California’s Terrible Price-Gouging Law Puts Markets at Mercy of Ambitious Prosecutors
California’s incredibly stupid, market-denying emergency “price-gouging” laws have struck again, this time hitting a grocery store chain for raising egg prices beyond what the state allows during pandemic-related shortages.
Value grocery chain Smart & Final has agreed to pay California $175,000 because, between March and June 2020, it increased the price of four different types of eggs during a period in which stores were struggling to keep their shelves stocked.
This was in the early days of the pandemic, when Democratic Gov. Gavin Newsom declared a state of emergency. That declaration triggered California’s “price-gouging” law, which says that businesses cannot raise prices by more than 10 percent during state emergencies unless they can prove the price increase is due to increased production or labor costs. According to Attorney General Rob Bonta, Smart & Final raised prices for some eggs by as much as 25 percent.
The Los Angeles Times notes that Smart & Final did have a reason for raising the prices—suppliers were also jacking up prices of eggs. But apparently Smart & Final acknowledged that suppliers were raising the prices of “standard” eggs, and that the chain commensurately raised the price of “premium” eggs.
Laws against price-gouging are bad, wrong, and counter-productive, and Bonta’s own observations about this case, quoted by the Times, explain why. He notes that, “When California first went into lockdown at the beginning of the pandemic, there was a run on essential supplies, and unfortunately, some businesses saw this as an opportunity to pad their bottom line.”
“While these were premium products, remember that during this time, shelves were often bare, there weren’t a lot of choices. Consumers had few, if any options.”
This is an economically illiterate grasp of why stores jack up prices in a crisis situation. The “run on essential supplies” caused absurd amounts of hoarding and over-purchasing, wh
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