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Some surgical masks, hand sanitizer and other PPE (Personal Protective Equipment) are appearing in some online auctions these days as a result of the Coronavirus.

I’ve seen instances where the prices for such have been much higher than they were a few months ago. Some are considering that price gouging; just what is price gouging? Here’s one definition:

Price gouging occurs when a seller increases the prices of goods, services or commodities to a level much higher than is considered reasonable or fair. Price gouging may be considered exploitative and unethical. Usually, this event occurs after a demand or supply shock. Common examples include price increases of basic necessities after hurricanes or other natural disasters. In precise, legal usage, it is the name of a crime that applies in some jurisdictions of the United States during civil emergencies. In less precise usage, it can refer either to prices obtained by practices inconsistent with a competitive free market or to windfall profits.

Auctioneers are almost universally saying: “Wait a minute here … we don’t set the prices at auction, the bidders set the prices so that’s not price gouging.” I would offer that at an absolute auction, the bidders set the prices, but at a with reserve auction, the seller/auctioneer help to set prices.

If you agree that a retail store selling “February-25” 10 cent surgical masks for $10 each on March 25 is price gouging, how is an auctioneer selling at a with reserve auction “February-25” 10 cent surgical masks for a minimum bid of $10, not price gouging?

However, if these “February-25” 10 cent surgical masks are being sold at absolute auction for $10 each then the auctioneer/seller is indeed not price gouging; such is completely open price discovery with the bidders unilaterally setting the prices.

In plain terms here:

    1. In a without reserve (absolute) auction, there cannot be any price gouging.
    2. In a with reserve auction, there can be price gouging if the seller/auctioneer sets reserves or miniumum bids far in excess of normal market values.

I’m not accusing any auctioneer of price gouging and most claims seem unsubstantiated. However, if reserves are set (particularly published reserves) much higher than prices in “normal” market conditions then it seems possible while truly absolute auctions couldn’t constitute price gouging under any circumstance.

We’ve recently written other articles about the Coronavirus and the auction industry including here:

Lastly, should sellers and auctioneers be donating these masks, sanitizers and the like instead of selling them? They can certainly decide to do that, but they can also decide to sell them as that seems to me to be a personal decision each one of us can make about our own property.

Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.