California's COVID-19 response leads the way on price-gouging protections, too
California has been praised for its response to the COVID-19 health crisis, but it deserves recognition for its response to price-gouging concerns as well. On April 3, 2020, California’s Governor Gavin Newsome issued another significant Executive Order aimed at preventing and punishing price-gouging. The Executive Order declares that California “is prepared to take strong action against price gouging, profiteering, and other unscrupulous business practices” that threaten California’s healthcare workers, first responders, consumers, and others.
The Executive Order generally makes it illegal for a business to sell food items, consumer goods, medical or emergency supplies, and materials designated as “Scarce Materials” or “Threatened Materials” pursuant to the Defense Production Act (50 U.S.C. § 4512) for a price that is more than 10 percent (10%) greater than the highest price charged by that business for that item on February 4, 2020. There are only two exceptions: (1) if a business can show that the increase is directly attributable to additional costs imposed on the seller by the supplier of an item; or (2) if a business was offering an item at a reduced price on Feb. 4, 2020 and can prove the item will not be sold for a price that is greater than 10 percent (10%) of its ordinary price. The Order extends these and other prohibitions against price gouging through September 4, 2020.
Critically, the Executive Order also clarifies that violations of the Order “shall also be redressable in the same manner as any other unlawful business practice under the Unfair Competition Law, Business and Professions Code section 17200 et seq., and as otherwise provided by the laws of the State.” This provision thus clarifies that private enforcers may also enforce the Executive Order through California’s Unfair Competition Law (UCL) and other applicable laws to seek relief for consumers and others who have experienced price-gouging.
In addition, California’s District Attorneys have already signaled that they are poised to enforce the law. For example, the Marin County District Attorney’s Office recently posted about enforcement of the Executive Order and California’s other price-gouging laws, warning that a “[v]iolation of the Governor's Executive Order is a misdemeanor under Government Code section 8665 and is punishable by imprisonment in a county jail for up to 6 months and and/or a fine of up to $1,000.”