Price gouging: How it works and how to protect yourself

MYRTLE BEACH, SC (WBTW) — After a natural disaster, one concern in its wake is price gouging. Price gouging is when businesses sell goods or services for a price South Carolina law calls, “unconscionable,” or “unreasonably excessive,” according to North Carolina law. However, without any federal laws addressing price gouging, Rob Salvino, Associate Director at Coastal Carolina University’s Grant Center for Real Estate and Economic Development, says it can be tough to pin down.

“We don’t have an economic definition of price gouging,” Salvino explains. “There’s no constraint that’s set by law that says ‘this much percent or this many dollars is price gouging,’ but what we do know is whenever supply is limited or demand surges, there’s going to be an affect in prices.”

In North and South Carolina, the price gouging law goes into effect once the state’s governor declares a disaster or emergency. Both governors enacted the law during extreme flooding in October 2015, and during Hurricane Matthew in October 2016. According to the states’ Attorneys General, there isn’t a set percentage or amount so that the law can apply to different products and services in times of crisis; things like gas, food, water or, in extreme circumstances, lodging.

According to Salvino, a normal hike in prices isn’t illegal nor is it out of the ordinary. In fact, he says short-term price increases can be a way to make sure emergency responders and rescue crews have the supplies they need to do their jobs.

“Prices cause people to change their behavior,” Salvino says. If everyone ran out and bought all the gas, anyone who had a vehicle went out and filled their tanks, the question would be: do the people who need it most have enough gas to help?”

So how can you tell the difference between price gouging and an average price increase? Salvino says there are several factors to take into account. “Let’s take gasoline prices, historically, they’re pretty low. $1.90 a gallon in the area. Let’s say a hurricane comes and they go up to $3.00, $3.50, $4.00. Depending on how bad it gets, I would say those are within reason. I wouldn’t call that price gouging. But if you see one station down the road at six or eight dollars, that’s price gouging, probably.”

John D’Ambrosio, President and CEO of the Better Business Bureau of Coastal Carolina, gives another example, “You need a place to stay, and you go to hotel X, where rooms are normally $99 a night, and now they’re $199. That’s price gouging. That’s taking advantage of a bad situation,” D’Ambrosio says.

The Better Business Bureau says there are steps you can take to make sure you don’t get scammed:

  • Check with the BBB before doing business with any companies or contractors. Make sure they are licensed and have good ratings or reviews.
  • Get multiple estimates for home repairs. Don’t be afraid to ask what the job would have cost before the storm.
  • Don’t ever pay for a job up front. Putting a percentage down in normal, but never any more than that.
  • Try and do business locally, that way you can reach them later if you have any questions or concerns.

D’Ambrosio says to be wary of any contractor who knocks on your door after a storm. “In a natural disaster, people come from other states because this is where the work is. I’d be very cautious about doing business with contractors from other states,” he says.

In South Carolina, price gouging is a misdemeanor offense and those who do it can get up to a $1,000 fine and 30 days in jail. In North Carolina, price gougers can face fines up to $5,000.

Under the law, the attorney general’s office can seek refunds for people who paid too much for goods or services. If you think you’ve been a victim, hang on to any examples or documentation and report it to your state Attorney General’s office. In South Carolina, email, tweet pictures or information to @SCPriceGouging or call 803-737-3953. In North Carolina, you can go to the Attorney General’s office website or call 1-877-5-NO-SCAM.