Hurricane Michael: Should Businesses Be Allowed to Price Gouge?

What’s the story?

• As Hurricane Michael makes landfall in Florida, Sunshine State officials are warning businesses against price gouging.

• Florida, Georgia, and Alabama have laws against increasing prices during federal emergencies. But should they? If you support a free-market system, why shouldn’t businesses be allowed to charge whatever price consumers are willing to pay?

What are the laws?

• Florida state law prohibits “an unconscionable increase in the price of essential commodities, such as food, water, hotels, ice, gasoline, lumber and equipment, needed as a direct result of an officially declared emergency.” Governor Rick Scott (R) declared a state of emergency of 35 counties in the path of Hurricane Michael.
• Under Georgia law, businesses may not sell, or offer to sell at retail, any goods or services identified by the governor at a price higher than the price at which the goods or services were sold or offered for sale before the declaration of the State of Emergency.
• Alabama makes it unlawful for anyone to raise prices on commodities or lodging by more than 25 percent during the declared state of emergency.

Critics of price gouging

• Alabama Attorney General Steve Marshall warned against those seeking to illegally profit from bad weather, saying “Alabamians should be cautious of those who would seek to prey upon them through crimes such as price gouging and home repair fraud.”
• Georgia Attorney General Chris Carr issued a similar sentiment, stating: “With pending inclement weather, we want to remind Georgia consumers that our Consumer Protection Division is at work to protect them from scammers and price gougers."

Supporters of price gouging

• When Hurricane Florence hit last month, Art Carden, an Associate Professor of Economics at Samford University in Birmingham, Alabama, wrote in Forbes that “preventing price gouging will” make hurricane damage worse.
• Carden argued that while it may seem like officials are protecting the vulnerable from “vultures who would exploit them,” they’re

“actually making matters worse by shutting down the mechanism - rising prices - that efficiently and effectively dispatches knowledge and information around the world and calls desperately-needed resources to the areas that are likely to be most affected by the storm.”

• And in a Harvard Business Review piece titled "The Problem with Price Gouging Laws," Rafi Mohammed said the question of price gouging in not a moral question, but an economic one.

"Doubling the price will make customers think twice about buying another gallon of milk, for example, thus leaving supply for those who didn’t arrive at dawn," Mohammed wrote.

• Mohammed also warned that laws against price gouging discourage “businesses from boosting supplies.” If prices are capped, he wrote, “there’s little incentive for businesses to hustle to increase supplies.”

What do you think?

Is price gouging “unconscionable”? Or is it the free market at work? Should states relax their price-gouging laws? Hurricane Michael is making landfall: take action above and tell your reps what to do, then comment below.

—Josh Herman

What can you do if you experience price gouging?

• Floridians who suspect price gouging can call 1-866-9-NO-SCAM or visit MyFloridaLegal.com. 
• Georgians can contact the Office of the Attorney General’s Consumer Protection Unit at 1-800-869-1123 or lodge complaints here.
• Alabamians can report possible unfair prices by calling toll free to 1-800-392-5658 or visiting https://ago.alabama.gov/ConsumerComplaint.

(Photo Credit: iStockphoto.com / hsun337)