News Story

Nessel: Offering Unavailable Masks At $2.39 Legal; Offering Them At $9.95 A Crime

‘Price gouging’ a politician’s word; going from shortages to no product at any price

One element of an empty-shelves dynamic in this state has been threatening letters to merchants from the Michigan Attorney General, pursuing what the department describes as price gouging.

In one letter under Attorney General Dana Nessel’s signature and sent to a Bloomfield Hills business, she said the firm was breaking the law with the prices it advertised for surgical masks.

The letter stated: “Following receipt of this information from the consumer, we searched the URL provided. The URL linked directly to your website, selling boxes of 10 3M n95 face masks for $99.95. The product is listed as currently out of stock. Upon further investigation, it was discovered that several suppliers sell the same face masks for much less. Grainger, a commercial supplier, sells the same 3M 8210 masks for $21.94 for a box of 20. Additionally, Home Depot sells boxes of 10 3M 8210 masks for $23.97. It is apparent the prices reflected on your website are substantially higher than other suppliers.”

Nessel acknowledged that the business accused of price gouging was sold out of the product.

What Nessel failed to acknowledge is that the other companies she identified as having lower prices have announced they too are completely sold out of masks.

Economists say that when an emergency creates temporary product shortages, the real issue isn’t so-called price gouging. Rather, it’s whether having products like surgical masks in stock at a higher price is preferable to having none available at prices that look attractive but are meaningless.

For example, Donald Boudreaux of the Mercatus Center at George Mason University frames it this way: “To begin, never pretend that reality is other than what it is. ... If this advice sounds trite, understand that government-imposed prohibitions on ‘price gouging’ mask the underlying reality, shielding people from the truth of it.”

Stanford University economist Caroline Hoxby describes one reality of laws prohibiting emergency pricing: They make shortages worse instead of better. Hoxby said in the Wall Street Journal, “I sympathize with the intention but goods must be allocated in some way and prices are better than first come or fights breaking out among people.”