{"id":4216,"date":"2005-11-16T15:30:14","date_gmt":"2005-11-16T19:30:14","guid":{"rendered":"http:\/\/blogs.law.harvard.edu\/formerlyknownas\/2005\/11\/16\/price-gouging-the-ftc-doesnt-"},"modified":"2011-08-05T14:54:24","modified_gmt":"2011-08-05T18:54:24","slug":"price-gouging-the-ftc-doesnt-convince-me","status":"publish","type":"post","link":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/2005\/11\/16\/price-gouging-the-ftc-doesnt-convince-me\/","title":{"rendered":"price-gouging: the ftc doesn’t convince me"},"content":{"rendered":"

<\/a><\/p>\n

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While I was in Washington in a hypo-blogging mode, the FTC told a <\/FONT><\/DIV>
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Senate committee that “Federal Price Gouging Laws Would ‘Unne-<\/FONT><\/DIV>
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cessarily Hurt Consumers’.” (FTC Press Release<\/A><\/FONT>; CNN.com, <\/FONT><\/DIV>
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“FTC against price-gouging law<\/FONT><\/A>,”<\/FONT> Nov. 9, 2006)  To my surprise, <\/FONT><\/DIV>
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many of the weblogerati who had opined so loudly on this topic <\/FONT><\/DIV>
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in September and October were silent last week. (for example, <\/FONT><\/DIV>
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Steve<\/A> <\/FONT>Bainbridge<\/EM><\/FONT><\/A>, Dave <\/FONT>Hoffman<\/FONT><\/A>, Dale <\/FONT>Oesterle<\/FONT><\/A>, <\/FONT>Max<\/FONT><\/A> Sawickly, <\/FONT><\/DIV>
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and Mark <\/FONT>Kleiman<\/FONT><\/A>)<\/FONT><\/FONT><\/DIV>
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<\/FONT> <\/DIV>
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\"gas<\/FONT><\/DIV>
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<\/FONT> <\/DIV>
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In her Statement<\/A> to the Committee, Deborah Plattt Majoras cautioned, <\/FONT><\/DIV>
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“that a full understanding of pricing practices before and since Katrina <\/FONT><\/DIV>
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may not lead to a conclusion that a federal prohibition on ‘price gouging’ <\/FONT><\/DIV>
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is appropriate. . . .  [P]rice gouging laws that have the effect of controlling <\/FONT><\/DIV>
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prices likely will do consumers more harm than good . . . While no con-<\/FONT><\/DIV>
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sumers like price increases, in fact, price increases lower demand and help <\/FONT><\/DIV>
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make the shortage shorter-lived than it otherwise would have been.”  Majoras <\/FONT><\/FONT><\/DIV>
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added that “Enforcement of the antitrust laws is the better <\/FONT>way to <\/FONT>protect <\/FONT><\/FONT><\/DIV>
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consumers.”<\/FONT><\/DIV><\/FONT>
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\"tiny Noting that at least 28 states currently <\/FONT>have statutes <\/FONT>that address <\/FONT><\/DIV>
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short-term price spikes in the aftermath of a <\/FONT>disaster, the FTC advised <\/FONT><\/DIV>
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that <\/FONT>enforcement of any federal anti-“gouging” law  – “should <\/FONT>be left up <\/FONT><\/DIV>
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to the states, <\/FONT>based on their proximity to retail outlets and their <\/FONT>ability <\/FONT><\/DIV>
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to react quickly to <\/FONT>consumer complaints on the local level.”<\/FONT><\/DIV><\/BLOCKQUOTE>
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I believe that I understand the economic arguments made by those against <\/FONT><\/DIV>
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price-gouging bans, but I’m not at all sure that they settle the issue.<\/FONT><\/DIV>
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1. Arguments about the effects of long-term price regulation <\/FONT><\/DIV>
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are simply not very helpful when talking about the immediate <\/FONT><\/DIV>
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reaction to a natural disaster and the short period of panic and <\/FONT><\/DIV>
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urgency that follows;<\/FONT><\/DIV>
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<\/FONT> <\/DIV>
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2. Defining it for the purposes of a statute or regulation may be \"dictionaryN\"<\/FONT><\/FONT>
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tricky, but t<\/FONT>he <\/FONT>notion<\/FONT><\/A> that “price-gouging <\/FONT>can’t exist<\/FONT><\/A>” is silly <\/FONT><\/DIV>
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semantics.<\/FONT><\/DIV>
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<\/FONT> <\/DIV>
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3. The public and its representatives have every right to declare <\/FONT><\/DIV>
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a particular economic activity to be anti-social and unlawful in <\/FONT><\/DIV>
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the context of a state of emergency.  Such laws, backed with <\/FONT><\/DIV>
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effective enforcement and publicity, surely do help to reduce <\/FONT><\/DIV>
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a practice that often serves to increase panic and paranoia, <\/FONT><\/DIV>
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and decrease morale in a time when public-spirited cooperation <\/FONT><\/DIV>
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is vital.<\/FONT><\/DIV>
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<\/FONT> <\/DIV>
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4.  <\/FONT>MaxSpeaks<\/FONT><\/A> answers those who say that attempts at price-<\/FONT><\/DIV>
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gouging cannot last for long in a competitive market.  We, of <\/FONT><\/DIV>
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course, do not require the successful exercise of market power <\/FONT><\/DIV>
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in other price-manipulation contexts (such as price-fixing <\/FONT><\/DIV>
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and boycott conspiracies).   The short-term, opportunistic <\/FONT><\/DIV>
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nature of many instances of price spiking in emergencies would <\/FONT><\/DIV>
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seem to suggest that the many virtues claimed for the practice <\/FONT><\/DIV>
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in theory are merely fig-leafs to cover a particularly anti-social <\/FONT><\/DIV>
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instance of greed.<\/FONT><\/DIV>
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<\/FONT> <\/DIV>
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\"fill<\/FONT><\/DIV>
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<\/FONT> <\/DIV>
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5. Like Dave Hoffman, “I dislike folks who intentionally profit on <\/FONT><\/DIV>
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others’ misfortune.”   Many of the neo-conservative opponents <\/FONT><\/DIV>
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of price-gouging bans are often, in other contexts, more than <\/FONT><\/DIV>
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willing to legislate morality.   It’s a cliche to ask “What would <\/FONT><\/DIV>
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Jesus Do?”, but I’m darn certain I know the answer.<\/FONT><\/DIV><\/DIV><\/BLOCKQUOTE>
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<\/FONT> <\/DIV>
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half a tank — <\/FONT><\/SPAN><\/SPAN><\/DIV>
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Old Glory in tatters <\/FONT><\/SPAN><\/SPAN><\/DIV>
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above the gas pump<\/FONT><\/SPAN><\/SPAN><\/SPAN><\/SPAN><\/DIV>
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<\/FONT><\/SPAN><\/SPAN> <\/DIV>
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         <\/FONT>dagosan<\/STRONG><\/EM><\/FONT><\/A> <\/FONT><\/FONT><\/SPAN><\/SPAN><\/DIV>
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              (hat tip to elizabeth macfarland)<\/FONT><\/FONT><\/SPAN><\/SPAN><\/DIV>
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<\/FONT><\/SPAN><\/SPAN> <\/DIV><\/DIV><\/BLOCKQUOTE><\/BLOCKQUOTE><\/BLOCKQUOTE><\/BLOCKQUOTE><\/BLOCKQUOTE><\/BLOCKQUOTE>
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Irony?<\/EM> In researching this piece, I discovered <\/FONT>another Bainbridge weblog<\/FONT><\/A> <\/FONT><\/DIV>
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that has discussed price-gouging.  At <\/FONT>Talk About Bainbridge Georgia<\/FONT><\/EM><\/A> <\/FONT><\/DIV>
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I learned that a lot of folks were quite unhappy with the local gasoline <\/FONT><\/DIV>
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prices after Katrina — especially those of their hometown company, <\/FONT><\/DIV>
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Southwest <\/FONT><\/A>Georgia Oil Co<\/FONT><\/A>, which operates SunStops stations and <\/FONT><\/DIV>
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distributes its private brand of Inland gasoline. Southwest Georgia Oil <\/FONT><\/DIV>
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was <\/FONT>accused<\/FONT><\/A> of price-gouging by the Florida state consumer services <\/FONT><\/DIV>
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commissioner<\/FONT><\/A> on October 27, 2005.  The <\/FONT>Inland<\/FONT><\/A> homepage states:<\/FONT><\/DIV>
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“Southwest Georgia Oil and Inland’s mission statement is, <\/FONT><\/DIV>
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‘Outrageous Customer Service<\/EM>,’ and our goal is to provide <\/FONT><\/DIV>
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outrageous customer service to employee customers and <\/FONT><\/DIV>
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external customers alike.”<\/FONT><\/DIV><\/BLOCKQUOTE><\/FONT><\/DIV>
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Outrageous in deed.  <\/FONT><\/DIV>
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<\/FONT> <\/DIV>
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update<\/FONT><\/STRONG><\/EM> (8 PM): Prof. David Hoffman<\/FONT><\/A>‘s response<\/A> to this post at<\/FONT><\/DIV>
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Concurring Opinions<\/EM> made me realize that I need to clarifiy<\/FONT><\/DIV>
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a point or two.  So, I left Dave this Comment: <\/FONT><\/DIV>
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Dave [Hoffman], I agree that there is no urgent need <\/FONT><\/DIV>
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for federal <\/FONT>legislation — unless someone on that level <\/FONT><\/DIV>
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comes up with an especially workable definition that <\/FONT><\/DIV>
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can be uniformly applied across the nation. <\/FONT><\/DIV>
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 <\/DIV>
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As with most opponents, the crux of the FTC Statement <\/FONT><\/DIV>
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went to ALL price-gouging laws, so the remarks at my <\/FONT><\/DIV>
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weblog are aimed at the general opposition. As a former <\/FONT><\/DIV>
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FTC antitrust lawyer, I surely agree with Chairman Majoras <\/FONT><\/DIV>
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that we need continuing close scrutiny of the petroleum <\/FONT><\/DIV>
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industry, and effective antitrust enforcement, should price <\/FONT><\/DIV>
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or supply manipulations be discovered that unreasonably <\/FONT><\/DIV>
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restrain trade in any important product in the wake of natural <\/FONT><\/DIV>
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or manmade disasters. <\/FONT><\/DIV><\/BLOCKQUOTE>
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                                                                                                                          \"gas<\/FONT><\/DIV>
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 <\/DIV><\/BLOCKQUOTE><\/p>\n","protected":false},"excerpt":{"rendered":"

While I was in Washington in a hypo-blogging mode, the FTC told a Senate committee that “Federal Price Gouging Laws Would ‘Unne- cessarily Hurt Consumers’.” (FTC Press Release; CNN.com, “FTC against price-gouging law,” Nov. 9, 2006)  To my surprise, many of the weblogerati who had opined so loudly on this topic in September and October […]<\/p>\n","protected":false},"author":94,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[2926],"tags":[],"class_list":["post-4216","post","type-post","status-publish","format-standard","hentry","category-pre-06-2006"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p6kP1R-160","_links":{"self":[{"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/posts\/4216","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/users\/94"}],"replies":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/comments?post=4216"}],"version-history":[{"count":1,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/posts\/4216\/revisions"}],"predecessor-version":[{"id":12920,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/posts\/4216\/revisions\/12920"}],"wp:attachment":[{"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/media?parent=4216"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/categories?post=4216"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/tags?post=4216"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}