The problem with bidding wars during a national pandemic

The problem with bidding wars during a national pandemic

by Gus Iversen, Editor in Chief | April 01, 2020
Business Affairs

In Texas, the Deceptive Trade Practices Act prohibits anyone from selling necessary items at an excessive price when a disaster is declared, therefore the price gouging lawsuit filed against Auctions Unlimited hinges on the fact that Texas governor Greg Abbott issued a disaster declaration prior to the listing. If the declaration had not been made, then there wouldn't be much of a case.

In Tennessee, governor Bill Lee declared a state of emergency on March 12, triggering the state's own anti-price gouging law. By that time, the two brothers were already having difficulty posting their stockpile on sites like Amazon and eBay, leaving them with nearly 18,000 bottles of hand sanitizer and nothing to do but sell it locally and at a fair price, (according to the Times, the brothers are now seeking to donate their stockpile).

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The specifics of price-gouging rules vary among the 30+ states that have them, according to Litan, and although many use language that is open to interpretation (like "excessive" or "unconscionable") California's law specifies a 10% threshold over the normal cost.

Ventilators illustrate a national challenge
While U.S. citizens may struggle to track down hand sanitizer in their neighborhoods, the COVID-19 pandemic is triggering shortages on a national scale that extend beyond personal protective equipment to capital equipment that can be used to save the lives of infected patients.

"Price gouging laws become most relevant with respect to ventilators because if you allow the market to work, then the ventilators would get sent to the highest bidder," said Litan. "But what President Trump can do under the Defense Production Act is allocate ventilators by telling Ford and GE to set pre-crisis prices and let the federal government allocate the ventilators as it sees fit," referring to the companies' plan to produce up to 50,000 ventilators within 100 days and 30,000 a month thereafter for patients who test positive for COVID-19.

In New York, the state that has been hit hardest so far by COVID-19, Governor Andrew Cuomo argues the existing plan for allocating ventilators needs a lot of work. At a press briefing yesterday he described a “bizarre situation” in which every state buys its own ventilators, pitting them against each other in bidding wars, the Guardian reports.

“We all wind up bidding up each other and competing against each other, where you now literally will have a company call you up and say, ‘Well, California just outbid you.’ It’s like being on eBay with 50 other states, bidding on a ventilator," Cuomo said.

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