SCOTT SIMON, HOST:
When disaster strikes or even when it looms, some people try to profit. Attorneys general in Florida and North Carolina say they've received hundreds of complaints of price gouging the days before and after Hurricane Helene and Milton. The storms left water, shelter, and gasoline in short supply, driving up prices. This week, President Biden issued a warning.
(SOUNDBITE OF ARCHIVED RECORDING)
PRESIDENT JOE BIDEN: Anyone who seeks to take advantage of our fellow Americans' desperation, whether you're a company engaging in price gouging or a citizen trying to scam your neighbors, we will go after you and we will hold you accountable.
SIMON: But as NPR chief economics correspondent Scott Horsley finds, price gouging is not always easy to define or to police. Scott, thanks for being with us.
SCOTT HORSLEY, BYLINE: Good to be with you, Scott. Good morning.
SIMON: What kind of complaints are we hearing from areas that were hit by the storms?
HORSLEY: The attorney general in North Carolina has received more than 300 complaints, mostly from Buncombe, Henderson and Cleveland counties. Residents there are upset about the high price of groceries, gasoline, and housing in the wake of the storm. Of course, Asheville has long been one of the most expensive housing markets in the state, and they had finally started to make some progress on that front. Unfortunately, Helene put the brakes on that progress. We're hearing similar reports out of Florida, lots of complaints in Hillsborough and Pinellas County around Tampa and St. Petersburg. People there were unhappy with the price of water and gasoline as they tried to stock up before Hurricane Milton or to get out of the way of the storm.
SIMON: Do governments have any power to answer those complaints?
HORSLEY: Both Florida and North Carolina have laws on the books that prohibit price gouging during times of emergency. But, you know, it can be tricky to draw the line between illegal price gouging and just the normal forces of supply and demand. One former federal trade commissioner once likened price gouging to what Potter Stewart said about pornography, hard to define, but you know it when you see it. Monica Vaca, who's a deputy director at the Federal Trade Commission in the Bureau of Consumer Protection, offers three rules of thumb.
MONICA VACA: Price gouging - we're talking about extreme increases in the retail price that is charged to consumers in an area where there's been an emergency declared. And then the third thing is you can't tie that price increase to some unrelated production cost.
HORSLEY: If there's a disaster that disrupts normal supply lines, for example, and it costs more to get supplies into an area, that could be a justification for higher prices.
SIMON: Scott, has the jawboning that we're hearing from government officials actually discouraged anyone from raising prices?
HORSLEY: Yeah, it may be having some effect. If you look at gas prices in Florida right now, they're actually lower than the national average, about 3.08 a gallon. That's, according to GasBuddy, which has been keeping an eye on the state. Even in hard-hit Sarasota, the average price of gasoline has actually come down a little bit since Hurricane Milton came through. But that's only if you can get gas. You know, as of Friday afternoon, more than 60% of the gas stations in Sarasota weren't selling any fuel, and pumps were out of service at more than three quarters of the stations in Tampa. Some of that, of course, is just the function of the storm damage, but it's also why some economists say rules against price gouging can be counterproductive.
SIMON: Explain that to us. How can that be?
HORSLEY: Nobody likes rising prices, especially in the middle of a natural disaster when people are stressed. But economist Michael Giberson says, those high prices can serve some important functions in times of scarcity. For example, they can encourage conservation.
MICHAEL GIBERSON: On the consumer side, the higher price encourages consumers to think twice before they buy that next gallon of drinking water, for example. Maybe they can get by with three instead of five or 10. So that means there's - could be more on the shelf for the next customer that comes along.
HORSLEY: Giberson, who's with the free-market think tank the R Street Institute, also says high prices can encourage businesses to get cranking faster to address the shortages that a natural disaster causes, just like surge pricing at Uber helps bring out more drivers.
GIBERSON: On the supply side, a higher price not only is a signal that some good is in greater need than before, it's also a reward for anyone who responds to that signal.
HORSLEY: Giberson notes that when Hurricanes Gustav and Ike hit South Carolina back in 2008, some gas station owners said they closed their doors rather than pay extra to have fuel trucked in and run the risk of being accused of price gouging. Obviously, that's not good for anybody. So as angry as people might be about high prices, in some cases, the alternative could be worse.
SIMON: NPR'S Scott Horsley - thanks so much for being with us.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
