Price Gouging in the COVID-19 Pandemic: Protecting Yourself and Your Business

Supply difficulties and price changes are focusing businesses and governments on laws and orders against hoarding and price gouging. The federal government has formed a task force to crack down on violators. States are announcing executive orders on top of the laws already existing in 35 states. If you are in the distribution chain for critical or short supplies, it is important to be aware of and comply with these laws and orders. If you are the victim of hoarding or price gouging, you may have remedies. If you are being investigated or have received a claim that you are in violation, you will need to take immediate steps to prove up your defenses or come into compliance. Our attorneys can assist you with any of these challenges.

With the increasing incidence of COVID-19 placing ever-greater strain on distribution channels for everything from critical medical supplies to basic foodstuffs, it comes as little surprise that serious allegations of price gouging and disaster profiteering have accompanied them. Recent news articles have reported that to secure needed supplies of gloves, facemasks and other critical equipment, hospitals and nursing homes are being forced to pay more than 30 times the usual cost of the protective equipment. And while not as stark, many non-medical products, including food and consumer goods, have also seen substantial price increases since the President’s March 13 declaration of a national emergency.

Although some of those price increases may stem from increased costs of manufacture and distribution in the crisis, many others are the result of companies and individuals looking to turn an easy profit off the crisis. This, in spite of the fact that 35 states and the District of Columbia all have laws specifically prohibiting price gouging in an emergency. For example, absent documented increased costs, California’s price gouging law prohibits charging prices for, among other things, consumer goods or medical supplies that are more than 10%of the price charged prior to the declaration of an emergency. In an April 3rd Executive Order found here, California’s governor extended this 10% moratorium on price increases until September 4.

While many states have adopted California’s approach to limiting price increases during a declared emergency to 10%, some states prohibit any price increases whatsoever. Others, however, take a less certain approach, such as prohibiting prices deemed to be “excessive.”

Even in the absence of a statute specifically addressing price gouging during an emergency, there may be other laws which come in to play. For example, some states have interpreted their general consumer protection or unfair competition laws to apply to price gouging. In addition, some state governors have issued Emergency Executive Orders, like this one, to specifically address price gouging during the COVID-19 crisis.

The Federal government has also gotten into the act. Attorney General Barr recently announced the creation of a COVID-19 Hoarding and Price Gouging Task Force within the Department of Justice on March 24, and encouraged U.S. Attorneys to “aggressively pursue bad actors who amass critical supplies either far beyond what they could use or for the purpose of profiteering. Scarce medical supplies need to be going to hospitals for immediate use in care, not to warehouses for later overcharging.”

Of course, such aggressive enforcement activities risk sweeping in both those who are legitimately passing on increased supply costs as well as those engaged in wrongful profiteering. To avoid additional problems, we recommend that anyone engaged in consumer sales or distribution be aware of the price gouging prohibitions in any jurisdiction in which they operation. Your Robins Kaplan professional can provide you with advice regarding what is required under those statutes and help guide you in connection with any governmental investigation. We can also assist you in evaluating your remedies and alternatives if you believe that you may be a victim of illegal price gouging.

Our team is ready to help you address these issues and any others you may have during this difficult time. Please reach out to your regular Robins Kaplan contact or email us here.