One Man’s Pandemic Is Another Man’s Profit: Price Gouging in Arizona During Times of Crisis

By Taylor Hamel.

During times of crisis, there are things that people cannot live without. In the wake of natural disasters, for example,those things include groceries, bottled water, and gasoline. Because those kinds of goods are necessary for survival, sellers can charge whatever they want for them and people will have no choice but to pay. Hiking up prices to take advantage of a crisis is called price gouging. The COVID-19 pandemic has created an entirely new list of products susceptible to price gouging: masks, toilet paper, and hand sanitizer, to name a few. Luckily, most states have laws that prevent people from engaging in price gouging tactics. Unfortunately, Arizona is not one of them.

How Arizona Has Been Affected

Blue medical face masks and money. Us Dollars and a face mask. illustration of expensive mask prices. Coronavirus Has Caused A Shortage Of Face Masks” by focusonmore.com is licensed under CC BY 2.0

Arizona has not been immune from price gouging, especially during the era of COVID-19. Recently, an Arizona man was caught trying to resell $7 bottles of hand sanitizer for $40 each. An ABC15 news crew confronted the seller, who justified the action by saying he was just trying to make extra money. After the confrontation, the gouger ended up donating the profits he made from previous sales, as well as his remaining hand sanitizer. First responders were also victims of price gouging at the start of the pandemic. A regular vendor for Arizona first responders attempted to charge 600% more for N95 masks than it had prior to the pandemic causing a spike in demand for the masks. Even long before the pandemic, price gouging was a problem recognized in Arizona. An example of such behavior, cited by one of the top aides to the current Arizona Attorney General, Mark Brnovich, was a “skyrocketing” of gas prices following the bursting of a Tucson gasoline pipeline in 2003. In 2004, the year following the burst, there was a push by the Arizona Attorney General, Terry Goddard, to enact price gouging legislation.

Price Gouging Legislation in Arizona

The 2004 proposal for price gouging legislation, which failed, has not been Arizona’s only chance to enact laws that would directly address the issue. In March, during the middle of the pandemic, there was a proposal presented to Arizona lawmakersthat would illegalize price gouging. This proposal never even made it to a vote before it was rejected. The 2020 proposal by a Tucson representative would cap price increases “[d]uring any abnormal disruption of the market for goods or services that are necessary for the health, safety and welfare of consumers” at 25% higher than the pre-disruption prices for those necessary goods and services. This proposal was more generous than some other state statutes, but this was not compelling enough for Arizona lawmakers adopt it.

The lack of adoption is not due to lack of recognition of the problem by Arizona officials. In an executive order requiring measures to be taken regarding the COVID-19 pandemic, Governor Doug Ducey demanded that Arizona’s attorney general prosecute complaints of price gouging as it relates to healthcare services, pursuant to Arizona consumer fraud laws. However, Attorney General Mark Brnovich has said that he is unable to prosecute such behavior without specific legislation to back him up. According to the Attorney General’s Office, Arizona law defines consumer fraud as “any deception, unfair act or practice, false statement, false pretense, false promise or misrepresentation made by a seller . . . .” The problem with price gouging is that increasing prices based on supply and demand doesn’t seem to rise to the level of unfairness or fraud that is outlined by the current statute. Or at least that appears to be Attorney General Brnovich’s view.

In a letter to the attorney general, Representatives Stanton and Gallego scolded Brnovich’s “interpretation of Arizona consumer protection laws,” calling it “narrow, short-sighted, and frankly dangerous.” They, like Governor Ducey, are under the impression that the attorney general “can and should do much more” to prevent price gouging from taking place in Arizona. Yet, with price gouging legislation proposed and rejected multiple times throughout Arizona’s history, the calls to action to the attorney general appear to be misplaced.

Are There Solutions Besides Legislation?

It is clear that Arizona officials believe the power already exists to prosecute price gouging. But if that were the case, the attorneys general wouldn’t need to push for specific price gouging legislation. In their letter, the two representatives encouraged Brnovich to take a broader view of the consumer fraud law; however, the attorney general shouldn’t be required to take part in quasi-lawmaking in order to prosecute behavior that Arizona’s lawmakers have neglected to confront.

Arizona’s House Speaker said that there are other forces to take care of price gouging, like shame. He wanted nothing to do with the 2020 proposal because he has seen examples—like ABC15’s story about the $40 hand sanitizer—of price gouging cured by confronting the gougers. But that example required the seller to be confronted by a news crew before he changed his ways. How many people had he gouged before that? And he was clearly not the only gouger during that time. News crews can’t be expected to confront every opportunist during times of crisis. Again, it appears that the wrong parties are being asked to solve the Arizona price gouging problem.

A third unique solution has presented itself during this gouging season: the invocation of the Defense Production Actby President Trump. This act makes it illegal for people to accumulate an unreasonable amount of scarce materials in order to resell those materials “at prices in excess of prevailing market prices . . . ” Because this law has been invoked, federal agents can crack down on price gouging regardless of an individual state’s laws (or lack thereof). In fact, an Arizona man was arrested and found to be in violation of the Defense Production Act for price gouging protective masks in New York City. But this way of addressing price gouging is not a reliable one by any means. The Defense Production Act is rarely invoked and would not be invoked for a crisis that primarily affects Arizona, like the bursting gas pipeline.

Finally, some think that price gouging requires no solution because it’s not a problem in the first place. This non-solution approach stems from the belief that price gouging causes people to prioritize their purchasing in a pandemic. It’s also argued that price gouging allows resources to be allocated where they are needed most. However, this argument ignores disparities that would create an enormous gap between the “haves” and the “have nots.” While the arguments are compelling that the high prices incentivize companies to keep the shelves stocked and prevent individuals from hoarding, price gouging takes away any element of fairness for someone who may not be able to afford $10 rolls of toilet paper during a pandemic.

It is clear that price gouging is a problem. Although there are a number of alternatives for dealing with it, the most effective one would be for Arizona to just follow the lead of the majority of other states and pass price gouging legislation.

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By Taylor Hamel.

J.D. Candidate, 2022

Taylor Hamel is a 2L Staff Writer from Gilbert, Arizona. He graduated from Arizona State University in 2019 with bachelor’s degrees in Finance and Accountancy, and a minor in Philosophy. In his free time, he enjoys reading, running, and playing golf at the cheapest courses he can find.

The opinions expressed herein are those of the individual contributors to the ASLJ Blog and should not be construed as the opinions of the Arizona State Law Journal or the Sandra Day O’Connor College of Law at Arizona State University.