OGDEN — Recently published research from Weber State University suggests the striking images of empty grocery store shelves early on in the pandemic may have been caused by anti-price gouging laws meant to protect consumers during such emergency situations.
The term price gouging refers to exorbitant prices charged by retailers and producers attempting to take advantage of a surge in demand caused by a natural disaster or other state of emergency.
Laws preventing price gouging typically come into play after hurricanes and wildfires, which affect only a portion of the country at one time. Because the COVID-19 pandemic has been a catastrophic event felt across all states, it presented a rare chance to study the impacts of these laws, according to assistant professor of economics Gavin Roberts.
“That’s a pretty rare opportunity to see the effect of price gouging regulations on consumer behavior,” Roberts said. “So we recognized that this would be an opportunity to compare different things in different states with or without those policies.”
According to the National Conference of State Legislatures, 36 states have some form of law that works to control prices during emergencies, including Utah.
Roberts and Rik Chakraborti, an assistant professor of economics at Christopher Newport University in Virginia, used publicly available internet search data from Google Trends to determine where certain goods were most scarce. They reasoned that a high number of searches for a product within a certain geographic area, like a state, represents a high likelihood of a shortage there.
Using the terms “toilet paper” and “hand sanitizer” — two of the most in-demand products at the beginning of the pandemic — the researchers worked to determine where supply was lowest. In Google Trends’ year-end summary of 2020 search trends, both of those terms, paired with “where to buy,” ranked in the top five.
“Those were widely reported to have been sought after in states with price gouging laws,” Roberts said.
The reason shortages were not as prevalent in states without anti-price gouging laws, Roberts explained, is because when retailers were able to raise prices, that disincentivized consumers from buying mass amounts of product. Roberts said raised prices also motivate producers to increase the supply.
One of the main arguments for keeping anti-price gouging laws is to maintain access to necessary goods for low-income residents. Roberts said from his standpoint as an economist, a better way to solve that issue would be income subsidies, like the two stimulus checks Americans received in 2020.
“Price gouging regulation is probably a really bad way to (help low-income families) because of the unintended consequences like shortages,” he said. “If a household is wealthy enough that someone is staying home, they have the ability to search. Low-income households don’t have time to search for the resource.”
Other economists throughout the country agreed that anti-price gauging laws were a detriment to Americans’ efforts to secure necessary goods early in the pandemic, and 190 signed a petition calling on state governments to repeal those laws. One Utah legislator is taking up that call.
Sen. Jacob Anderegg, R-Lehi, is sponsoring a bill that would repeal Utah’s Price Controls During Emergencies Act. The act is triggered when a state or national state of emergency is declared.
The bill is currently being considered by the Senate Business and Labor Committee. Anderegg did not respond to requests for comment.
Such legislation could make a big difference in Utah, Roberts said, citing reports that the state was near the top when it came to panic shopping. According to local commerce platform Womply, grocery sales in Utah hit a high of 403% what they were the year prior during the week of Feb. 29 — a few weeks after the U.S. declared COVID-19 a public health crisis. It was the second largest spike in the country throughout the pandemic.
“When we talk about price gouging regulation in a popular sense, we focus on ... extreme cases of it when people bring bottles of water to post-hurricane disaster situations and sell it for $20. There are good reasons to be concerned about that situation, but we focus less on the consumer side of this,” Roberts said.
He continued, “I think we miss the big picture when we focus on those anecdotal situations that make us very uncomfortable. This is a whole America, so it’s not just the one person with those bottles of water that’s going to react to this policy.”