‘Unreasonably excessive’: Price gouging in the wake of Hurricane Florence

Price Gouging after Hurricane Florence

SOUTHEASTERN NORTH CAROLINA (WECT) - Price gouging or just business?

In the weeks following Hurricane Florence, hundreds of complaints of price gouging poured into the North Carolina Attorney General’s office.

From tree removal companies charging tens of thousands of dollars to a $26 pack of gummy candies, nearly every kind of good or service was represented.

So far, only three cases are pending in court as officials wade through reports from every corner of the state.

Price gouging basics

The state’s price gouging law went into effect on Sept. 7 when Governor Roy Cooper signed the declaration of emergency for the storm. At that point, it became illegal for businesses to unfairly raise their prices for goods required to sustain life, property and societal order.

That process is the same for every disaster. An emergency declaration sets off a 45-day period where businesses can be held liable for charging too much.

However, the law isn’t as simple as a price freeze.

To truly be considered price gouging, the cost of a good or service must be deemed “unreasonably excessive.”

“The standard for price gouging is not objective. It’s not, ‘There will be a 20 percent increase, and anything over 20 percent is price gouging.’ It is subjective,” Attorney General Josh Stein said.

The statute, NC G.S. 75-38, sets out the considerations for what constitutes “unreasonably excessive.”

Interpreting that law is where things get tricky.

“So, we have to use our judgement in making a conclusion about whether we think it is unreasonably excessive,” Stein said.

For example, if a gas station had a significant price increase but the company paid a trucking service three times the normal rate to bring in more fuel overnight, the company has the right to pass that cost along to the customer.

“That’s justifiable,” Stein said, explaining it’s when the business cannot provide a justification for the price increase that it is considered gouging.

...when we see something that just shocks the conscience or is clearly outrageous, that’s when we bring an action.”
NC Attorney General Josh Stein

When a report comes in with documentation of the price during the complaint — either a receipt or visual confirmation — his office can look at business records to see if there was indeed a significant price jump. Then, he said, they would investigate and interview the business to see if there is a justifiable cause.

Those litmus tests for price gouging are easier to apply to goods than to services, Stein said, because proving what the price was before can be difficult.

“When you have something like a service, like tree removal, there’s not an objective price. There’s not just that one, definitive price,” Stein said. “So we have to use: ‘What’s an industry standard?’ (then) we check with consultants and experts, and when we see something that just shocks the conscience or is clearly outrageous, that’s when we bring an action.”

A long list of reports

During the complaint periods for both Hurricane Florence and Tropical Storm Michael, the state received 853 reports of price gouging from every corner of the state. Of those, 183 were reported by residents in southeastern North Carolina, and New Hanover County led the state with 71 reports.

New Hanover County led the way in complaints based on where the person reporting lives with 71. Wake County came in a close second, followed by Durham County.
New Hanover County led the way in complaints based on where the person reporting lives with 71. Wake County came in a close second, followed by Durham County.
Durham County and Wake County had the most complaints, with 90 and 80 reports respectively (Source: WECT).
Durham County and Wake County had the most complaints, with 90 and 80 reports respectively (Source: WECT).

Based on the location of the businesses implicated in the reports, southeastern North Carolina generated 127 reports, but Durham and Wake counties generated more with 90 and 80 reports, respectively.

Stein said it makes sense that a large percentage of the reports would come out of Wake and Durham counties since 20 percent of the state’s population live there. Most of those were complaints of high gas prices in the days leading up to the storm.

Additionally, as people evacuated from the coast, reports tied to businesses further inland were to be expected.

A wide variety of complaints

Gas prices were the largest category of complaints at 40 percent, which Stein said is to be expected as people worried about getting out of town or having fuel for generators.

With the threat of being cut off from gasoline deliveries and having fuel for generators being among the top priorities before and after the storm, lines for gas stretched nearly a mile down major thoroughfares in Wilmington such as Shipyard Boulevard and Independence Drive.

Gas prices — and the threat of running out of gass — played in to New Hanover County and the City of Wilmington’s decision to forego a mandatory evacuation, and Wilmington Mayor Bill Saffo has been vocal about his belief the state needs to better prepare to have those resources.

But even with so many reports, Stein said most of the increases in gas prices were to be expected. An increase of 5 to 15 percent, as was the case in most of the complaints, could be attributable to the cost of bringing more fuel in more quickly.

It’s when gas prices double or triple that the state really starts to take a look, Stein said, though it takes every complaint seriously.

“It could be a legitimate case, but basically, not every action that a company takes that is wrong is illegal,” he said.

Following closely at 27 percent, complaints about high prices for food or bottled water came in as the second most common complaint.

Some of the reports were minor increases — a restaurant charging $1 more for a sausage biscuit, or the price of a steak burrito bowl jumping to $12.

In one case, however, a distinct pattern emerged.

More than two dozen individuals reported the Family Dollar on Guess Road in Durham for price gouging, saying the store was charging $43.20 for a 24-pack of bottled water.

When asked about the claims, the discount store chain said it was a misunderstanding, but did not elaborate.

“There was a misunderstanding and upon being made aware, the concern was immediately addressed. Our thoughts are with the communities that were impacted by the storm,” said media relations manager Kayleigh Painter.

Stein said gas and water are easier cases to determine whether or not a business is gouging because those goods have an easy to find “before” price.

On the other end of the spectrum are services like tree removal, roofing and other things needed after disaster strikes. In those cases, Stein said his office relies on complaints and looks for particularly egregious prices, like the $80,000 one company charged homeowners in Wilmington to remove five trees.

While complaints against tree services might be more difficult to prosecute, the state has brought three cases to court against tree companies, and has been awarded injunctions and temporary restraining orders in all three.

Three of the five defendants in those cases are from out of state, and while he said his office doesn’t distinguish between in and out of state bad actors, Stein said it didn’t seem unusual that was the case.

“It doesn’t surprise me the out of state companies are over-represented because they’re the ones who come in, drive the trucks down in the middle of a storm to exploit just for this very reason,” Stein said. ”That’s not to say that every company that comes in from out of state is up to no good, but I think … they’re over-represented in terms of the bad actors.”

Prosecution

Once his office has determined a business has taken advantage of consumers, Stein said the process is similar to any lawsuit, but that his office was able to pursue the first few cases in “record” time.

The price gouging form, shown here, can be completed online or by mail.
The price gouging form, shown here, can be completed online or by mail.

“We filed one complaint within five days of getting our first complaint from a citizen, which is incredibly fast in the legal world,” he said.

If the court finds in the state’s favor, defendants can be required to pay $5,000 in civil penalties per incident, an incident being every customer the business overcharged. Consumers are also entitled to refunds in many cases, and the businesses can be barred from operating in the state.

It isn’t always monetary rewards that motivate people to complain.

Thomas Smith, a Shallotte resident, filed a complaint against a tree company for charging $1,200 to remove one tree. He said he was frustrated and angry the company charged him so much and ultimately didn’t use them, but said he wanted to try to keep the company from taking advantage of anyone else.

“I didn’t expect any compensation for myself, but I did hope the DOJ would investigate the company’s practices concerning price gouging to protect others,” Smith said in an email.

Stein said the state isn’t always able to get the money back, but that pursuing litigation against businesses which engage in price gouging can serve as a warning to others.

“What we want to do is make sure that it doesn’t happen in the first place, and we can deter companies from responding to their worst angels and listen to their best angels.”
NC Attorney General Josh Stein

“What we want to do is make sure that it doesn’t happen in the first place,” Stein said, “and we can deter companies from responding to their worst angels and listen to their best angels.”

That’s why, even if not every case will count, Stein said he wants people to report anything they see that might be price gouging.

“People just need to understand that the law exists to protect them," Stein said. "When they have experienced a storm, and they’re in a point of desperation and there’s something that they need like food, or shelter, or gas, that the law ensures they will not be subject to market manipulation by greedy companies trying to make an extra buck.

"And if they see it, or if they think they see it, just let us know, and we will look into it, and when we conclude that the company has acted unlawfully, we will hold them accountable.”

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