The Price of Price-gouging Laws

By:  Steve Byas
10/11/2013
       
The Price of Price-gouging Laws

When do government price controls, which are meant to help consumers, hurt consumers? Whenever they are in effect.

Mohammed Mannan faced up to a year in prison for his “crime.” He very well may have thought that, in America, a man’s property is his to offer for sale at whatever price he wishes. But, when Mannan offered gasoline for sale at his Tulsa, Oklahoma, gas station for $3.29, he landed in Tulsa County District Court. Mannan had raised the price from $2.69, an increase of 60 cents, following a December 2008 ice storm.

Then-Attorney General Drew Edmondson explained how Mannan had run afoul of the Oklahoma statute against price gouging. “Under Oklahoma law, once an emergency has been declared, business owners cannot artificially raise the price of necessary goods and services more than 10 percent above the pre-emergency price. Based on the pre-emergency price of $2.69, the maximum increase allowed by law once the declaration was issued was 26 cents.” Those extra 34 cents by which Mannan dared to raise the price of his gasoline now threatened him with time behind bars, and a $1,000 fine for each count.

Fortunately for the owner of the M & F Mart in Tulsa, he escaped the slammer for the three misdemeanor counts. Instead, Mannan was ordered to serve a six-month deferred sentence, give refunds to consumers who paid “the artificially inflated price,” and pay a $1,500 fine plus court costs. Additionally, the attorney general’s office encouraged persons who paid the illegal price to produce proof of payment, so they, too, could get a refund. Mannan agreed to the deal in a no contest plea.

The Proliferation of Price-gouging Laws

Oklahoma enacted the price-gouging statute following the May 3, 1999 tornadoes that struck the state, causing particularly heavy loss of life and extensive property damage in the Oklahoma towns of Moore, Bridge Creek, Del City, and Stroud. Oklahoma’s statute prohibits an increase of more than 10 percent on the price of most goods and services when a state of emergency has been declared. The law reads, “No person for the duration of a declaration of emergency by the Governor of this state or by the President of the United States and for thirty (30) days thereafter shall sell, rent, or lease, or offer to sell, rent, or lease, for delivery in the emergency area, any goods, services, dwelling units, or storage space in the emergency area at a rate or price which is more than ten percent (10%) above the rate or price charged by the person for the same or similar goods, services, dwelling units, or storage spaces immediately prior to the declaration of emergency unless the increase in the rate or price is attributable only to factors unrelated to the emergency and does not include any increase in profit to the seller or owner.”

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— Photo: AP Images

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