Recently a handful of politicians called upon the Federal Trade Commission to investigate oil companies for potential price gouging. I was reminded of an episode from a few years back in which politicians called upon the US Department of Transportation to investigate potential price gouging by airlines.
An Amtrak train derailed in Philadelphia in May 2015, interrupting passenger service in the area for several days. Air travel rates jumped along some affected travel routes. In response Senators and Members of the House called upon the DOT to investigate.
I blogged about the calls for investigation in a July 2015 post at Knowledge Problem. There I made the following prediction:
After a month or two the DOT will report finding that airline prices did jump suddenly after the derailment as demand for air travel jumped up. They will observe that initial price spikes resulted from airlines’ computerized pricing mechanisms and did not reflect an intent to “take advantage of stranded passengers in the wake of such a tragic event.” They will note that airlines responded by adding flights and pressing larger aircraft into service. The report will conclude temporary price spikes reflected the ordinary workings of supply and demand under short-lived extraordinary circumstances. No finding of unfair practices will result, and no trade practices will be condemned.
I did not recall whether the investigation led to any particular conclusion, so I Googled it. To my surprise, my prediction was wrong in a key part.
I wrote “after a month or two the DOT will report…” but it was actually 18 months before DOT concluded its investigation. There was no report. Rather, as the Associated Press described it, the “department quietly sent letters to the airlines” stating the investigation had concluded. The DOT said it found “no evidence of unfair manipulation of airfares or capacity, nor evidence of unconscionable increases in fares beyond normal pricing levels.”
I was wrong on the timing of DOT action, but right about what it would find.
One wildcard this time around. The new chair of the FTC is a strong critic of existing competition policy practice. Last September the FTC announced several efforts to boost scrutiny of gasoline markets. Perhaps under new management FTC lawyers and economists will come up with some new theory of price gouging to justify doing something.
More likely, sometime after the November 2022 elections, the FTC will conclude they found no widespread market manipulation or price gouging. It won’t make much news when they conclude the report.