Is Florida Agency Price Gouging or Just Charging What the Market Will Bear?

Michael Giberson

Last year thousands of Florida consumers called the state to complain about price gouging on gasoline after Hurricane Ike.  This year, hoteliers, gas stations, and other business owners are saying they are being price gouged by the Florida Department of Transportation.  The issue: the fee the state charges business owners who wish to appear on the blue gas, food, and lodging signs near interstate highway exits.  The state plans to increase the charges from $1,000 to a maximum of $2,500 in rural areas and $5,000 in urban areas.

“When you increase 300 and 400 percent, that’s a form of price gouging. We consider this economy to be a hurricane, truly the worst disaster that we’ve seen in the economy since our lifetime,” said Hemant Patel, Treasurer with the Asian American Hotel Association. “We understand a level of fair playing, we understand a 10 percent increase, 15 percent increase, which is fair to business and we understand the economy, but to have it 300 and 400 percent, that’s no different than me charging my hotel rates by 300 percent when we have a disaster in our area.”

According to the story:

Officials from Florida’s Department of Transportation said state lawmakers adjusted the program earlier this year so they could generate more revenue for the state’s Transportation Trust Fund. Moving forward, DOT officials will review each interchange, each year, and adjust the prices accordingly based on traffic, population, market conditions, demand, and the cost of the program.

The director of “Right of Way” for the Transportation department said, “If you think of these as advertising value, these are still the best advertising value.”

Some policy activists argue that government should be run “more like a business.” With the focus on boosting revenue, this policy change appears to be an example of what that slogan entails. But revenue maximization probably ought not be the sole goal of state policy.

  • Note, for example, the government is a business that has the capability to regulate the competition.  The more restricted the ability to install private billboards (or present other forms of information for travelers), the higher the value of appearing on the state’s blue roadside signs.  We wouldn’t want the state to maximize its revenue by excessive clamping down on other advertising.
  • More generally, policy changes by the state acting as a vendor should consider more than just private costs and benefits to the state and business owners.  The factors to be considered in adjusting rates mentions the “cost of the program,”  which probably just refers to the state’s program expenses.  But, in the ideal, the state should encompass consideration of the net costs (or benefits) to travelers and other “third parties” from constraining advertising in the way the blue highway signs do.
  • And, realizing that it is fallible in its assessments, the state may want to err on the side of permissiveness in its restrictions on alternative sources of roadside information.

With the rise of location-aware smart phones and internet-aware navigation systems, the state’s little blue signs will slowly diminish in value — useful to consumers lacking smart phones (a smaller and smaller group), consumers in cell phone “dead zones,” and to all consumers during emergencies which disrupt communications services.

Perhaps the state is just trying to grab some extra revenue from the program while it can, before technology renders it mostly meaningless.