5/22/2006

The FTC's bizarre definition of price gouging

Before we look at the FTC's conclusion on price gouging, let's look at how when it was defined as occurring:

For the purpose of the report, and as mandated by Congress, the FTC defined price gouging as "any finding" that the average price of gasoline in designated disaster areas in September 2005 was higher than in August 2005.


A Republican congress approved this? We know that prices went up so the conclusion was already predetermined. Based upon that definition, this is what they found:

The Federal Trade Commission on Monday said it found 15 examples of gasoline price gouging after Hurricane Katrina, though the agency said it has not identified any widespread effort by the oil industry to illegally manipulate the marketplace.


Here is one question. If it is price gouging whenever the average price rises, what do you call it whenever the average price falls? Uncontrolable altruism by companies? Is the ideal market one where the price never moves? If you are interested, you can see how much the price of gasoline goes up and down over time. Boy, there must be a lot of market power.

UPDATE: Fox News that I cited above may have blown this story. Here is what I just read in the WSJ.
"The FTC defined gouging as a gas price in September 2005 that was higher than the previous month for reasons other than higher cost or market trend." (Emphasis added.)

However, I will say that I don't understand this market trend argument and I don't know why demand changes aren't included, especially since different blends of gas can make it hard to move gas from lower to higher valued areas.

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