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The Juridical Evaluation of the Price Gouging Strategy

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Based on the reading, it appears Tommy Takem intentionally, and unnecessarily, raised his prices beyond what they should have been. This sounds like an example of price gouging. Price gouging takes place when “sellers of a certain necessary good sharply raise their prices beyond the level needed to cover increased costs” (Zwolinski, 2018, p. 347). A few years ago, Hurricane Harvey hit the Houston area where I was going to school. Once the hurricane hit, residents were without power, and even water. I remember going to the grocery store with my roommate, only to find people trying to sell packs of water for close to seven dollars. This was the same water that originally sold for less than four. Because we were, unexpectedly, without water, the only option I had was to purchase the packs being sold at the store. At the time, I was appalled. I can vividly recall calling my mom in a rage wondering how they were able to get away with selling it for that much. I truly felt the store had taken advantage of me and other locals, who had no other choice but to pay the increased price. In a similar fashion, I believe what Mr. Takem is doing is unethical.

Since there is little competition in the area, I do not feel like Mr. Takem’s strategy of charging about 10 percent more than other retailers is wrong. In fact, I think it is a smart tactic. As someone who believes capitalism is a good thing, charging slightly more than the original price is probably the way he can afford to put food on the table and live comfortably. I do however think a 20 percent increase is steep and starting to be questionable. In addition, I believe charging 30 percent more for customers who purchase the goods from their own homes is questionable. The Bible, in Leviticus 25:14, says, “If you sell land to any of your own people or buy land from them, do not take advantage of each other” (New International Version). Had he told the customers that there would be an increase in price if they decided to purchase from their homes rather than in store, I do not believe this would be as immoral as I find it to be. Instead, I find his process to be deceptive and exploitative.

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The thing I find the most unethical about Mr. Takem’s business tactics is what appears to be him targeting low-income families in his community. The case says the salespeople get the customers to sign agreements, notes, and bills of sale “since many customers are poor, relatively uneducated and unsophisticated.” Proverbs 22:22 says, “Do not exploit the poor because they are poor and do not crush the needy in court” (NIV). It looks to me that Mr. Takem is exploiting the poor, as he charged the maximum rate of interest allowed by law and did not discuss the details of the aforementioned agreements. He knew that the customers were low income and, more than likely, unable to afford such steep rates and fees. In addition, he knew that they may not have the knowledge to understand the details of his business processes. Thus, I believe Mr. Takem’s business model is unethical.

Conclusion

In conclusion, based on the information I have found, I do not find Mr. Takem’s business practices to be illegal. From research I have conducted, it appears a contract existed. The four elements of a contract were present in the case. There was mutual assent, the parties had legal capacity, there was consideration, and the contract regarded legal matter. Because each of these elements were present, Ms. Walker’s refusal to pay was a breach of the enforceable contract.

In addition to the contract, the use of negotiable instruments is also legal. The UCC allows negotiable instruments, which guarantee a sum of a payment to the specified person. These documents indicate that the amount stated must be paid in full. As such, I find Ms. Walker to be in the wrong, since she signed and stopped paying the specified amount.

While I do not believe his business to be illegal, I do find them unethical. The way he goes about his business should be questioned. I would even suggest his morals be questioned. Selling appliances at a higher price than the standard price, knowing customers are unable to afford an increase, is wrong. While the prices used may not be reasonable to the consumer’s eye, I do not believe they would be considered illegal. Similarly, creating documents knowing customers do not understand the processes in place and not further explaining this to them is also wrong. In my opinion, he will continue to run into issues if his business model is not updated.

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