We Can’t Stop the Twisters, But We Can Stop Price Gouging
Natural forces are blind to what they destroy. People aren’t. In the past month, tornadoes and flooding in the South and Midwest left behind crippled lives, destroyed homes, and eviscerated infrastructure.
Now as the victims of the tornadoes try to rebuild, they are left vulnerable to another foe–people who use the disaster for economic gain by price-gouging.
Price-gouging occurs when merchants artificially raise the price of consumer goods that are in an emergency or natural disaster. For example, it’s price-gouging, when after Hurricane Katrina, people were forced to pay $7 for a bottle of water.
Thankfully, there are legal protections against price-gouging in many states, including those that recently declared a state of emergency: Alabama, Arkansas, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma, Tennessee, and Virginia. In each of these states, the price-gouging statutes allows the attorney’s general to investigate and prosecute instances of price-gouging once a state of emergency is declared.
The definition of price-gouging is not settled in some jurisdictions. In Virginia and Tennessee, for example, price-gouging is an “unconscionable” or “unreasonable” price-hike. The exact definition of those terms is then left to the discretion of the AG in the first instance, and then to a judge or jury if a case is tried. In other words, it’s open to interpretation and litigation.
Other states have taken an approach that more clearly delineates what is or isn’t price-gouging. Arkansas follows a more strict approach, prohibiting price increases above 10% for storm recovery products (i.e. water, batteries, food, fuel, and construction materials). Meanwhile, Alabama allows for higher price-hikes than Arkansas. It only prohibits raising prices above 25% of the average price for the previous 30 days.
The consequences in prosecuting a price-gouging crime are also different from state to state. So the same price-hike in one state could carry with it a penalty of $10,000, but in a different state it would only be $1,000 per violation.
How does any of this help the victims of natural disaster? In theory, the threat of these consequences will deter potential price-gougers from profiting excessively from the misfortune of others. This is why Attorney Generals in the affected states have made public statements warning price-gougers and asking citizens to report incidents of price-gouging.
It may not be much of a comfort to people who are currently the victims of price-gouging that state Attorney’s General try to prevent gouging. But there can be additional ways for victims to get help. States, like New York, are considering creating a private cause of action in these cases, allowing victims to sue to stop the price-gouging practice and to collect damages. And in other states, like Vermont, there is a right of action under consumer fraud statutes.
The availability of recovery all depends on the laws of your state. But in all of the tornado affected areas, there are means to deter and punish price-gouging. If you suspect that you are a victim of price-gouging, you can check out your state’s attorney general’s office, or consult a knowledgeable local attorney.
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