Price gouging is a service, not a crime

I went to the hardware store after the snowstorm hoping to score some ice melt, only to discover that it’s all sold out.  I only needed one bag and I’d have gladly paid more to get what I needed.

The thing that really frosts me is that the reason I could not get ice melt was because politicians know they can win votes by creating the crime of price gouging.

The anti-Price Gouging law

I can’t explain it any better than does our Missouri attorney general at his website:

It’s against Missouri law to take advantage of a desperate situation by drastically increasing prices on merchandise, whether it’s gasoline, kerosene after winter storm, hotel rooms, ice, gas-powered generators and other necessities.”

He is referring to Missouri’s Unlawful practices statute, which reads:

407.020. 1. The act, use or employment by any person of any  . . . deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise . . . . is declared to be an unlawful practice.

Violation of this statute is a class D felony.

One may rightly wonder how this law prohibits “price gouging.” It’s because the legislature gave the Missouri attorney general permission to make regulations needed to enforce the law (apparently intending that the attorney general would designate sizes and styles of typefaces acceptable for use in consumer advertising).

Years went by before the attorney general created regulations which would transform this anti-fraud law into what should be called the “Lets-run-out-of-everything-as-fast-as-we-can-when-we-need-it-most” law. The regulation became law and created the crime of price gouging:

15 CSR 60-8.030 Price Gouging

PURPOSE:  . . . this rule enumerates specific practices which are unfair and are violative of section 407.020, RSMo.
(1) It is an unfair practice for any person in connection with the advertisement or sale of merchandise to—
(A) Take advantage of a person’s physical or mental impairment or hardship caused by extreme temporary conditions, and charge a price substantially above the previous market price of the merchandise in seller’s trade area;
(B) Charge within a disaster area an excessive price for any necessity; or
(C) Charge any person an excessive price for any necessity which the seller has reason to know is likely to be provided to consumers within a disaster area.

The law seems to have no purpose except: 1) to soothe the feelings of angry citizens who feel they have been taken advantage of; and 2) to provide the Missouri Attorney General a platform from which he can pose as champion of the consumer.

Harmful effects:

When it comes to helping the rest of us, the law does nothing to insure that we can buy essential goods when we need them most. On the contrary, such price controls guarantee that we will NOT have enough of what we need.

If a disaster strikes, and water, gasoline and food cannot be sold for significantly higher prices, then stores will sell out early as everyone buys more than they need. Then none is left to buy AT ANY PRICE. In addition, it is unlikely anyone will rush to bring in essential supplies when the government has removed the profit incentive.

In an emergency, a hotel manager who doubles his room price on 100 rooms, may force a big family to rent one room instead of two. Or cause two poor families to double up. If such “price gouging” were allowed, the hotel could provide shelter for twice as many people in an emergency. True enough, the hotel owner gets a big payoff, but should that be a crime when it was only his self-interest that put everybody under a roof?

The repeal of price gouging laws would in itself decrease the severity of shortages when they do occur. If merchants knew they could raise prices during shortages, more would take risks and stock up on ice melt and snow shovels. But with no prospect of a payoff, they play it safe and stock just what they are sure they can sell in a typical winter. And if people knew prices could rise greatly during emergencies they might be better prepared, further decreasing the demand in times of shortage.

Some say that the merchant’s sin is greed, but at least the merchant’s self-interest serves the public by keeping goods available. The flip side of the merchant’s greed is the consumer’s envy, which does no one any good, neither housing nor feeding anyone. Is it harsh to say that anti-price gouging laws are motivated by hate? That supporters are people who would rather have NO GAS available at $3.00 a gallon, than have all the gas they want at $5.00? Under this law, half of us can get our gas tanks filled, whether we need it or not, and the other half goes without. This has to be one of the more foolish laws we have, yet most people probably think it’s good.

Missouri’s Attorney General has been aggressive in threatening Missouri merchants with prosecution if they violate these price controls. See Attorney General Koster warns consumers about storm-related price gouging. Koster makes it easy for “victims” to complain at his website:

Click here to rat out greedy businessmen.


For more information about the “wisdom” of price gouging laws:

The Role of Prices- Walter Williams

Price Gouging Saves Lives

The Non-Crime of Price Gouging

Come back with a warrant