The Line Between High Prices and Price Gouging
When parts of Los Angeles were ravaged by wildfires last month, some unscrupulous landlords tried to take advantage of the desperate scramble for temporary housing, raising rents by 50% or more in some cases, according to authorities.
After Hurricanes Milton and Helene hit the southeast U.S. last fall, there were hundreds of complaints of overcharging for gas, water, groceries and hotel stays. And during COVID-19, the Department of Justice created an entire taskforce to prosecute those who were behind steep markups on face masks and other protective equipment.
All of these instances were labeled price gouging, a term you’ve probably heard or read about in the news. But in a period of persistent inflation, what exactly determines when it’s price gouging rather than just the expected byproduct of a supply and demand imbalance?
Context matters here. Price gouging refers to capitalizing on sudden needs by raising prices to unreasonably high levels. It usually happens during a natural disaster or other emergency, when a victim is desperate and feels they have no choice but to pay $99 for a case of water, $10 for a gallon of gas, or triple the normal rate for a hotel room.
In short, price gouging is localized and opportunistic. Inflation, on the other hand, reflects broad economic shifts over a longer period of time and typically affects everyone. (It’s worth noting, however, that some economists object to bans on price gouging, seeing them as disruptive to the free-market forces that limit shortages.)
There is no federal law explicitly prohibiting price gouging. But 39 states have specific laws against it, and in most states it’s considered a violation of laws against unfair or deceptive trade practices, according to the National Conference of State Legislatures. Some states define price gouging as an increase of 10%, 15% or 20% over the pre-crisis price, while others simply say it must be excessive.
So what? If there’s a hurricane, wildfire or other declared emergency in your area, beware of costs that suddenly spike. You can report price gouging to your state’s attorney general to investigate, and offenders may face fines or even imprisonment.
Related Reading
• Los Angeles Landlords Jack Up Rent by as Much as 124% — Flouting Price Gouging Laws During Deadly Wildfires (USA Today)
• N.Y. Attorney General Warns Businesses Against Price Gouging Amid Rising Egg Costs (Associated Press via Spectrum News)
• How to Identify and Report Price Gouging (U.S. PIRG Education Fund)
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