Price gauging from perspective of consumers and business

by Melissa Bought, September 27, 2018.

For most, news of an impending hurricane means picking up some bread and an extra case of water, fueling up the gas tank and deciding whether to evacuate.

For some businesses though, that same news means dollar signs – it creates an opportunity to take advantage of desperate people planning for the worst.

The North Carolina Attorney General’s Office has received more than 700 reports of price gouging – a prosecutable crime – since Sept. 7, when Gov. Roy Cooper declared a state of emergency in anticipation of Hurricane Florence.

Many of the reports reflect small prices increases across the state, 20 cents for gas here, $20 extra for a hotel room there, a couple extra bucks for cases of water – murky territory for a prosecution. A handful of reports are for goods that definitely would not be covered under the price gouging law: a $2.52 increase for a 12-pack of Busch Ice beer in Robeson County, a $7 increase for a pack of Pall Mall cigarettes in Pender County and a $12 price increase for a steak bowl in Bladen County.

Where price-gouging becomes a little more apparent in the reports is when stores and hotels more than tripled their rates for goods and services.

For example, there are nearly 40 reports of a Family Dollar store raising the price of a case of water by more than 750 percent (from $4.99 to $43.20). There are several reports of hotels changing their under $100 per night rates to well over $200 per night. And there are more than a couple instances reported of gas stations increasing fuel prices by near or more than $1 per gallon.

“They completely are taking advantage of people in our situation,” said Lisa Price.

She lives in Frisco, a small community on Hatteras Island, and was forced to leave due to a mandatory evacuation before the hurricane made landfall. She reported a Holiday Inn Express in Nags Head for raising their rate from $89 to $239.

“We had stayed there before,” she explained in a phone interview. “I thought this was just terrible, that someone would do something like that when we have no choice but to leave.”

Price said she made the report after seeing a news segment about price gouging and how it wouldn’t be tolerated. She ended up finding a place to ride out the storm in Virginia Beach and said she would not be returning to the hotel she reported in the future.

A voice message left for the general manager of that Holiday Inn Express was not returned Wednesday.

In a similar situation, Karen Barton reported an instance of hotel price gouging after trying to find a room for one of her friends. She said that a Comfort Inn in Shelby raised its rate from $79 per night to $249 per night.

“I called and they said it was just because they only had two rooms left,” the Salisbury resident explained.

Barton said that she was a Hurricane Hugo survivor and remembers price gouging well, which is why she made the report to the AG’s Office.

“It’s wrong,” she said. “They lost my business and anyone else I can convince. I hate hearing people do that.”

An Internet search of the hotel Wednesday showed that rooms at the reported Comfort Inn could be booked for $89. General Manager Rosemarie Nixon said the prices were raised but not because of the weather – they were increased because of the FEI World Equestrian Games, a “special event” which began Sept. 5 in nearby Tryon.

“We definitely have sympathy for every person who was going through that,” Nixon said. “[The rates] would never intentionally go up. We would never do anything like that.”

A spokesperson Choice Hotels said in an email that all hotels in its system – which includes Comfort Inn and many others in the AG reports – are independently owned and operated, and franchisees are responsible for setting their room rates.

“Prior to Hurricane Florence, we communicated to our franchised hotels in the impacted areas to be sensible with rates and reminded them of state laws,” the email states.

Businesses often have explanations for what happened after consumers make reports – especially in this day and age of social media. Several reports about various businesses allegedly price gouging people that were made to the AG’s Office were based on social media posts.

That was the case with the nearly 40 reports about a Family Dollar store on Guess Road in Durham selling cases of Aquafina water for $43.20. The picture that was circulating showed cases of water with an orange, handwritten sign attached that stated the 24-pack was $43.20, “(sold individually @ 1.80/each).” The bottles, however, were not individually displayed – they were in plastic-wrapped cases.

People from as far away as California and Florida reported it, as well as many North Carolinians from across the state.

Micandra Walkerwhite, of Fayetteville, reported the store based on the picture she saw online and word of mouth from people she knew from the area.

“It just seemed like no one was doing anything about it,” she said. “Everyone was just talking about it.”

Jyllian Freedman, of Durham, saw the picture on the Nextdoor app and talked to an elderly woman in her neighborhood who was upset after trying to buy some water at that Family Dollar store.

Freedman and another friend from the neighborhood then decided to go to the store and see if it was really happening. She said when they got there and saw the sign, they asked to speak to a manager but were instead cursed out by an employee and asked to leave.

“I reported it because so many people had talked about it; everyone was talking about it but I didn’t know if anyone had actually reported it,” she said. “It’s obviously inhumane. When we saw it, we were all pretty upset.”

Kaleigh Painter, a spokesperson for Family Dollar and Dollar Tree stores, acknowledged the incident, but didn’t address what actually happened.

“There was a misunderstanding and upon being made aware, the concern was immediately addressed,” she said in an email. “Our thoughts are with all of those in the area impacted by the storm.”

Painter did not respond to follow-up questions.

Another business in the Durham area was similarly called out on social media for selling overpriced cases of water in a post that was shared over 2,000 times.

Lee Barnes, President of Family Fare stores, said that “at the height of the chaos” as Hurricane Florence approached, Family Fare “booked in” many additional cases of water from any approved vendor that would supply them.

The only water traditionally sold out as a case at the store (not refrigerated) is sold at $4.99 or two cases for $8, Barnes said.

Other cases of water come from various suppliers and are traditionally sold as a single unit only and sold in refrigerated form. The retail price point on those individual waters ranges in price from $1.19 for a single to $1.59 for a single.

“Customers came to at least one of our stores and asked the person on duty to sell them cases of water in the form traditionally supplied to consumers on a per unit basis,” Barnes said in an email. “The person at the store obliged out of duty to the consumer. The only way to do this is to sell the water as marked for resale. All Family Fare stores have scanning systems. The only way the water could be sold professionally and as directed is by scanning it through the system.”

Barnes said the accusation that Family Fare was price gouging was inaccurate and defamatory. He said they reached out to the person who shared the accusation on Facebook and requested an apology but none has been made.

Barnes also got his attorney to be proactively involved by reaching out to the AG’s Office.

Jason McGhee, of Hillsborough, is one of the Family Fare customers who reported the water pricing. He said up until Sept. 11, he would buy the $4.99 cases for work.

He said he realized the waters were being sold individually but took issue with them remaining in packaged cases and the $4.99 cases being unavailable.

“They were able to conform to the law,” he said. “I don’t think it’s prosecutable, but that probably lost some business. In the day and age of social media, there is a greater punitive effect of loss of business than any fines you could impose.”

Attorney General Josh Stein said his office is still combing through price gouging reports and that the law would stay in effect until the state of emergency ended.

He explained that the law covered goods and services when there was an unreasonably excessive price increase without justification.

Stein’s office has already sent one investigative demand to a gas station they received price gouging complaints about, but the station had not yet responded as of Monday afternoon. They are in the process of preparing more investigative demands to some hotels, he said.

An investigative demand is the first step the AG’s Office takes in addressing allegations of price gouging. A prosecution from that point depends on how a business responds and the factors surrounding the price increase. Sometimes just reaching out to a business is all it takes to stop the problem.

“If the business is able to address any concerns – you know, perhaps the consumers were misinformed and they weren’t charging that price, or they were charging that price but they had an explanation about why they had to raise their prices because their cost had gone … we move on,” Stein said. “If they cannot, then we decide if we should litigate, or go to court.”

He said that price gouging reports tend to come in phases – goods like water and gasoline are often part of the first part, or the rescue phase. The next phase is recovery and he expects that additional complaints will be made.

“We anticipate hearing from are people who might be gouging for tree removal or home or roof repair or hardware stores selling wood,” Stein said.

He encouraged people to make reports to his office either online or by calling 877-5NO-SCAM.

“In a perfect world, no company would take advantage of people’s dire straits, and the fact of the matter is, the vast majority of businesses out there are busting their tails trying to better serve people’s needs,” Stein said, adding that he hopes there won’t be many reports. “They want to offer goods and services to help people get their lives back on track, and some of the businesses have been heroic in terms of opening up their doors even when they didn’t have power because they wanted to make sure people had an opportunity to get food or whatever it was that they needed.

“Businesses are neighbors just like people are, and they want to help, but there are a few out there that will take advantage of people’s bad situation and that’s why we have the law and that’s why my office will aggressively enforce it.”