Immoral But Not Always Illegal: Price Gouging After Natural Disaster

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The recent floods in Colorado have brought a problem to the forefront: post-disaster price gouging. While 35 states have made this a crime, there are still 15, Colorado included, where this is merely considered capitalism.

Justifying the Colorado position, Assistant Attorney General Jan Zavislan recently said, “The price of a product or service alone is not a scam if it's fully disclosed … If the consumer has the information and has the right to shop around, but the sources in an emergency aren't there, it might be an outrage to people, but there's no specific law on the price itself."

As a Florida resident, I am no stranger to natural disasters. The threat of hurricanes are an annual event here, and as a result, Florida is one of the 35 states that have enacted anti-price gouging measures. Many other states enacted similar provisions in the wake of the 9/11 terrotist attacks when gasoline prices soared nationally. Others occurred after Hurricane Katrina swept through the South in 2005. In these states, price increases on items deemed necessary after a disaster, such as food, gasoline, and batteries, are capped (usually by a percentage of the uninflated product price as calculated from some point before the disaster).

Not so in Colorado, however, despite its recent flooding. There, as long as a merchant is clear on the price, even if it is outrageous, then no law has been broken. Indeed, a measure to prevent price gouging died in 2006 when Governor Bill Owens vetoed it, saying it “violates the fundamental principles of our market-based economy.”

Nationally, many laws protect consumers from false advertising, unfair trade practices, and monopolization, both at the federal and state level. Still, the United States is considered a capitalist, fair-market system. As a cornerstone of that philosophy is the belief that the market will adjust itself with little outside influence to strike a balance between demand and supply of any product or service. However, just as with the cases of false advertising, unfair trade practices, and monopolies, anti price gouging measures are designed to keep a disproportionately powerful player in a transaction from taking advantage of the other.

However, there are no direct constitutional rights or prohibitions regarding commercial transactions; no right to a fair market. As a result, states are able to widely influence these transactions within their jurisdictions, while the federal government is able to regulate interstate transactions. As a result, if there is no law expressly prohibiting price gouging in a particular jurisdiction, there is no way to prevent it. Such is the fate of many in Colorado.

Still, a victim of price gouging may have some remedies. It may be possible to rely on false advertising to force a store to honor its stated prices. Failing to do so may give rise to a lawsuit which, individually may have little impact but, when combined with a number of other affected consumers in a class action, could lead to a massive judgment. If you have been the victim of price gouging, whether in a state that prohibits it or not, you should contact a local attorney for assistance and to determine what relief may be available. On the other hand, if you are a vendor accused of price gouging, you should contact your insurance provider to determine whether there may be any coverage for your situation and, possibly, your attorney, as well.


Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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