Three years ago when COVID-19 first broke out, nationwide lockdowns in China witnessed the first wave of price gouging in groceries, including vegetables, fruits, frozen dumplings and other daily necessities. The only store in Shenzhen I visited during the Chinese New Year holiday that kept its prices intact was a Walmart outlet.
Recently when China started to loosen its anti-pandemic measures, another much fiercer wave of price gouging took place in medicine, particularly those over-the-counter drugs needed for the treatment of such COVID symptoms as fever and coughing. The price of a bottle of ibuprofen infant suspension drops shot up as high as 100 times in the black market.
Such drug hording and outrageous preying on the misfortunes of fellow citizens is sheer despicable shamelessness that must be prevented in the future with clear legislative stipulations and strict law enforcement. We need to strengthen laws and regulations to effectively curb this kind of event-driven price malpractice in the market place.
In the United States, price gouging went out of control during the beginning of the pandemic in personal protection equipment such as masks, disinfectants and gowns, as well as other medical devices required to cope with the outbreak. Due to a lack of manufacturing facilities for such items domestically in the U.S., it took quite a while for the global supply to adjust to soaring demands and for excessive prices to return to normal levels.
To fight such insensitive price manipulation, the U.S. congress passed the Price Gouging Prevention Act of 2022, which prohibits price gouging during all abnormal market disruptions — including the current pandemic — by authorizing the Federal Trade Commission and state attorneys general to enforce a federal ban against unconscionably excessive price hikes, regardless of a seller’s position in the supply chain.
A proper balance needs to be established between business profits and social justice. We can enhance similar legislative efforts in China to prevent the occurrence of contagious predatory price gouging activities in the future. Currently there are the Pricing Law, Punitive Regulations for Illegal Pricing Activities and other regulations covering price gouging. However, more comprehensive and inclusive legislative updating is needed to further deter potential price gouging and to make relevant law enforcement better substantiated and more effective.
There is normal profit margin expansion and contraction in a market economy, driven by supply and demand, competition and other factors that affect the price of goods. It is important that governments kept their hands out of such ordinary price fluctuations.
Should there be unfortunate events, however, such as a pandemic or an earthquake, that affect the wellbeing and livelihood of a great number of people at the same time, we need specific governing laws and regulations in place to ensure the proper functioning of society, leaving no room for ill-willed people to take advantage of the helpless.
(The author is an independent financial investor.)