cut capacity via public airwaves, especially during earnings calls; these announcements can be understood as an “invitation to collude” by rivals. The policy question is whether antitrust is up to the task of policing these exercises of market power.
The Narrow Scope of Antitrust
In broad strokes, antitrust recognizes pricing conduct as being anticompetitive when it falls into one of two buckets: (1) a unilateral price hike made possible by an exclusionary restraint; or (2) a coordinated price hike made possible by an agreement among rivals or a series of acquisitions that give rise to collective market power. An example of the former would be a single firm with market power that needed to use a restraint like a most-favored-nations provision or exclusive contract in order to raise prices. (The restraint typically must pierce the firm’s boundaries—that is, appear in a contract with buyers or suppliers.) A price hike taken solely by virtue of a firm’s lawfully acquired market power, by contrast, is not cognizable under antitrust. An example of coordinated conduct condemned by antitrust would be a group of firms sharing current or future price information via excel files or some third-party information broker to jointly raise prices. A roll-up of small horizontal rivals by a private equity firm—think anesthesiology practices in Texas—could also be condemned under antitrust laws. A coordinated price hike achieved “tacitly” and thus without an agreement, by contrast, is outside the scope of antitrust law.
When we think about the types of price hikes that can fuel inflation, it becomes painfully obvious that antitrust cannot be the first line of defense. Consider the following not-so hypothetical examples:
- A company cites rising costs during a crisis as a basis for hiking prices by nine percent, even though its actual marginal costs rose by less.
- A collection of companies exploit a modest cost increase to tacitly coordinate a much larger price increase.
- A company in a concentrated industry announces that because of pending tariffs, it plans to reduce its capacity by four percent, suggesting that anything less is undisciplined.
The first two tactics fall outside the scope of antitrust. And while the third is addressable via Section 5 of the FTC Act, only the FTC could bring such a challenge.
Even for conduct that falls within the narrow scope of antitrust law, prosecuting a case can take multiple years to resolve, and even then, settlements can allow perpetrators of price-fixing agreements to pay a fraction of the harm inflicted. Consider a case of coordinated price hikes made possible via a common pricing algorithm, such as RealPage, or a more primitive form of information sharing, such as the Agri Stats cases (disclosure: I’ve been an expert in two of Agri Stats matters). Or a case of a private equity roll-up of dozens of small horizontal rivals, such as cheerleading competitions by Varsity, granting the combined entity newfound pricing power (disclosure: I was the gyms’ expert in Varsity). The complaint in Varsity was filed in October 2020, and the order approving the disbursement of settlement funds was issued in May 2025, nearly five years later. And that’s speedy for an antitrust case in my experience.
The Makings of a New Toolkit
So what is needed to effectively police this kind of inflationary conduct? Beginning with conduct within the ambit of antitrust, in addition to prosecuting the use of common pricing algorithms via antitrust enforcement, many cities such as San Diego, Berkeley, San Francisco and Minneapolis have simply banned the use of RealPage software and others should follow suit. The Lever’s Luke Goldstein recently documented a cottage industry of “price optimization consultants” spotting price-hiking opportunities for companies in the same industry. Turning over the pricing decisions, as well as competitively sensitive information, to a third party that is also advising your rivals should be banned generally. There’s no reason to wait for these “facilitating practices” to bear fruit for their clients before prosecuting; by then, the damage of higher prices has already been inflicted. Indeed, Congress should make clear that any common pricing algorithm, no matter how primitive—e.g., sharing excel spreadsheets via an intermediary or chatting over the phone with a shared pricing consultant—or sophisticated should be per se illegal under the antitrust laws.
Similarly, there is no reason to wait for a roll-up of rental units in a neighborhood by a single entity (often private equity) to lead to rental inflation before we intervene ex post via antitrust. As I documented in an OECD paper with two co-authors, the most consolidated neighborhoods in Florida experienced the steepest increase in rents in the post-Covid era. Cities and states could address this threat ex ante by imposing a cap on the share of units that could be controlled by a single entity in a neighborhood.
Although public invitations to collude are covered by the FTC Act, Congress should extend the same policing authority to states and private enforcers. At least one federal court has decided that such cases are not amendable to private enforcement under the Sherman Act. The brazen behavior of firms, especially airlines, makes clear they perceive antitrust law to be impotent here. To wit, in March of this year, Delta and United discussed planned capacity reductions at the same JP Morgan investor conference in succession. In April, both airlines announced plans to reduce capacity in the third quarter by nearly the same amount (four percent). Given the FTC’s limited resources, the agency can’t be expected to police every perceived invitation to collude.
Moving to conduct outside of antitrust, recall that a single firm raising prices without the crutch of a restraint is permissible. Hence, antitrust cannot police episodes of firms unilaterally exploiting a crisis to pad their profits. Just as Covid served as a generalized cost shock, so too do tariffs. One pricing consultant recently bragged to DealBook that tariffs represent a “golden opportunity” to exploit customers, and explained the term “taking price,” which means using a rivals’ (potentially legitimate) price hike as cover for your own price hike. And several firms, including Black & Decker, Adidas, Hasbro, and Procter & Gamble have announced planned price increases owning to Trump’s tariffs.
A federal anti-price gouging law, as proposed by Kamala Harris during her presidential campaign, would be a good start. Price hikes would still be tolerated, so long as they could be justified by a commensurate increase in the firm’s costs. But we must go further: Industries experiencing above-average inflation should be automatically probed by a designated federal agency (either the DOJ or FTC). Egg prices were soaring, in part due to coordinated pricing in a concentrated industry as documented by Basel Musharbash, until Trump’s DOJ announced an industry probe in March. Other industries exhibiting above-average inflation, including auto insurance, should also be subjected to government probes. And the use of the bully pulpit by the president, along the line of what JFK did to turn back prices hikes by the steel industry, would also be helpful.
Yet another inflationary strategy that escapes antitrust scrutiny is surveillance pricing, sometimes referred to as dynamic pricing, in which a company adjusts prices based on the personally identified characteristics of shoppers or market dynamics (e.g., a school bus full of hungry soccer players arrives at a fast-food restaurant). Some states are moving to ban these practices in retailing. At a minimum, these practices should be subjected to regulatory oversight, as they have the potential of extracting consumer surplus (even relative to monopoly levels) by charging each customer one penny below her willingness to pay. Even worse, this technology could lead to discriminatory pricing on the basis of race or income or time since the last paycheck. Alas, the new FTC Chairman, Andrew Ferguson, closed an inquiry into surveillance pricing initiated by his predecessor.
Thinking Outside the Box
As reported in the Times, the Catalonia government has employed several remedies to address soaring rental inflation in Barcelona, including (1) imposition of rental price caps last March (rents have since fallen more than six percent); (2) ending licenses for Airbnb homes, and required owners to convert units into long-term leases at capped rates (brining 10,000 units back into the market); and (3) teaming up with private developers to build 50,000 new units by 2030. In addition to these fairly radical interventions, the government is considering a proposal to compel landlords and banks that are holding defaulted mortgages to put 75,000 units to use for long-term rentals. Another proposal would close the loophole in Catalonia’s housing laws that allow investors to convert residential apartments into tourist rentals. Not mentioned is the notion of deregulating zoning laws—potentially helpful at the margin, but not something to bring renters short-run relief (and certainly not fodder around which to build a political campaign).
It’s time for policymakers generally and progressive authors of the next presidential transition project in particular to think outside the box. As the 2024 election made clear, voters are willing to embrace autocracy when basic needs become unaffordable. Aside from stepped-up antitrust enforcement, the Biden administration took a hands-off approach to inflation, deferring mainly to the Fed. And we know the results. Although the Fed eventually brought down prices by raising rates, it did so at tremendous costs, making home ownership out of reach. The high social cost of inflation militates in favor of developing a new toolkit to preserve democracy and make America affordable again.