Price-gouging concerns raised during COVID-19 crisis
COVID-19 has had major ripple effects throughout the economy, including an enormous increase in demand for emergency supplies as well as common staples (and, of course, toilet paper). Unfortunately, such increased demand often leads opportunistic persons and businesses to capitalize on this demand by significantly increasing prices. Doing so, however, can cause companies to run head-on into price-gouging laws, which are sure to be aggressively enforced as the crisis continues.
In over half the states, there are already laws on the books that can be used to prevent price-gouging during emergencies. Price-gouging is defined differently from state to state and may be modified by emergency executive declarations as well. Often price-gouging is assessed under the state’s unfair or deceptive trade practices laws and will look at whether prices are “excessive” or “unconscionable”--which is generally determined by looking at average prices in the affected area over a given time-period before to the emergency. For example, under California law, there is a prohibition on charging a price that exceeds, by more than ten percent (10%), the price of an item before a declaration of emergency. This law applies broadly, including to stores selling emergency supplies, and subjects violators of the price gouging statute to criminal prosecution that can result in a one-year imprisonment and a fine of up to $10,000. Violators are also subject to civil enforcement actions including civil penalties of up to $2,500 per violation, injunctive relief, and mandatory restitution.
Already, state attorneys general are stepping up enforcement of price-gouging laws and taking additional steps to prevent price-gouging. For example, Missouri Attorney General Eric Schmitt said on March 20, 2020 that he had issued subpoenas to eight Amazon sellers suspected of price-gouging, seeking information about their sale history and pricing of face masks, respirator masks and hand sanitizer. Earlier, on March 25, 2020, attorneys general from 33 states sent letters to the CEOs of Amazon, Walmart, and several other online platforms calling on the companies to take measures to prevent price gouging on their online platforms.
In the meantime, new legislation aimed at curbing price-gouging is progressing in state legislatures around the country. Michigan, for instance, is considering a new bipartisan bill designed to strengthen the state’s anti-price-gouging laws, including by providing more investigative tools, criminal penalties, and enforcement authority. Likewise, in Maryland, shortly after the Governor declared a state of emergency, both houses of the General Assembly introduced legislation aimed at limiting increases in consumer goods and services during the emergency to no more than ten percent (10%).
Expect new legislation and increased enforcement efforts in the coming weeks and months as the COVID-19 crisis continues.