In the midst of an old article about the personalities on the American Pickers television show, I noted this particular sentence for future reference: “One of the criticisms of American Pickers is that they basically rip people off by buying things real cheap so they can sell them for a huge profit.” Buying things cheap and selling them for a huge profit—isn’t that the goal of every American business? If that is not the goal of a business, then why is it in business?
People are applauded by the “sharks” on the show Shark Tank when they say that something costs them x to make and they sell it for y. “Wow, that’s a great margin,” I have heard it said many times.
There are many books and articles that have been written about “retail arbitrage”; that is, purchasing a product from a local retail outlet for a low price and then selling it for a higher price on Amazon, eBay, or Craigslist.
So why does there exist the ridiculous non-crime of price gouging? And why is it a federal offense?
In Puerto Rico, the U.S. Attorney’s Office just charged Tonatiuh Antonio Leal-Matos with “two counts of violating the Defense Production Act (50 U.S.C. § 4512) in relation to price gouging personal protective equipment (“PPE”), face masks and disinfecting wipes, during the COVID-19 national public health emergency.”
According to a press release by the U.S. Attorney’s Office for the District of Puerto Rico:
From approximately April to July 2020, Tonatiuh Antonio Leal-Matos sold PPE face masks and disinfecting wipes at a substantial markup and at prices in excess of the prevailing market price.
The defendant accumulated over 5,000 face masks that covered the user’s nose and mouth. Some of the face masks that the defendant accumulated offered protection from particulate materials at an N95 filtration efficiency level while others did not. The defendant sold the masks that he acquired for between $10 and $35 per mask; these sales prices were at least two times his acquisition cost.
Tonatiuh Antonio Leal-Matos also sold most of the clinical grade disinfecting wipes he accumulated in several transactions. The defendant purchased containers of clinical grade disinfecting wipes for $6.95 per container and subsequently sold those disinfecting wipes for approximately $39 per container, at an approximately 461% markup. The manufacturer’s price for each container was approximately $6.75 to $8.45.
“The defendant knew that the price he charged for face masks and disinfecting wipes exceeded prevailing market price,” said U.S. Attorney Muldrow. “He saw the devastating COVID-19 pandemic as an opportunity to make illegal profits on needed PPEs.”
If convicted of both counts, the defendant faces up to two years imprisonment and a fine of up to $20,000.
According to the international law firm Proskauer, in a Federal Price Gouging Enforcement Update:
With no comprehensive federal legislation on price gouging, enforcement has largely taken the form of the Department of Justice and other executive agencies acting under the Defense Production Act (the “DPA”), a law passed in 1950 in response to the Korean War which gives the president broad authority to manage domestic industrial affairs in the interest of “national defense.”
The DPA has two sections relevant to the COVID-19 pandemic: an anti-hoarding provision and an anti-price-gouging provision. The anti-hoarding provision bars accumulation of materials “in excess of the reasonable demands of business, personal, or home consumption.” The anti-price gouging provision bars accumulation of materials for the “purpose of resale at prices in excess of prevailing market prices.” The act carries both civil and criminal penalties.
It was President Trump, that great economic mind, who issued three executive orders to combat price gouging, and referenced the DPA.
Price gouging is a crime in search of a victim. The seller is happy because he sells his product. The buyer is happy because he buys the product. Where is the victim? Free and unfettered interaction between buyers and sellers is always to be preferred to government intervention.
But how can the buyer be happy if he has to pay an exorbitant price? He doesn’t have to. If he doesn’t like the price, then he doesn’t have to make the purchase.
But what about during times of crisis and emergency when people need certain items? It makes absolutely no difference. No one has the right to purchase any particular item for any particular price at any particular time. Natural disasters don’t negate economic laws.
The simple rule is: My property, my price. To argue otherwise is to impugn property rights.
If I own something (face masks, disinfecting wipes, bottled water, ice, plywood, generators, prepackaged foods, gasoline, propane, diapers, infant formula, medicine, flashlights, batteries), then it is mine. It doesn’t matter how long ago I bought the items or what I paid for them. No one has a claim on any of my property before, during, or after a natural disaster. If I want to hoard my property, then it is my business. If I want to neglect my property, then it is my business. If I want to consume my property, then it is my business. If I want to destroy my property, then it is my business. If I want to give away my property, then it is my business. If I want to sell my property, then it is my business. If I want to sell my property at a discount or loss, then it is my business. If I want to sell my property at a high or exorbitant price, then that is my business.
Price-gouging laws grossly violate property rights—pure and simple.