SMU Law Review Forum

Unconscionability and Poverty

Mark G. Kelman, Stanford Law SchoolFollow

Abstract

Matthew Desmond made the claim in Evicted, his powerful work on housing insecurity, that those concerned with alleviating poverty should focus not merely on ensuring that poor people have higher disposable incomes, but on countering the exploitative price gouging that depresses the value of whatever income they have. This suggests the possibility that it might be a worthwhile anti-poverty strategy for courts to use the unconscionability doctrine to regulate exploitative contracts.

Three main issues follow from considering this possibility: (1) Do the poor actually pay more for goods of the same quality? (2) If they indeed pay more, do they do so because prices are exploitative? How should we define an exploitative price, and how can we identify that any particular group of buyers is indeed exploited? (3) Could courts seeking to make use of the unconscionability doctrine realistically identify cases in which poor people generally are overcharged, or will courts successfully invoke the doctrine to challenge unwarranted prices only when the price a particular seller charges exceeds some benchmark (e.g., the price charged before an emergency or the price charged to other buyers in highly similar transactions)?

While there is (reasonably) good evidence that the poor pay more for equal quality goods and it is possible (but very hard to determine) that exploitative pricing is a genuine issue as well, efforts to use the unconscionability doctrine to solve the problem of exploitative contracts are quite unlikely to succeed. Doctrinal and practical constraints make this solution a bad fit. If we worry, for example, that small stores in urban areas with high concentrations of poor residents overcharge, we should probably look to establishing and sustaining less exploitative suppliers, not to using common law courts to police price gouging.