As the coronavirus health crisis continues, regulators across the country are stepping up their enforcement efforts related to price gouging. As a result, retailers and others should ensure that their pricing practices comply with the relevant state and local laws.
Most states currently have laws or executive orders that prohibit some sort of price gouging. Those that don't often take the position that price gouging violates the state's general consumer protection laws (which may prohibit, for example, unfair or unconscionable business practices).
While there's no substitute for reviewing the specifics of each rule, here are some key things to keep in mind when setting prices, in order to avoid being charged with price gouging:
- Don't assume that a state of emergency needs to be in effect for price gouging laws to apply. While that is true in some states, it's not true everywhere.
- Don't assume that the price gouging laws only apply to face masks and hand sanitizer. While some rules do only apply to certain types of consumer goods, others apply to almost any product or service that consumers may need in connection with an emergency.
- States define "price gouging" very differently. In some states, any price increase during an emergency may considered to be price gouging. In others, price increases only violate the law if they are "unconscionable," if they are "exorbitant" or "excessive," or the increase violates a similar standard. In addition, some states define price gouging as price increases that are generally anywhere from 10% to 20% over the usual price. Some states also say that a price increase of a certain amount -- such as 20% or 25%, for example -- is prima facie evidence that a price is illegal.
- Even in an emergency situation, prices may generally be increased (as specifically permitted by the applicable rules) if the increase is to due to increased costs. Depending on the state, this could be the increased cost of the product itself -- or other increased costs in running the business.
- Depending on the state law that applies, there may be additional restrictions as well. For example, in Utah, if you sell a product during an emergency that you didn't sell before, the law limits the amount of profit you can make on the sale.
- Penalties for violating a state or local price gouging law can be substantial -- up to thousands of dollars per violation. Some states also prohibit price gouging under the state's criminal laws.
If you're looking for further information about state and local rules on price gouging, here are some relevant links: Alabama, Alaska, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Jersey, New Mexico, New York, New York City, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin.
Further information about price gouging is also available on our blog. For example, we've written recently about New York City taking enforcement action against retailers for price gouging, Senators and members of the House calling for the FTC to take action on price gouging, Attorneys General calling on retailers to do more to prevent price gouging, and Amazon pulling listings that engage in price gouging,
"During this difficult public health emergency, it’s imperative that we stop price gouging anywhere in the supply chain" -- California Attorney General Xavier Becerra