Is a 10% consumer-goods price hike gouging? A Colorado bill would define it so.

Sponsors of a bill to ban price gouging say diapers are one of the every-day items they want to go after with the bill.

Five years after Colorado banned price-gouging on certain items during declared emergencies — and ran into no business opposition in doing so — legislators will consider broadening that law substantially, which worries retailers and other business leaders.

House Bill 1010, sponsored by Democratic Reps. Yara Zokaie of Fort Collins and Kyle Brown of Louisville, is scheduled for its first hearing at 1:30 p.m. Thursday in the House Business Affairs & Labor Committee. It would ban price gouging at all times on “good and services that are necessary for the health, safety and welfare of consumers or of the general public” and would define the act as raising prices by at least 10% over their average cost for the past 90 days.

The law would not consider a price hike above 10% to be gouging if the boost in cost is directly attributable to additional costs imposed by the seller’s supplier or suppliers or other direct costs of providing the goods or services. HB 1010 directs the Colorado Attorney General’s office to adopt rules necessary for it to enforce the law.

Diapers rest by a changing table in a Colorado home.

Zokaie, a newly elected representative, said that after hearing repeatedly from voters on the campaign trail about the high cost of goods, she thought she could do something by going after “bad actors trying to hide behind inflation.” She cited goods ranging from diapers to potatoes to everyday food items as the ones she is trying to safeguard for budget-constrained state residents.

“The issue that kept coming up for families was the cost of living, and the cost of groceries came up a lot too,” Zokaie said, recalling conversations at people’s doors. “These are the things that everybody needs just to get by … I think the intent of the bill is very clear.”

Is bill vague and unreasonable?

While Colorado Retail Council President Chris Howes appreciated Zokaie’s outreach while putting together the bill, he couldn’t disagree more on its clarity, saying its definitions are so vague that it may be hard for store owners to know if they’re complying with the law. The broad definition of necessities in the bill recalls the early days of the pandemic when government shut down businesses that were not considered essential, leaving both business owners and local governments to interpret that term differently, he noted.

Those potentially illegal price fluctuations for consumer goods could come to just a few bucks. Under the definition that cites a 10% cost jump as gouging, a $3 increase in a $28 box of diapers could be a crime, as could a $1 increase in a dozen eggs — or even a 25-cent rise in a two-pound bag of potatoes.

While Zokaie said the bill is aimed at stopping “corporate greed,” Howes argued that market competition is the best deterrent to unnecessary price hikes now. Grocery stores, gas stations and department stores typically are within close proximity to each other in any semi-urbanized area, and a steep price hike at one is met by other stores advertising that their goods are cheaper in comparison, he said.

“There is zero opportunity for retailers to increase price without the other guy trying to take advantage of it. So, Colorado is certainly not in an environment where you can just raise prices for anything you want,” Howes said, noting many retailers have profit margins of 2% to 3%. “I think history has shown that where the government sets prices, especially when it comes to food, food is not delivered.”

He added that the bill’s allowance for an affirmative defense based on supplier pricing offers little comfort, as retailers likely would have to offer such a defense only after they already are spending resources on being investigated by the AG’s office.

Previous approaches to price-gouging different

Colorado state Rep. Yara Zokaie speaks at the Colorado Chamber of Commerce in 2024.

Colorado became the 37th state to outlaw price-gouging in July 2020 when Democratic Gov. Jared Polis signed a law four months into the pandemic banning the “unfair and unconscionable act” within the first 180 days after a disaster is declared.

That bill didn’t cite a percentage hike defining price gouging but specified the law to building materials, consumer food items, emergency supplies, medical supplies, other necessities for human or animal survival, repair or reconstruction services, transportation or storage services, or services used in an emergency cleanup. While legislative Republicans opposed it almost universally, business groups did not.

Zokaie said she modeled HB 1010 after similar laws in Michigan and Ohio. But Howes and others argue there are significant differences with the statutes in those states.

Michigan in December defined an “excessively increased price” as a 10% or greater jump, but it limited enforcement of the law to periods of declared emergencies. And Ohio’s law requires intent by suppliers to commit an “unconscionable act or practice,” such as knowingly taking advantage of a consumer with physical or mental infirmities or knowing the transaction was substantially one-sided in favor of the supplier.

Bill emblematic of larger debate

While Zokaie said she hopes she can get bipartisan support for HB 1010, it’s more likely to exemplify how Democrats and Republicans are seeking the same goal of reducing costs of living this legislative session through different methods. While majority Democrats want to limit costs that businesses charge to consumers — other bills restrict charges by child-care centers and landlords, for example — minority Republicans are seeking to roll back government fees and regulations.

In addition to business opposition, HB 1010 is facing pushback from Polis, who has told sponsors that he doesn’t like bills that get in the way of the market. Observers expect sponsors will offer some amendments.

When asked if such gouging is prominent, Zokaie said there is “reason to suspect it’s happening.” And even if there are not a bevy of prosecution if the bill becomes law, she thinks its mere existence can help to limit price hikes on goods needed by families.

“This acts as a deterrent to let people know you can be held accountable,” she said.

Colorado Retail Council President Chris Howes testifies during a Senate committee hearing in January.

Howes, however, said it’s one more deterrent to people setting up businesses in Colorado at a time when regulatory and required wage increases are contributing to the decisions of some retailers to shuttering stores. And the damage a bill like this could do to the state’s business atmosphere, while hard to quantify, should not be overlooked, he added.

“The attitude is that we’re going to run these bills to punish American corporations. And that is a terrible attitude,” he said.