Many are asking how long states of emergency can continue to be renewed, and whether such extended renewals are permissible or valid. Given the lack of comparable precedent, there is some uncertainty around the issue. Expectations are that while some courts are likely to defer to the use of extraordinary executive power, not all will and there may be strong arguments for a curtailing of things like pricing restrictions.

Several states have maintained price gouging restrictions in effect despite other COVID-19 related restrictions, such as physical distancing limitations on restaurants and other businesses, being lifted. It would not be unprecedented for states to keep such individual restrictions in effect for months to come.

Pennsylvania, for example, was already two years into an existing state of emergency before COVID-19 became a concern. Last month, Pennsylvania Governor Tom Wolf signed the twelfth consecutive renewal of the state’s January 2018 disaster declaration to help the state fight the opioid epidemic. The “disaster emergency” related to the opioid crisis also appears to have triggered price gouging prohibitions, as the language of the state price gouging act provides that “[d]uring and within 30 days of the termination of a state of disaster emergency declared by the Governor … it shall be a violation of this act for any party within the chain of distribution of consumer goods or services or both to sell or offer to sell the goods or services within the geographic region that is the subject of the declared emergency for an amount which represents an unconscionably excessive price.” Penn. P.L. 1210, No. 133 §4(a). Since the conditions necessitating the emergency declaration remain a threat, the state has repeatedly renewed the disaster declaration, and arguably extended the application of those price gouging laws.

We have discussed the effect of overlapping states of emergencies in the past, and some of the challenges and confusion they may pose for price gouging calculations. It remains to be seen how courts will parse the appropriate pricing baselines for products that may have been subject to ongoing price gouging controls before this past March.

Additionally, while challenges to the validity of long-term states of emergencies and price controls are likely, it is worth noting that their outcomes can be unpredictable. This fall, as discussed, the Michigan Supreme Court ruled that Governor Gretchen Whitmer had no authority to issue or renew executive orders relating to COVID-19 beyond April 30. And, just last week the U.S. Supreme Court enjoined New York Governor Andrew Cuomo from enforcing certain executive orders that imposed occupancy limits on religious services during the COVID-19 pandemic.

The Kentucky Supreme Court, however, recently upheld that state’s emergency orders. On March 6, 2020, Kentucky Governor Andy Beshear declared a state of emergency, which remains in effect. Three Kentucky businesses sued Governor Beshear in June, challenging the validity of the governor’s orders related to COVID-19. The court ultimately found that the orders “were, and continue to be, necessary to slow the spread of COVID-19 and protect the health and safety of all Kentucky citizens.” Addressing challenges to the kind of authority that the governor was exercising in issuing these orders, the court concluded that, “the Governor is largely exercising emergency executive power but to the extent legislative authority is involved it has been validly delegated by the General Assembly consistent with decades of Kentucky precedent, which we will not overturn.” While the order did not specifically address price gouging restrictions, those restrictions were activated by the Governor’s March 6, 2020 state of emergency declaration per Ky. Rev. Stat. §367.374(1)(b).

In short, it appears that there is a real possibility that price gouging restrictions will remain in place for as long as the condition underlying the state of emergency persists. In the face of this uncertainty, businesses that gain comfort navigating price gouging compliance now are likely to have surer footing with respect to enforcement actions and legal challenges in the future.

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Visit Proskauer on Price Gouging for antitrust insights on COVID-19.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.