Big companies have used their market dominance to rake in profits by raising prices on families. These price hikes have played a detrimental role in driving inflation and resulted in persistently higher prices for American families. This has been especially clear with the price of food, where industry consolidation in sectors like meat production gave corporations more extreme pricing dominance and major returns in profits. Some companies have also reduced the size of essentials like food and household paper products without lowering prices, shorting families while pushing up profits.
Data shows that big companies made abnormally high profits during the recent period of rapid inflation, driving up prices. Typically, company profits account for only 13% of price increases. However, between April 2020 and December 2021 company profits accounted for 54% of overall price increases, and remained above normal levels through 2022. The rise in profits was especially extreme for the largest companies, whose margins surged and remained high following April 2020.
Democrats and the Biden administration are pushing back on big companies and these practices by going after corporate consolidation, pushing down the cost of prescription drugs, cracking down on junk fees, and supporting unions. In contrast, Republicans are calling for more tax cuts for the wealthy and are trying to undo Democrats’ efforts to protect consumers. While prices may change based on shifting economic forces, the federal government has a clear role in protecting families from excessive and predatory price hikes.
When families were struggling with inflation in 2021, many CEOs continued to raise prices to ratchet up profits, beyond what was needed to cover costs.
While American families struggled with rapidly rising prices in 2021, corporate CEOs and shareholders raked in surging profits. In many cases, companies raised prices well beyond what was necessary to cover their costs—taking hard-earned money away from American families. Several CEOs have even touted this to their investors, showcasing how unnecessary price increases directly benefited their companies, often using inflation as just an excuse. The CFO of the major auto parts company AutoZone called inflation “a little bit our friend…in terms of retail pricing.” The head of a major company for construction materials, Holcim, noted that their “proactive” pricing drove up the company’s profit margins. The CEO of Kroger also emphasized passing increased costs to consumers, stating “we view a little bit of inflation as always good in our business.” In 2023, large corporations were still increasing prices on families, even while they recorded months of heightened profits.
Evidence shows that big companies were able to take advantage of their market dominance to hike prices during the pandemic.
Economists and policymakers have called out how corporations with historic market dominance seized on the pandemic and post-pandemic economy to rake in profits at the expense of families. In recent years, large companies have increasingly carried out mergers—when two or more companies combine into one larger company—and acquisitions—when one company buys another. If these companies sell similar goods, families are left with fewer options to choose from when they are shopping around for the best price. In this way, by reducing competition, CEOs can force hiked prices on families with few to no alternatives.
Studies have shown that since the 1970s, fewer companies have been participating in U.S. industries overall due to mergers and acquisitions. The number of small companies has declined, and just a few big companies now dominate many markets. This overall trend is known as greater corporate concentration.
Larger companies in industries with greater corporate concentration can more brazenly pass higher production costs onto consumers, using inflation as an excuse to rake in higher profits. When studying inflation, the Federal Reserve Bank of Boston found that companies are more likely to pass increased production costs onto consumers in concentrated industries. A recent Federal Reserve study also showed that profit margins remained highest among the largest companies following the pandemic.
