Understanding Price Gouging Laws During COVID-19

From the onset of the COVID-19 pandemic, consumers have faced increased prices for numerous goods such as water, masks, and cleaning supplies. A number of sellers have viewed the pandemic as an opportunity to raise prices as demand for these products has outpaced supply. Consumers have begun to file price gouging complaints—sometimes hundreds in a day—with their respective Attorneys General. Depending on the state statute, and the amount of the price increase, the seller’s actions may run afoul of these laws.

There is no federal law prohibiting price gouging, although U.S. Attorney General Barr has created a task force to investigate and prosecute hoarding and related price gouging in connection with the COVID-19 pandemic. But the prosecution of price gouging is largely left to the states. You can read more about that here.

More than 30 states have price gouging laws, and governors of certain other states, such as Maryland, have issued executive orders to prohibit this type of behavior. These laws are triggered by price increases following the respective governor’s declaration of a state of emergency or disaster. Generally, the statutes focus on price increases that are not purely or largely a product of increases in the seller’s costs that themselves may have resulted from the emergency. However, some factors vary from state to state, including:

• The definition of price gouging—certain states set a threshold measured by a percentage increase in comparison to pre-emergency pricing, e.g. anything more than 10 percent, while others simply describe the prohibited price increase, using terms like “gross disparity” or “unconscionable” price hikes.
• Scope of products—some states only cover goods that are “necessities,” others also apply to services that are “necessities,” while still others include all consumer products.
• Enforcement mechanisms—some laws can only be enforced by state government, usually through the respective Attorney General’s office, while others permit a private right of action, for example based on the state’s unfair trade practices act.
• Look-back period—some statutes set the benchmark price as the price “immediately” prior to the emergency declaration, others look to prices 30 or 60 days before that declaration.

Businesses can implement measures to minimize the risk of liability for price gouging by:

• Retaining records of pricing history and input costs;
• Tracking input cost increases, including shipping cost increases;
• Creating, updating, or otherwise maintaining a pricing history process; and
• Creating procedures to approve price increases.

Ballard Spahr attorneys have experience counseling companies regarding antitrust issues, including price-gouging laws and their relation to the COVID-19 pandemic. If you would like to discuss how to ensure that your pricing policy is consistent with laws prohibiting price gouging, or alternatively if you believe that your company has been the victim of price-gouging, please contact Ed Rogers or any member of Ballard Spahr’s Antitrust and Competition Group.

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