By David Tulis
A towtruck driver has been indicted in South Carolina on charges that he violated a statute that prohibits “unconscionable prices during times of disaster,” and makes it a misdemeanor to raise prices during events such as the flooding that has hit the state.
The ban went into effect when the governor, Nikki Haley, declared a state of emergency, and its authority lasts 12 days.
The premise underlying the statute that snagged Robert Boland, 40, of Carolina Towing & Recovery is that during a public emergency an increase in prices is unjust, an abuse in the market, a moral wrong. To criminalize an increase in prices is to condemn the market to shortages and to subject it to irrationality.
3x the price
Ordinarily Mr. Boland would have charged F$85 for a tow. But he charged F$250 to tow one vehicle.‡ Reports indicated he showed up in Dorchester County, which partly surrounds his place of business, Summerville. He solicited business outside his area of license, another offense — another state artifice imposed upon the marketplace.
Mr. Boland arrived to tow vehicles parked near the Frances R. Willis animal shelter in a lot that was slowly being flooded. Mr. Boland apparently asked one motorist F$150 to unhitch a vehicle, evidently in objection to his high price.
It violates state law to “rent or sell or offer to rent or sell a commodity at an unconscionable price within the area for which the state of emergency is declared.” An “unconscionable price” is “a gross disparity between the price of the commodity or rental or lease of a dwelling unit, including a motel or hotel unit, or other temporary lodging *** and the average price at which that commodity or dwelling unit *** during the thirty days immediately before a declaration of a state of emergency ***.” (South Carolina Code 39-5-145)
“Price gouging is when a business offers a product or service,” the state’s consumer affairs division says, “at a much higher price than the average price of the product or service in the 30 days prior to the state of emergency. Price gouging only happens when either (1) the governor, (2) the attorney general or (3) the president has declared a state of emergency.”
An outcry on Facebook and other social media brought the state’s attention to Mr. Boland’s misdeeds outside the animal shelter.
Purpose of pricing
Mr. Boland’s rough play in charging to unhook a car doesn’t look good for him and won’t be easy for a jury to swallow if he argues his innocence at trial.
Still, the statute’s attack on price increases requires people in the market to operate in an irrational fashion. Sellers raise prices to meet demand. If demand rises, sellers charge more for a good or service to make allocation rational.
If a tow is F$85 and a tow truck operator cannot raise his price, he is effectively forced to give away a service well below its real rate in the market. Charging F$250 is rational because it lets the person who really needs to be towed to get service first, with those less needing it willing to wait a turn, or wait for the price to decline.
Forced to sell service at F$85 guarantees that people who don’t need the service as badly can get it first if they happen to be near, whereas the motorist who needs the service and is willing to pay more for cannot obtain it.
A rising price is a rational market mechanism that lets buyer and seller meet at F$250 to consummate a transaction. If Mr. Boland is forced to sell every tow at F$85, he is deprived of the means of deciding who goes first, or who gets service. He must rely on other sorting mechanisms.
These may include chivalry — women and children first. It may include race (whites first, or black), or emotional appeals over patient and resigned waiting for service of the next person who spares himself or herself an outburst.
I’m not discounting the need to put women and children first. Indeed, a man has a duty that way.
Still, raising prices brings reason into the process and lets the seller ration his service to the most needy first.
Best leave things not to general assemblies and attorneys general, but to people in local economy, reacting to local conditions.
That’s the free market, one that allows for that meeting place between buyer and seller — price — to change with changing circumstances.
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‡ A TV report says Mr. Boland towed vehicles parked at a nearby gas station on higher ground, then held the vehicles hostage for F$250. This report, http://www.abcnews4.com/story/30209673/summerville-tow-truck-operator-arrested-charged-with-price-gouging-in-state-of-emergency, conflicts with a newspaper account, cited below.
Melissa Boughton, “Tow-truck driver accused of gouging volunteers during animal shelter emergency,” Oct. 7, 2015, The Post & Courier, http://www.postandcourier.com/article/20151007/PC16/151009486