NY Attorney General Subpoenas Craigslist For Post-Sandy Price Gougers

TheSync writes "In the wake of Hurricane Sandy, the New York State Attorney General has subpoenaed Craigslist, demanding that the site identify more than 100 sellers whose prices on post-Sandy gas, generators and other supplies were of an 'unconscionably excessive price' during an emergency. AG Eric Schneiderman said: 'Our office has zero tolerance for price gouging [and] will do everything we can to stop unscrupulous individuals from taking advantage of New Yorkers trying to rebuild their lives.'"

Comments

Morons.

[Anonymous Coward]

Price controls have exactly the same effect in an emergency that they have at any other time. If you prohibit higher gas prices, you guarantee shortages.

Re:Morons.

[russotto]

You know what else guarantees shortages? FEMA diverting shipments from gas stations to FEMA and state distribution points, where it gets doled out for free to the politically connected. Plenty of gas at the one near my house (and it's available all the time, though the gas stations are closed after 6pm whether they have fuel or no fuel by order of our fascist mayor), none for regular old peons.

Re:Morons.

[Anonymous Coward]

Yeah, damn those politically connected fire departments and utility workers!

Re:Morons.

[Culture20]

When gas is cheap, many use it incorrectly (for an emergency scenario); idling for an hour to "keep the engine warm", using it for lighter fluid, driving a block away, etc. when it's expensive, it's treated as precious.

Re:Morons.

[causality]

apparently they tried to stop shortages by outlawing "hoarding". They arrested a guy and confiscated gasoline because he collected from neighbors and went beyond the gas shortages to bring back gas to them. The big screw up on his side was putting it in non-gas approved containers, but the charge was actually hoarding supplies.

His "crime" was showing by his example how passive and lazy most other people were. Most people who are embarassed by a better example seek revenge, as though their lackluster ability to plan for eventualities is the fault of anyone else; this is just a collective form of such childishness codified into law. Too many think the government is going to make it all better so they don't keep some emergency supplies on hand to be prepared, even when they could afford to. It's not that they are so stupid. It's that they feel so privileged, that concern for their own well-being should be someone else's job.

Incidentally, getting what you can and then sharing it with your neighbors is the very opposite of hoarding. Not only should the charge be thrown out, the law enforcement officer who issued it should be fired.

Re:Morons.

[immaterial]

Umm, no. His crime was filling 30 5-gallon Home Depot buckets with gas, because Home Depot buckets are not made for or approved for holding/transporting gasoline. But don't let that get in the way of your (and the GP's) conspiracy theories.

Re:Morons.

[A nonymous Coward]

If the gas was cheap, many would buy it. So they would have gas. With the price gouging the prices are exorbitantly high, so few can obtain it.

These people increased the scarcity of these items (buy buying large quantities for themselves) to try to extort money from people who needed them. Regardless of what your hero Ayn might think, a completely free enterprise doesn't always work.

You are sooo unimaginative.

Everything you say would be true -- if supplies were normal. They aren't. It costs more to bring supplies into a disaster area, believe it or not. Prices are a very simple fact of life: when demand exceeds supply, they rise, and when supplies exceed demand, they drop.

So with dwindling supplies, prices rise. Note carefully: humans CAN NOT CONTROL prices artificially. The money price may be legally limited, but all that means is that the time or effort price rises. People wait in line or bribe suppliers to get first dibs.

Why aren't more supplies brought in? Because it costs more, in money and time and effort, and if they can't get paid correspondingly more for that effort, they aren't going to lose money just to be noble.

If the government had kept its paws off, the price would rise enough to bring in more supplies.

Supplies are always rationed one way or another. Even in normal times, there is a cost of production and distribution, and that limits supplies.

In bad times, when supplies dwindle, the government can force rationing in ugly ways by forcing the money price so low that more supplies are not brought in. Then rationing goes by who is willing to wait in line, or knows the right people, or has the extra money to bribe. Whereas if money prices were left alone, prices would rise, and rationing would be by money price.

You are just another one of those unthinking idiots who suppose that passing laws accomplishes something, no matter how illogical. Ban alcohol? Sure that worked. Ban drugs? Guns? Price rises? All the same, pass a law, mission accomplished.

Re:Morons.

[icebike]

There is no such thing as "use it incorrectly".

You use it as the price allows.

Re:Morons.

[TubeSteak]

I feel like you and many others are missing the point: This isn't about supply and demand.

1. These areas are in an official State of Emergency. The rules of business are what the State says they are.
2. Price gouging is its own social harm. It is exploitative and creates massive inequities during a crisis

/Price gouging isn't illegal in all 50 States. Check your local laws.

Re:Morons.

[pla]

There is no such thing as "use it incorrectly". You use it as the price allows.

By the same token, you'd have no such thing as "gouging" - You price it as (high as) scarcity and demand allows.

The whole concept of "price gouging" makes absolutely no sense to me. If I stock up on emergency supplies, specifically hoping to sell them in an emergency at a profit, hey, call me scum, but where the fuck does the government have a place in regulating the sale of a legal product between two private parties?

Or perhaps a better analogy, all of health care - A dying man will pay anything for the cure. Why doesn't charging him an arm and a leg (for a drug that costs pennies) count as a form of "full-time gouging"?

Re:Morons.

[pla]

This isn't about supply and demand.

How absurd. Supply and demand apply more in a "crisis" than they do normally - Normally, we have an effectively infinite supply throttled only by the cost of production and the available demand. In a crisis, you actually do have limited supply, which makes it not just desirable for the seller, but for the buyer as well to price at the intersection of the supply and demand curves. Lower than that causes shortages.


These areas are in an official State of Emergency.

So? If you run out of #2 heating oil on a cold winter's night, you could say the same thing. Does a nighttime run-out delivery fee count as "gouging"?


The rules of business are what the State says they are.

Bullshit. The rules of business "are", if you want what I have for sale, you pay what I will sell it for. Anything else means people will hoard rather than sell, making the situation even worse. Again, back to supply and demand, a la Micro 101.


Price gouging is its own social harm. It is exploitative and creates massive inequities during a crisis

"Social harm" doesn't exist except as a fiction convenient for demonizing those who have what we want, and justifying using the power of the state to take it away from them. The inequities you describe always predate the crisis-of-the-day - Someone doesn't just stockpile generators for the hell of it. They do it as an investment, plain and simple.


Check your local laws.

The one accurate point you made - "Dear AG-of-the-week-looking-to-make-headlines: This sale will take place in my local jurisdiction. Go take a flying fuck at a rolling doughnut, 'kay?"

Re:Morons.

[ShanghaiBill]

and yet the biggest problem was that the stations had no power to pump the gas. Thus no sale is possible.

WRONG! The sale was possible. They could have scrambled to get a generator, even if they had to pay double the price for it, or had it trucked in by overnight express. They could have made it happen. But they didn't because it would have been illegal for them to recover their cost by charging the market price (what the market will bear). They had no incentive. Why should they spend money and work hard if they can't make more than they would if they just sat on the gas till the electricity came back on?

If the price was allowed to go up to $8 or $10 per gallon, the supply would have skyrocketed as gas station owners found a way to cash in. Greed is the mother of invention.

Re:Morons.

[Z34107]

An illustration, from Gwartney and Stroup. TL;DR: If ice is going for $10 a pound, you'll have people trucking it in from out of state. If you declare that illegal "price gouging," your grocer won't be able to keep his inventory from spoiling at any price.

In the fall of 1989 Hurricane Hugo struck the coast of South Carolina, causing massive property damage and widespread power outages lasting for weeks. The lack of electric power meant that gasoline pumps, refrigerators, cash registers, ATMs, and many other types of electrical equipment did not work. In the hardest hit coastal areas such as Charleston, the demand for such items as lumber, gasoline, ice, batteries, chain saws, and electric generators increased dramatically. Stores that remained open using backup gasoline-powered generators sold out of most items immediately. Goods that began to flow in from other cities were being sold by some sellers at much higher prices. A bag of ice that sold for $1 before the hurricane went up in price to as much as $10, plywood went up in price to about $200 per sheet, and gasoline sold for as much as $10.95 per gallon. Individual citizens from other states were renting trucks, buying supplies in their home state, driving them to Charleston, and making enough money to pay for the rental truck and the purchase of the goods, and to compensate them for taking time off from their regular jobs.

In response to consumer complaints of "price gouging," the mayor of Charleston signed emergency legislation making it a crime, punishable by up to 30 days in jail and a $200 fine, to sell goods at prices higher than their pre-hurricane levels in the city. The price ceilings kept prices down, but also stopped the flow of goods into the area almost immediately. Shippers of items such as ice would stop outside the harder hit Charleston area, to avoid the price controls, and sell their goods. Shipments that did make it into the Charleston area were often greeted by long lines of consumers, many of whom would end up without the good after waiting in line for up to five hours. Shortages became so bad that military guards were required to protect the goods and maintain order when a shipment did arrive.

The price controls resulted in serious allocations of resources such as electricity, which, during the emergency, could only be gotten from emergency generators. Grocery stores could not fully open because of the lack of electric power, and inside the stores, food items were spoiling--thousands of dollars' worth, in some stores. Gasoline pumps require electricity to operate, so, although there was fuel in the underground tanks, there was a shortage of gasoline because of the inability to pump it. Consumers were faced with problems of obtaining money, as ATMs and banks could not operate without electric power. Hardware stores that sold electric generators before the hurricane typically had only a few in stock, but suddenly hundreds of businesses and residents wanted to buy them. The price ceilings would not allow the store owners to ration the few generators they had by raising the price, so the owners had to allocate the sale of their generators in other ways. It was not uncommon for the owner fo the store to take one generator home, and to sell the others to his or her friends. While these families used the generators for household uses, gasoline stations, grocery stores, and banks were closed because of their inability to buy a generator. Thousands of consumers could not get goods they urgently wanted because these businesses were closed. Without price controls, we would expect the price of generators to be bid up to the point that they would (a) be purchased by those who had the most urgent uses for them, and (b) be imported into the city rapidly enough to keep the price from rising still further.

The secondary impacts of the price controls used during Hurricane Hugo in Charleston, South Carolina, highlight the importance of understanding economics and the role of prices in our economy. Despite pleas from economists in local newspapers and in The Wall Street Journal, the price controls remained in effect, increasing the suffering and retarding the recovery of the areas most severely damaged by the hurricane.

Re:Morons.

[jcr]

But if it were (price gouging) expensive, then it would be EVEN MORE SCARCE.

Wrong.

The high price is the signal to 1) reduce consumption and 2) increase supply. If gasoline is selling for 2x in the disaster area, then it's worthwhile for vendors to divert supplies to that area. If some pinhead politician is preventing a vendor from charging more than the price before the disaster, then why would they bother?

People needed these supplies.

Which is EXACTLY why imposing a price limit was a brain-dead thing to do.

-jcr

Re:Morons.

[Pinky's Brain]

Don't equate rationing with price controls ... when you can identify the consumers and limit their consumption rationing works just fine, ignoring some inevitable corruption, you do this when social stability is preferred over market efficiency. This got the UK (and a lot of other countries) through WW2.

http://en.wikipedia.org/wiki/Ration_stamp

In a disaster this obviously doesn't work because you don't have a system ready to identify consumers and ration accordingly.

Re:Cracking Down On Free Enterprise?

[alen]

Buying up stuff at retail after a disaster and reselling it at huge markups is not free enterprise

Re:Cracking Down On Free Enterprise?

[Reverand Dave]

How is it not exactly? It really is kind of text book free enterprise. That is taking advantage of the market when it benefits you most and guarantees the highest rate of return on your investment.

"Better yet, leave it to the private sector."

[bennomatic]

This is exactly what was wrong with Romney et al's stance on FEMA. If there's a profit motive, then you're going to get the highest possible cost for the least possible value of goods and services. Where there's reasonable infrastructure, competition can reduce that, but a post-hurricane disaster zone is more likely to resemble turf-based economies (drugs, prostitution) than it is to resemble truly competitive markets (e.g. bazaars).

If your kid is at home coughing up a lung due to a flu and there's no heat in the house, and if phone lines and emergency services are basically unavailable because of the greater circumstance, you're going to buy that last can of chicken soup from your corner market rather than shopping around for a better deal further away. Call it supply and demand if you will, but shopkeepers who engaged in price gouging are profiteering off of others' misery, plain and simple, and there should be consequences.

On the other hand, there are stories of great generosity, like the pizzeria that kept making pies throughout the peak of the crisis, and gave away something on the order of 1000 pizzas to hungry families and emergency workers. That business deserves to prosper. I hope that some anonymous millionaire hands them an envelope containing ten times the profit they would have made had they sold all those pizzas. Hell, maybe FEMA should cut them a check for helping out. At the very least, they should be able to write those costs off for tax purposes.

Re:"Better yet, leave it to the private sector."

[PrimaryConsult]

you're going to buy that last can of chicken soup from your corner market rather than shopping around for a better deal further away

Except, when prices are allowed to rise, if you *really need* that can it is still available. If the store is forced to keep it at their normal price, the can would have been gone hours before you got there, to some random person who could have done just as well with a can of ravioli.

Re:"Better yet, leave it to the private sector."

[PrimaryConsult]

or for individuals to sell generators that they had bought before the storm at double their retail value.

By making that illegal it becomes better for someone who has an extra generator to simply not sell it. While the generator would be doing no one any good, it is still available to the person holding it in case he needs it - to him the $700 generator is worth $1400 (the risk of needing it and not having it is worth $700 to him) but by not being allowed to sell it at that price, he would be taking a perceived loss for no reason. I fail to see how this is better than allowing supply/demand to take over.

As for gas, keep in mind this is the NY metro area. Very few people actually *need* gas. If the prices at the stations were allowed to rise to $10, people who do need the gas would be able to get it, and people who don't would take the bus/railroad/subway. Right now, the commodity being sacrificed is time: people who have more time on their hands and can sit on a line for 5 hours are better able to get gas than those working 3 jobs. How is that right?

Oh really?

[kurt555gs]

And how about pharmaceutical companies that charge $1000s for pills that cost less than the plastic bottle they come in? Want real price gauging?

Re:What about Bloomberg?

[hawguy]

Actually, I think it was the private race organizers that had the generators.

Yes it was, until they were shamed by the New York Post.

Actually, I think it was the Mayor who wanted the race to go on, they just went ahead with his wishes

Do you just let residents run extension cords out their windows?

Sure, why not? They would also be handy for running elevators, powering the pumps for the plumbing in buildings big enough that higher floors have no water pressure, lighting and heating for the lobby at least...

Why not? Because having 100 residents run 100 extension cords out their windows to the streetside generator is street is unsafe. Even ignoring the overloading "Look mom, we can plug in the refrigerator, this space heater *and* my hair dryer" issues, the generator is not on the same ground plane as the building so there's an additional shock hazard unless you get an electrician to ground the generator to the building ground (and possibly installing a local grounding rod at the generator, depending on local regulations)

But if they wanted to power the elevators, it's not as simple as just buying a long extension cord at Home Depot. The elevators in my building run on 480V 3 Phase power and are on a 150A breaker, so they may need a few hundred feet of 00 or 000 gauge cable just to hook into the electrical panel. I don't know if it's even legal to run unprotected 480V cables on the floor, or to run an energized panel with the covers off if there's no cable inlet to hook up the cables.

And, of course, you need electricians to do all of this work - electricians that could be working on repairing damage that's preventing entire buildings from being energized instead of hooking up temporary power for an elevator that might be used for 24 hours before power comes back up.

Re:Cracking Down On Free Enterprise?

[tkrotchko]

So your take is its better for no one to have generators than to have people who value the generator pay more for it?

All you do with this kind of rational is ensure there is a generator shortage.

I live far away from the carnage, but I have a Honda portable generator.

I'm willing to sell it for $2,000 to anyone who wants it. For $3,000 I'll deliver.

Am I now a scumbag?

Or consider:

I have a generator, but its not worth my while to sell it to you at what you consider a fair price.

Now I'm a good guy, right?

If you want to stop price gouging....

[mark-t]

... then sell the same stuff that people are being gouged on at a lower price.