--> Gill Blog: Eliminating Predatory Pricing in the Wake of Disasters

Gill Blog

Thursday, October 27, 2005

Eliminating Predatory Pricing in the Wake of Disasters

As a follow-up to our post on public-private partnerships in disaster zones, and the session we heard via conference call from Islamabad, my friend Jim Finch brought up a very thought provoking question. We had been told that potential is always there for disasters to motivate suppliers to engage in predatory pricing (i.e. setting prices for needed goods far above market prices when supplies are temporarily cut off - a better definition is available here). Jim asked the group how this can be stopped.

Some suggested that legislation be drafted that makes such behavior a criminal offense, others talked about public-private partnerships pooling resources to provide an inventory of critical items that can be accessed during a disaster. I thought about it and remembered the first time hearing about predatory pricing was in the aftermath of Hurricane Andrew in 1992. I just remember that being a very big story in the days that followed.

Since that time, the media has played a very important role in disuading potential pricing predators from acting, simply by using the public airwaves to identify and publicly punish those who do (identifying perpetrators can significantly damage their reputation and brand).

It also seems that we have entered a period where our collective antennae are far more attuned to the idea that large disruptive events will occur. When this becomes part of the group psyche of people, they have a tendancy to better prepare themselves for these types of events. As awareness and preparedness grows, the incidents of predatory pricing will drop because those who contemplate it think twice, because there is much more negative public opinion associated with it.