[This article has been published in Restoring America to highlight how invasive government intervention in the economy can hurt both individual consumers and the free market system on which they depend.]
when gasoline prices started to increase. Prices continued to increase, and elections are on the horizon, so blaming companies for “price gouging” is now the response of the day.
The good news is that the direct price controls of the past appear to be dead and buried. Even though the public and officials blame the 1970s gas lines and rationing on OPEC and the “embargo,”have concluded that our troubles were the result of price controls imposed by President Nixon on large oil companies leading to significant shortages.
Congress also appears to have learned that real price controls are a terrible idea. Tasking the FTC with investigating mischief in the price‐setting process is instead the bipartisan preferred solution of late. After Hurricane Katrina reduced oil production in the Gulf of Mexico, the Republican‐controlled House passed anti‐price gouging legislation in October 2005.
If passed, of course, anti‐price gouging laws such as this would introduce new uncertainty for wholesalers and retailers. They would face the additional legal prospect of having to prove a demand surge was a mitigating factor for increasing prices and are only offered an affirmative defense if they can show that their price hike is the result of a cost explosion.
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