Now there seems to be some grumblings that there needs to be tougher laws governing the business of contracting in the name of protecting the public. So far the suggestions I have heard will not accomplish the task because they fail to address what I see as the main issue, homeowner ignorance. But this ignorance is quickly cured when a little attention is paid to a few simple notions I address below. The state legislators should be trying to find ways to educate the public about how to be a better consumer rather than saddling legitimate and honest contractors with laws that the scofflaws will continue to ignore anyway.

It is understandable that at a time of crisis, as was the case following Katrina, people are not necessarily thinking clearly. But that does not excuse the public from there own responsibility. … Namely buyer beware. There are a few ways to determine if the contractor you are hiring to work on your most prized possession is worthy or not. But most important of all is using your own common sense.

The number one thing that people seem to ignore is that if a contractor tells you he cannot start the work without a substantial deposit, in some cases recently reported as much as 80-90 percent of the total contract, then you need to tell the contractor to take a hike. Any contractor that cannot secure and deliver the materials to start your job on their own credit should not even be granted your consideration. Is this their first job? Do they have bad or no credit available from their suppliers? If either of those are even a remote possibility, that should be enough to kick their quote, as well as posterior, to the curb.

The fact is clear, if a contractor insists on a large amount of money down they are either trying to float their company’s finances on your credit or are flat out trying to scam you.

If the quote from the contractor looks good and the down payment if any, seems reasonable then you’re good to go right? Not quite. You still have the question of whether this contractor can do the work correctly and on time. Most people will assume that if the contractor’s license checks out as valid that he must do good work. Think again, that license is nothing more than proof that the contractor or someone that works for that contracting company was able to pass a test and keeps their annual fees paid to their state’s contracting board. You must insist on verifiable references and you must not only call those references but go and see the work for yourself or with someone that has some idea of what to look for. Otherwise you may well end up with a new leaky roof or out of plumb doors that won’t close properly. If you did not qualify the contractors work ahead of time, then you may need to look in the mirror to find the person to blame.

But, you say, the contractor was from out of state and all of their references were long distance. How was I supposed to check on them? Simple you don’t. Hire them I mean. Contractors that descend on a disaster area are the most suspect of all. Why? Because they are so difficult if not impossible to check out. The crooked ones like it that way. It’s probably smarter to assume that the contractor is less than honorable if they are in your area only for the purpose reaping the benefits of the ridiculously inflated pricing that they charge due to whatever catastrophe you’ve just experienced.

The most egregious example after Katrina has to be the inundation of roofing contractors that setup shop on every corner and in every hole on the coast. Charging upwards of $300 per square for a job that pre-Katrina would have been in the $110 per square range. Meaning a 2000 square foot roof went from $2200 to in some cases to over $6000. Price gouging at it’s finest. Why? Well, there was no shortage of roofing materials, shingles were stacked up pallet after pallet at almost every location. Nor was there a shortage of roofers. It was easy to get 5 quotes from different companies in a day. The reason was only an abundance of desperate, panicked people that had temporarily thrown some of there good sense out the window with their water soaked belongings and were convinced by these contractors that the gouging was somehow justified.

Most of these roofers were here for about one to two months and as soon as they saw that the hysteria was subsiding they bailed out. Needing to stay one step ahead of the law and pissed off homeowners. Of course good luck charging them with price gouging since they most likely have no permanent address at which to serve papers and their temporary ‘local’ phone number is now disconnected. So who’s to blame, the slime that came here to reap the benefits of a disaster or the people that let them? I say to some degree both.

Link to Full PDF Document PDF (53K)

The Nation’s drivers, the Administration, and Members of Congress are rightfully concerned about high gasoline prices and the burden high prices impose on families and businesses, particularly on those low-income households least able to adjust to high prices. All policymakers firmly oppose any anticompetitive practices perpetrated by firms. Any instances of illegal collective anticompetitive action can and should be vigorously fought by the Federal Trade Commission (FTC) and, if criminal conduct is involved, by the Department of Justice.

The problem with this legislation is that terms like “price gouging” and “unconscionable” have no economic definition. As such, there is no economic evidence that can establish or refute claims of gouging or unconscionable behavior. We agree with FTC Chairman Deborah Platt Majoras: the legislation “likely will do consumers more harm than good.”

Legislation like the “Petroleum Consumer Price Gouging Protection Act” as part of S.1419 or H.R. 1252, the “Federal Price Gouging Prevention Act,” will harm the economy generally and specifically will harm drivers – the very people the bills are intended to protect. The approach contradicts standard economic principles.

Such legislation is harmful for primarily two reasons: ……

* “Price gouging” legislation that effectively places controls on prices exacerbates shortages and potentially increases lines at gasoline stations.

* The difficulty in defining “price gouging” would create an unnecessary regulatory regime with potentially high litigation costs and great uncertainty for sellers, enforcement agencies, and the courts. These added costs and uncertainties would deter investment in new supply, increasing prices in the long run.

Supply Disruptions and Lines at Gas Stations
“Price gouging” legislation would reduce incentives to supply areas facing a fuel shortage. For example, in the days after natural disasters, such as hurricanes, price increases induce domestic refineries outside the affected region and foreign suppliers to rapidly ship additional gasoline to affected areas. If this legislation were implemented, it could deter retailers from increasing prices and it might not be worthwhile for suppliers to divert their shipments. Retailers in the affected region would have even less gasoline and drivers would face additional hardship. With gasoline prices kept below market levels, there would be shortages. Consumers would be forced to line up at gas stations, but gasoline would run out before satisfying demand and many would be forced to do without.

Without the flexibility for prices to increase, supply disruptions last longer than they would otherwise. By disrupting the price mechanism, price controls make lines longer during emergencies, misallocate the available supply, and prevent those with the greatest need for gasoline from getting access. Also, by making it illegal for prices to increase when supplies are tight, price gouging legislation makes retailers reluctant to lower prices when supplies are readily available, for fear of not being able to adjust to future supply changes.

It is useful to compare the experiences of the 1970s to the present day. In the 1970s, when price controls were in effect, oil price increases were accompanied by long lines at the pump and economic recession. In recent years with flexible prices, oil price increases of similar magnitude have been accompanied by gasoline availability and strong economic growth.

Enforcement
The legislation would create an unnecessary and costly enforcement regime. Competition between suppliers ensures that they cannot take advantage of consumers by setting prices that are out of line with their cost and ensures that gasoline goes to consumers who need it most.

Existing antitrust law based on economic principles already ensures healthy competition by protecting against anticompetitive business practices both generally and during an emergency. Antitrust law prohibits sellers from explicitly colluding to impose higher prices. Retailers and refiners are prohibited from taking exclusionary actions that would create monopoly power (See the appendix for additional details).

Enforcement of and compliance with price gouging legislation, on the other hand, is costly because price gouging is not well-defined. Firms and regulators therefore would face a great deal of uncertainty, potentially leading to costly and unnecessary litigation. These added uncertainties and costs could deter future investment and increase prices in the long run.

Conclusion
For all of these reasons, “price gouging” legislation should be opposed. Excessive legislation such as this is effectively a price control and would set a bad precedent for the government’s involvement in the market. A wide variety of economists have found with both empirical research and practical experience that these policies do not work. Long experience has shown that allowing the market to set prices—the principle that forms the basis of our Nation’s free-market system—is the most efficient and effective method to allocate scarce resources.

Appendix: Existing Laws already prevent anticompetitive behavior by firms

Competition policy already makes it illegal for participants in the gasoline production and distribution network to conspire to restrict supply or raise prices after a disaster. The antitrust laws, as enforced by the Department of Justice’s Antitrust Division and the Federal Trade Commission, prohibit actions such as the following.

* Gasoline retailers exploiting the reduced availability of gasoline by explicitly colluding on higher price levels than otherwise would have prevailed.

* Explicit collusion among refineries and wholesalers to designate exclusive territories, allowing them to charge monopolistic prices in those areas.

* Unlawful monopolization or attempts to monopolize by gasoline retailers in a relevant retail geographic market.

* The imposition of some retail price maintenance schemes in which gasoline is made available to retailers only on the condition that the retailer charges a price higher than a pre-set minimum.

You can (and should) read the editorial in its entirety here.

How do we keep gas available and affordable in an emergency?

It is illegal in Mississippi to take advantage of a state of emergency by hiking prices, but Attorney General Jim Hood discovered before Gustav that some gas stations were raising prices ahead of the governor’s emergency declaration.

They will continue to find ways around the gouging law until it is written to actually close these loop holes and enable the Attorney General to vigorously prosecute the offenders.

Gov. Haley Barbour declared a state of emergency on Thursday, Aug. 28, in advance of Gustav’s landfall.

“We sent people out down there Wednesday (Aug. 27),” Hood said, “and we saw where prices shot up some places as much as 32 cents a gallon.”

“They anticipated the state of emergency coming in and they jacked their prices up,” he said.

I would like to see the names and locations of the stations that were guilty of taking part made public for all to see. Was anything done? Warnings issued or anything? No because until the Governor enacts an S.O.E. the AG has no teeth. In addition the stations will just claim that their suppliers jacked up their prices, but c’mon every station did it. They don’t all get their tanks refilled simultaneously.

As a result, Hood plans to propose the same law his office proposed to the Legislature before Katrina. It would allow the Attorney General’s Office to declare a state of emergency only for the purpose of enforcing price-gouging laws and preserve the governor’s authority to declare the overall state of emergency that is needed to deploy resources, seek federal assistance, and streamline local government response.

Will this mean that the prices will just be raised sooner and sooner? Will ‘hurricane season’ just become ‘higher gas price season’? There should be a system in place to force the prices back down to previous non-emergency prices in the same amount of time it took them to go up. Isn’t that what people are really mad about? That the prices not only went up but are still up? Even though the price of oil has been dropping.

We understand the profit motive and operate in the free market system ourselves. But an emergency should not be an opportunity for businesses to take advantage of frightened customers.

Amen brother!

U.S. Department of Energy Gas Price Reporting Site

Mississippi Attorney General’s Website and official complaint form. (the complaint form is a .pdf document) If you’re writing to MS’s AG you may want to complain about not having an online form available.

Alabama Attorney General’s website and online complaint form

Louisiana Attorney General’s website and online complaint form

Florida Attorney General’s website and online complaint form

Tennessee Attorney General’s website and online complaint form

You should also inform your local office of the Better Business Bureau

If your state isn’t listed here it either has ceased to exist, doesn’t exist in my mind or I just got tired of looking this stuff up for you.
Here’s what you do: Google it.

“It’s not what you know, it’s what you do with what you know.”
Anonymous

Join the forum discussion on this post - (1) Posts

Rip-off

• Now that crude oil has dipped to under $110 per barrel from the high of $147, why is gas not $3 a gallon? It sure is not reacting downward as quickly as it reacted upward. One of those things that makes you think “rip-off” if not “gouging” and nothing to do with hurricanes.

This is of course the main problem with the reasons given for spikes in the price of gas. Station owners say they have to raise their prices because their costs have gone up due to a flea sneezing or whatever else they want to make up. BUT when the same condition they used to justify their actions reverses direction the price does not come down nearly as fast IF at all. Is this having your cake and eating it too? Or perhaps just shafting the consumer creatively?

More Opportunism

• OK, it’s been a few days since Gustav and the price of oil has gone down… again. Are the local gas stations waiting till Josephine passes? This just makes me sick.

They’ll wait till Wendy drives through if they can.

Cap the gas gougers

Once a storm is threatening the United States, insurance companies will not and cannot write policies for people. So why is it when a storm is threatening the Coast, we can’t say the gas and oil companies are not allowed to go up on their prices? The cost of a barrel of oil has gone down $9 in two days. The price at the pump has gone up. The price should go down because the hurricane did no damage.

We can say it all we want, but until our so-called representatives get off their butts and actually pass laws restricting this type of behaviour it will continue. I think you may well be the smartest person in the world, but I’m afraid I can’t condone popping a cap in the gas gougers… might be just a little bit severe.

Most people call this gouging whether it fits the official definition of the practice or not. And every time it happens Mississippi’s Attorney General says he’s going to be tough on the perpetrators . Yet virtually nothing gets done. Look at what happened before Gustav. Average regular gas prices in Gulfport, MS hovered around the $3.35 per gallon mark. In the days approaching Gustav’s arrival, prices steadily increased, sometimes several times a day to as much as $3.80 or more. This was in “anticipation” of a state of emergency declaration from the Governor. They new once the declaration was made they would have to hold their profit margin. So the law lets them go ahead and gouge you until the state of emergency is in effect. WTF!

The fact that this is allowed to occur isn’t necessarily the Attorney General’s fault. He can only act within the confines of the current law. The problem is that what the law deems gouging isn’t what most citizens would consider gouging. Plus having to wait until a state of emergency is declared in order to enforce a law against an illegal activity is ridiculous.

Of course station owners use their old standby excuse “Our cost went up, we have to raise the prices or we’ll lose money”. Blah, blah, blah. It’s bullshit and we know it. Do you really expect the public to believe your prices went up three times in one day? It’s gouging plain and simple.

Well here we are now over a week past Gustav. The price of crude oil is lower then it was before Gustav was ever a threat and yet prices at Gulfport and other Gulf Coast gas stations are still as much as twenty cents higher per gallon than before the storm. Am I the only one that sees how this completely eliminates any credibility of the stations excuse for raising their prices? Why isn’t there an investigation going on. Why isn’t the gas station owners and distributors being brought in and questioned or better yet fined or jailed.

What say you? Leave a comment or start/join a discussion in our forum.

Join the forum discussion on this post - (1) Posts

Punish price gougers

• I just thought it should be noted, and questioned, why all the gas station prices went up so high so quick when oil prices fell, and they’re still at $3.69 when they were down way lower than that? I think this is price gouging and there should be some retribution against these service stations.

Pure and simple greed

• The time has come for local gas dealers to pay for their huge pre-Gustav raise of gas prices. The prices were raised on the rather thin assumption that prices would raise because of Gustav. It is now out here for all to see that the cost of oil did not increase, but rather it decreased to a cost lower than before April. Just when and how will our day of retribution come? This last price hike was “price gouging” in its purest form.

Name names, call out the offenders publicly. The ‘mainstream’ media won’t do it but you can. Insist on investigations by your state’s Attorney General instead of just more lip service and posturing. Insist that the investigation results be made public.

Don’t Blame Us

I hope that you will print this for the service stations owners like me who have been getting slammed in the Sound Offs. Not everyone went up on their prices. We sold what we had in the ground, but after we sold all that, and we got another load from the distributor, who is local, they went up on their prices, so we had to go up on ours. Please print this so that you can tell what it is really like for the store owners who aren’t making much money on gas to start with. We are barely making it.

I won’t comment on this and believe me it’s hard not to but I would rather hear what you have to say about this excuse for gouging the public. You can comment on the post or better yet comment here and join the discussion in our forum.

Join the forum discussion on this post - (1) Posts

Shameful act

• Shame on the gas stations in the Biloxi area. I filled up today and as I was filling up they had changed the price three times in the last 24 hours. That is a crying shame that they are doing that under the duress of the storm coming in. I hope they suffer for what they are doing to the economy and the people of Biloxi.

Price Hike

• I would like someone to explain to me how gas Wednesday morning can jump 10 to 15 cents a gallon because of a hurricane in the Caribbean. People in state government need to look at this. If it’s not price gouging, I’d like to know what you call it.

Well a lot of people would like to know what to call it. I think we can reasonably call it ‘taking advantage of the consumer in the name of extra profit under the guise of a potential emergency’. Hey it’s not exactly poetry, I know.

Unacceptable

• Shame, shame, shame. Shame on the fuel stations that are jacking the prices up overnight because of a tropical depression that isn’t even in the Gulf of Mexico yet. One station I regularly fuel at went from $3.34 a gallon to $3.65 a gallon overnight for no other reason than the almighty dollar. Shame on you. I will never buy fuel from you again.

According to the station owners, at least the ones that are willing to speak about this practice, it isn’t their fault. Of course, there’s always someone else to blame .  It’s the American Way.

Louisiana Attorney General Buddy Caldwell received more than 300 complaints by late Saturday… Investigators cited three stations for violations; the stations claimed they didn’t know they could not increase the prices. “In one case, a station was caught jacking up the price of gas from $3.50 a gallon to $4.10,”….

Remember class, ignorance of the law is no excuse… but complete friggin’ idiocy just might be. Is it wrong to be a little freaked out that these same people are responsible for handling and dispensing thousands of gallons of flammable liquid?

Hurricane Gustav may hit Louisiana and as residents heed the warnings to fill up their cars with gasoline, in case of evacuation, Attorney General James D. “Buddy” Caldwell says he has gained business’ cooperation by assuring a tough stance against price gouging by anyone.

“We will not tolerate gouging of any kind,” says the Attorney General. “We have our investigators checking and documenting pre-storm prices at all types of businesses especially gas stations, to make sure their prices stay relatively the same as before the storm. Businesses have been very cooperative, welcome our involvement and are helping us police competitors. Caldwell says he has had his investigators combing the streets statewide the past couple of days, documenting prices and preparing for anyone who would take advantage of consumers during a time of emergency. Local law enforcement, sheriffs and municipalities are assisting as well.

Louisiana law states that once a state of emergency has been declared, merchants may not grossly raise the price of products without good reason. Unreasonable price increases are considered “price gouging” and subject to penalties. In an emergency situation, a merchant may increase the price only if they incur a “spike” in the price of doing business.

If you see a place of business you suspect is price gouging you can call our consumer protection hotline at 1-800-351-4889.

Gas cans, jugs and drums are all being filled with gasoline in preparation for Gustav.The rush to get gas got so bad in Grand Bay, two stations ran out… People also tell us that they’re worried the prices will go through the roof.

The price gouging law is dormant right now. It only goes into effect if Governor Bob Riley declares a State of Emergency. Then, gouging is determined by an equation. You have to calculate the average 30-day price at the particular gas station. Now, take a look at the price today. If today’s cost is more than 25% higher than the 30-day average, you have a price gouging case.

Still confused?

Hey, over here, yeah I’m confused. Why is any price gouging law EVER dormant. If price gouging is illegal shouldn’t always be illegal. Is bank robbery only illegal in certain circumstances? If so let me know when it’s cool because I’ve been a little short in the wallet lately.