I’ve heard a factoid tossed around in support of various political positions, and I am dubious (no less so because I somewhat hold some of those positions). It’s that it is illegal for a business to charge less than the competition, the same as the competition, or more than the competition.
Here’s what I assume is the reality underlying that:
< - predatory pricing, and a possible shareholders’ suit if lower prices mean less revenue. On a different thread I’ve seen indications that it’s illegal to sell items below cost even if it’s not predatory, and while that offends me as an American it still may be true.
= - not illegal per se, but it’s illegal to collude with nominal competitors in order to all charge the same price.
> - I can’t imagine, unless it’s that you’re open to a shareholders’ suit if higher prices mean lower sales volume and therefore less revenue.
Am I approximately right? If so, does that make the factoid essentially meaningless? Because it’s not that every company is always doing something illegal, which I imagine is what I’m supposed to take away from it.
In other words, like a lot of “weird laws” claims, someone spotted a “here is a law that means that under some circumstances a person doing X can go to prison for it” and interpreted that as “X is against the law.”
What’s illegal in many locations is arranging prices with the competition (price fixing, which usually leads to higher prices than if they weren’t arranged), or dunking prices (consistently selling below cost in order to outsell your competition to the point of killing their presence in the sector); there’s also places where some companies got in trouble for requiring certain customers to buy their products from a channel with higher prices than other publicly available channels (soft drink companies requiring bars to buy their drinks from them rather than from local supermarkets which sold them at lower prices than the drink’s maker).
Nothing illegal about taking the competition’s prices into account per se, many companies are very careful about noting the prices of other local businesses before promising to “pay the difference if you find it cheaper”, but any of the price relationships can be illegal depending on the details.
There is also the offense of “predatory pricing”. This is when a company underprices their product for the puropse of driving another competitor out of business or out of that market. If McDonalds moves into a city, and prices everything well below the competition and it seems to be for the purpose of making all the other burger joints close, that’s predatory pricing. proof is when the situation might be - the price is too low to make a profit, they calculate they have more cash than the other guy; price is much lower that in other, non-competitive markets; prices jump once the competition disappears after being excessively low; etc. Large corporations generally are very aware of this rule and careful not to do anything that might set off an anti-trust investigation.
Three gas station owners are sitting in a jail cell.
The first one says, I charged a few cents more for my gas than everybody else and the government locked me up for PRICE GOUGING.
The second one says, I charged a few cents less for my gas than everybody else and the government locked me up for PREDATORY PRICING.
The third one says, I was careful not to do like the two of you. Instead, I charged exactly the same for my gas as everybody else.
“Oh, so what are you in here for?”, asked the first two.
“The government locked me up for PRICE COLLUSION”. -_-
(IANAL)
But the point is that “price gouging” is, generally, not just charging more. It’s charging unconscionable prices during a state of emergency. For example,
“Florida Statute 501.160 states that during a state of emergency, it is unlawful to sell, lease, offer to sell, or offer for lease essential commodities, dwelling units, or self-storage facilities for an amount that grossly exceeds the average price for that commodity during the 30 days before the declaration of the state of emergency, unless the seller can justifying the price by showing increases in its prices or market trends. Examples of necessary commodities are food, ice, gas, and lumber.” (Price Gouging Frequently Asked Questions | My Florida Legal)
Also, I believe the other two situations (charging less and charging the same), also include additional elements other than simply charging the same or less. You have to have anti-competitive or monopolistic intent before you are guilty.
So if on June 1 I quadruple the requested rent on my condo, and a hurricane appears on June 29, I can be charged with price gouging, for raising my costs less than 30 days before an emergency?
I recall during that major storm that knocked out power or something a while ago, one of those 20-20 programs followed up on a guy charged with price gouging. He had a trailer-load of generators; he and a buddy pooled their life savings (not much) to buy several dozen generators, and were selling them in the parking lot of a sold-out Home in the affected area. They were charging double the original price. Apparently, they had no idea gouging was against the law and tried to sell one to the uniformed policeman just before he arrested them and seized the goods. The program mentioned it had to be during an emergency and the profits had to be “excessive”.
The trouble with collusion, gouging, or predatory pricing (especially the latter 2) is that direct evidence of intent is hard to come by. Unless one peron turns states evidence, or their internal emails were remarkably stupid and revealing, the prosecution has to go on what’s “obvious”. In the case of predatory pricing, if the prices “recover” as soon as the competition closes, and then especially if they go well above normal market rates, that’s a good indicator. Also, it helps (and prosecution is more likely) if the pattern repeats itself in several markets.
Ha! Nah, I read it like that at first but the 30 days is talking about the average price. The crime is raising the price during the emergency, with the average price to taken from how tfhe thing was priced during the 30 days preceeeding it.
In that case, the average price for the 30 days preceding would be dominated by your June pricing, and so the June 29 price wouldn’t be grossly above the average.
It’s not illegal to raise prices during the 30 days before an emergency, only to raise prices during the emergency significantly above the average in the 30 days prior.
Raising prices during hurricane season generally is good business sense, and your customers know when hurricane season is as well as you do, so that’s not price gouging.
Anyway, I just spotted this, relevant to the original question:
[QUOTE= Northeastern Telephone Company v. AT&T 651 F2d 76]
[P]rices below reasonably anticipated marginal cost will be presumed predatory
[/QUOTE]
