| Unedited 12/30/11
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Small Business Ethics |
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Price Gouging
Please Note: The ethics of gouging are very complex. Analyzing price gouging is best done in the context of many other points of moral and ethical analysis. As morals and ethics have evolved a civilized world social agreements and social contracts have also evolved to define a broad spectrum of behaviors. To act counter to the social contract is a highly profitable move because while other competitors are constrained by moral and ethical rules that are costly to adhere to, opportunists reap easy profits free of the constraints of rules. These contracts define what is socially responsible and what is not, however they do allow for some tolerance to deviation in the short-term. So, when analyzing price gouging it is important to note weather the gouging is a way of life or some temporary, much needed action. Good and honest people often make this common mistake in their ethical judgment. For the lack of education and experience they unknowingly follow a path of exploitation. Price gouging occurs when there is not a reasonable connection between the actual cost of goods and services and what is charged. There are two forms of price gouging. 1. Raising the price of goods and services in times of local and national emergency. These are rare circumstances. A case can be made in some instances that business have the right to charge more when supply is scarce if the price is not too extreme. 2. The second type of gouging is predatory gouging. This type of gouging is ever present in the service industry. It includes carpet cleaners, plumbers, contractors, auto repair businesses and the like. This type of business practice can be described as systematic taking. It profits by going against against the many social contracts and social agreements everyone has learned from childhood. People learn what is respectful, fair, considerate, and reasonable behavior. It goes against the ongoing process of civilizing the world in which victimizing vulnerable people is viewed as exploitative and less than moral behavior (i.e. prohibitions against taking candy from a baby restricts primitive impulses for the betterment of the world.). Predatory gouging is not an isolated event. It is an ongoing way of conducting business. It occurs when a business person systematically extracts money from clients far in excess of what might be considered "standards of industry." Their mark-ups are arbitrary and based on Tooth and Claw Darwinian Ethics where "might makes right" and getting caught is the only moral prohibition. Using high priced advertising on radio, television and phone advertisements predatory merchants are able to attract a large client base of people who urgently need a product or service. The plumbing trades are an example of a business where predatory price gouging can be found. Here a home owner might experience a broken water pipe flooding their house or drains that are stopped up. Many home owners are impulsive in choosing a plumber and so they call the business highly branded and advertised. Many of these businesses are "system houses" that maximally extract immense profits from people. Here marketing studies and computer analysis predetermines the maximum amount of money a plumber can extract from a client. The service provider arrives armed with a book of prices “way out of line” with the majority of other plumbers. But, the client is in desperate need of a plumbing repair and so agrees to the high-priced service. The owner either pays one hundred and fifty dollars for the service call or agrees to proceed with the repair. This can be a fatiguing experience to a home owner. In addition, the client is worked over with fear-mongering to ever increase the cost of the plumbing repair. A repair that would normally cost three hundred dollars is billed out at a thousand dollars. It is not unheard of for electricians to charge twenty-eight hundred dollars to change a light switch or five thousand dollars to change a circuit breaker. In some sense price gouging approaches the description of swindling because it takes advantage of human weakness to elicit enormous profits.
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