Price Gouging

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What is Price Gouging?


Price Gouging is when a seller dramatically increases the fees and or prices for goods and services to an amount much higher than is considered fair exchange for those goods or deemed reasonable. Usually, most of the time, this occurs after a surge for the demand of a given product and or a limited supply of said product appears. A typical example of this is when a price increase of necessities after a declared disaster like a hurricane or severe storm.


In precise, legal usage, it is a name of a crime that applies to some jurisdictions of the United States when civil emergencies. You can refer either to prices obtained by practices inconsistent with the free market in less precise usage. Price gouging is also considered to be exploitative and unethical.


The term is similar to profiteering but is usually short-term. In a localized area, however, with a Pandemic like Covid-19, it is not localized. However, National and Law Enforcement and the Federal Government is cracking down on this unethical practice, and it is illegal to raise prices on essential items such as food, clothing, shelter, and medicine, and anything that is needed for the preservation of life and property. In counties jurisdictions where there is no such crime, the term may still be used to pressure companies and resellers to refrain from this behavior.


Price Gouging in Texas As the coronavirus spreads across the state; In regular times, an N95 face mask would cost a dental office in Texas 2-3 dollars each, give or take, especially if they were buying reasonably large quantities, But this is not a regular time for our country, and bids for N95 masks from suppliers are through the roof.

Currently, the new coronavirus is rapidly spreading across the country, and health care professionals are desperate for these face masks.

The N95 mask filters out about 95% of airborne particles to protect sick people and anyone else in the immediate area. Unfortunately, prices for masks have quadrupled amid this pandemic.


Cases of 20 masks for 150 dollars and more. The profiteering and price gouging of this kind is sickening. Our health care workers are getting sick because we have significant mask shortages in our country. "They are not just raising the price a few cents per mask, but dollars per mask is 3-4 times the regular price.


This is highway robbery, and Texas will not stand for it. A sales quotation by Hatfield and Co. has recently appeared in the news and had an offer to resale one million N95 masks for $6.3 million cash. Hatfield and Co. said it is not price gouging, saying it is making a small profit margin. The company refused to identify the supplier. The company said it is a group of doctors in Texas who have the masks but would not say anything about it.


The demand for protective equipment has soared since the outbreak. The U.S. surgeon general told everyone to save the N95s for health care professionals who need them. He Quotes, "Seriously, people - stop buying masks!" The demand has pushed prices for the masks from between $ 10 to 15 dollars a mask.


Under the Texas state's price-gouging laws, it is illegal to charge "excessive" prices for necessities during a disaster, and Texas Attorney General Ken Paxton has said he will not tolerate anyone using the Covid-19 pandemic to profit. He quotes, " We are all susceptible to price gouging, and under Texas laws, those who violate the Texas Deceptive Trade Practices Act can and will be met with the full force of the law," the attorney general's office said.


The state has gone after a Houston area company in the past week for attempting to auction over 750,000 masks online, with listings as high as $180 for a package of 16. According to the Washington Post, price-gougers in Texas can face civil penalties and be required to reimburse consumers.


Texas, the price-gouging law, applies to items considered to be necessary for an official emergency, like food and medicine. On March 13, President Donald Trump has declared a federal state of emergency; all small businesses can, under the Texas Deceptive Trade Practices Act sue, if they believe they are victims of price gouging. Businesses can recover up to three times the damages and attorneys' fees. All size businesses and large corporations alike, the oil company Hatfield were trying to sell masks. The attorney general's office has broad powers to sanction profiteers and will prosecute all that tries.


The statute does not define what level a markup must reach for it to be considered "excessive." But a price of over $6 a mask struck Professor Emeritus Richard Alderman, director of the University of Houston's Consumer Law Center, as high given that the masks, according to numerous online offerings Please check your local laws on price gouging and if you suspect you are a victim of price gouging, please report it to the local officials.


In the United States, the laws against price gouging have been held up constitutionally and at the federal level levels and are a valid exercise of the power to preserve order during catastrophic events and emergencies and combined with anti-hoarding measures.


As of 2020, 34 states have in place laws against price gouging and hoarding. Price gouging is further defined by the terms of the criteria listed below.

Period of emergency: Most of the laws apply to price shifts during a declared emergency or disaster necessary items: the laws apply only to items essential for survival, such as food, water, and housing.



Price ceiling laws: 


The laws limit the maximum item price charged for any given item.

Many states that do not have a specific statute or law addressing price gouging can apply the law as "unfair" under the consumer protection act. 


So, when does this law apply?


Prohibitions on price gouging take effect when trying to protect people from being exploited and from the increase in costs of vital goods needed to sustain life.

Once a state of emergency has been declared. States have legislation in place with different requirements for reporting a state of emergency for price protections to take effect. 

Some state laws that prohibit price gouging include Alabama, Florida, Mississippi, and Ohio. But prices that increase only once are enough; the President and the state governors have declared a state of emergency in the region.

For example, California permits emergency proclamations by officials and other governing bodies of cities and counties to trigger the state's price gouging law. 

What does the law protect against?


Laws can really vary alot from state to state but most protect us from price increases over a certain percentage. As an example, California has set a 10 percent ceiling on price increases. Florida prohibits price increases that greatly exceed the average daily prices of items from 30 days prior to the emergency. 

Many state laws do not define what constitutes a "gross disparity," making it difficult for law enforcement to prove that price gouging has occurred; others limit vendors and landlords from price increases of less than 25 percent. 


Some laws allow for price increases that can be justified in terms of cost of supply, transportation, and storage. 


Law enforcement of price gouging ordinances can be difficult because of the exceptions often contained within the laws and the lack of oversight mechanisms. In addition, laws generally give a broad discretion of not to prosecute. In 2004, Florida state determined that one-third of complaints were unfounded.


In Florida, state of emergency law, for example. Price gouging may be charged when suppliers of essential goods and services drastically increase prices asked in anticipation of a civil emergency and when it cancels or dishonors contracts to take advantage of an increase in prices for such emergencies.

For example, the retailer increases the cost of existing milk and bread supplies when a hurricane is imminent.


California Penal Code 396 prohibits price gouging, defined as anything over 10 % of the regular daily price of an item, once a state of emergency has been declared is considered price gouging!

California has laws that prohibit price hikes after an emergency is declared; the state, like many others, has virtually no price monitoring structure. Law enforcement generally relies on the news or word of mouth to learn about retailer's price gouging practices. The D A of Sonoma County has attempted to remedy this by creating its task force focused on combatting and prosecuting price gouging.


In 2018, the California legislature amended C.P.C. § 396 after the fallout from the 2017 wildfires. 

A California D.A reached out explaining how the current language of section 396 made it difficult to enforce. However, by the time the 2017 fires were over, the median rent had increased by more than 35 percent, and the rental vacancy was zero. 

Some News reports have said renters are getting forced out of their homes and condos due to the fact that they can not afford to pay more and to make way for people who can afford to pay more from the landlords that are jacking up rental prices so those who can afford more either with their own money or money from their insurance companies.


The legislature completely rewrote section 396. Before the revisions, those sections of the law had only specified that the prohibitions on price gouging could be extended for additional 30-days and violators of the law could be punished by imprisonment in county jail, but no longer than one year, or be fined no more than 10,000 dollars, or both. 


The amended version of this law went into effect in January 2019 to reduce the exploitative practices that had ensued after the 2017 fires. Section 396(e) stipulated that "it is unlawful for any person, business, or other entity, to increase the rental price and advertised, offered, or charged for housing, to an existing or prospective tenant, by more than 10 percent. This amendment stated that landlords might increase the rent by up to 10 percent if they could demonstrate that the increase in costs was directly attributable to repairs; it also clarified what could not justify an increase.




If we continue to let suppliers get away with price gouging, they will never stop doing it. 




Katie Jane - Contributor 


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