Q&A of the Day – What Is Florida’s Definition of Price Gouging?
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
Social: @brianmuddradio
iHeartRadio: Use the Talkback feature – the microphone button on our station page in the iHeart app.
Today’s entry: Today’s note was submitted via Talkback: Hi Brian. The last couple of days you've touched on the recent cliched surge in fuel prices. I know it's probably more of a federal thing, but is there anything that Tallahassee can do to help? Ratchet down some of this, call it price gouging, much like we've done for times during a hurricane on plywood, fuel, and other commodities.
Bottom Line: Today’s note is in reference to my oil/gas analysis last week when I pointed out that the news media effectively hyped the oil price increase by universally using the term “surge” when reporting on oil price increase. The reporting early last week was met with immediate and significant price increases at gas stations across Florida and the country. Effectively, news reporting conditioned Americans that massive gas prices increases were on their way and gas stations took advantage of the conditioning by immediately passing through prices increases for fuel they’d purchased at pre-Iran war prices.
As I highlighted in my analysis, the average gas price margin is 1 to 3 cents per gallon, however during the week last week that had been expanded to 31-34 cents per gallon (and some higher than that through the weekend). But the question is, does that example meet the legal definition of “gouging” under law?
Under Florida law, price gouging is addressed in the Deceptive and Unfair Trade Practices Act. It prohibits charging unconscionable prices for certain items during a declared state of emergency. That last piece is key to this conversation. Here’s the way Florida law reads:
Rental or sale of essential commodities during a declared state of emergency; prohibition against unconscionable prices.—
- “Commodity” means any goods, services, materials, merchandise, supplies, equipment, resources, or other article of commerce, and includes, without limitation, food, water, ice, chemicals, petroleum products, and lumber necessary for consumption or use as a direct result of the emergency.
- The amount charged represents a gross disparity between the price of the commodity or rental or lease of any dwelling unit or self-storage facility that is the subject of the offer or transaction and the average price at which that commodity or dwelling unit or self-storage facility was rented, leased, sold, or offered for rent or sale in the usual course of business during the 30 days immediately prior to a declaration of a state of emergency, unless the increase in the amount charged is attributable to additional costs incurred in connection with the rental or sale of the commodity or rental or lease of any dwelling unit or self-storage facility, or regional, national, or international market trends; or
- The amount charged grossly exceeds the average price at which the same or similar commodity was readily obtainable in the trade area during the 30 days immediately prior to a declaration of a state of emergency, unless the increase in the amount charged is attributable to additional costs incurred in connection with the rental or sale of the commodity or rental or lease of any dwelling unit or self-storage facility, or regional, national, or international market trends.
So that’s what constitutes price gouging. If there’s no declared emergency, those statues aren’t actionable under state law. However, that doesn’t mean, for example, that companies can just artificially inflate the price of goods, services or commodities in perpetuity. The non-emergency protections that are in place for consumers come into play under Florida’s Antitrust Act. This is the law that pertains to price fixing and collusion.
The wide-reaching Antitrust law defines collusion as price fixing, bid rigging, market allocation, or other anti-competitive practices. In other words, if gas stations were to band together and agree to artificially keep prices higher permanently, independent of market-based considerations, that would be an act that’s illegal and would be actionable by the state.
In the recent example of immediate gas price increases, there’s no evidence of collusion between gas stations taking place, but rather opportunism based on hyped up reporting that lacked key contextual information about the timeline and size of gas price increases based on real-time market pricing.
In real-time gas stations have paid higher prices for the fuel that’s being delivered to their stations. With that said, ultimately the opportunism should be short-lived, not just because oil and wholesale gas prices have backed off of recent highs significantly, but also due to the market-based system that will lead to some gas stations seeking to lower prices to attract customers to their business.