Recent flooding in the Houston, Texas, area brought us hours of television and online footage of that region’s coping.
One image that became popular in that recent media coverage was a photograph of a case of bottled water marked with a price that was over twice its pre-disaster price. Everyone seemed to have an opinion of the propriety of charging extra for water during an emergency when drinkable water becomes scarcer. Are increased prices in this context simple capitalism, or is it “price gouging”?
I am extra sensitive to price gouging because my grandparents owned a hardware store and small engine repair shop when I was growing up. A tenet of my grandfather’s business philosophy was to never gouge anyone on price. Every time I discuss my fees with a client, I am relentlessly focused on being fair in what I ask.
Price gouging generally means spiking the price of services or commodities to a level that is considered unreasonable or unfair, to the point of exploiting consumers. The issue of price gouging is most often discussed in the context of natural disasters.
Wwithin the context of natural disasters, price gouging is most often looked at with gasoline and drinking water. This is because there is typically no real substitute for gasoline or drinking water. Simply to “cut back” on their consumption of these products, especially water, is essentially impossible.
There is no federal law governing price gouging. However, senators, such as Ohio’s Sen. Sherrod Brown, have introduced legislation to limit or preclude price gouging nationwide.
Some states have no laws concerning price gouging. Several states require that businesses selling goods or services not increase the prices whatsoever in the context of a disaster. Other states allow only a few percentage point increases in the prices of goods or services in the context of a disaster.
Ohio uses a broad and somewhat vague standard that prohibits “unconscionable” increases in prices, where the circumstances make price “shocking to the conscience.” More specifically, Ohio law on this topic prohibits sellers of almost anything (other than real estate) to sell anything “on terms that the [seller] knew were substantially one-sided in favor of the [seller].”
Obvious factors used by the legal system in Ohio to determine if the transaction is unconscionable price gouging are whether the price of an item increased significantly or too quickly, particularly when the item was already in the seller’s stock before the price increase occurred.
As a matter of practicality in Ohio, the threat of the Ohio Attorney General pursuing sellers under this law is often sufficient to conform the conduct sellers of gas and drinkable water into not gouging customers on price.
However, private people may also assert actions for breach of this particular law. In these circumstances, a private party who prevails could be awarded triple his or her actual damages, plus attorneys’ fees. Nonetheless, there are few, if any, reported judicial decisions regarding price gouging in Ohio.
Making money is fine, but the law precludes taking excessive advantage of others in these contexts.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.