Businesses regularly engage in promotional pricing and discounts as a sales strategy to attract customers.  However, what happens if a business enacted a promotional price right before the pandemic struck and price gouging laws were triggered?  Are those businesses stuck with those promotional prices until states of emergency come to an end and price gouging laws are turned off?  Some state price gouging laws explicitly provide an exception for promotional or discount pricing.  And while other states are silent on the issue, that doesn’t mean businesses are without a defense.

Some state price gouging laws specifically address promotional pricing.  Mississippi’s price gouging law, for example, includes a provision providing that “[t]he prices ordinarily charged for comparable goods or services in the same market area do not include temporarily discounted goods or services.”  Miss. Code Ann. § 75-24-25.  Rhode Island’s price gouging law similarly addresses promotional pricing, “the average price calculation during said thirty-day (30) period shall not include discounted prices set and offered as a result of bona fide manufacturer’s or supplier’s limited discounts or rebates.”  R.I. Gen. Laws § 6-13-21(b)(1).  While Virginia’s price gouging law considers “the price charged by the supplier for the same or similar goods or services during the 10 days immediately prior to the time of disaster, provided that, with respect to any supplier who was offering a good or service at a reduced price immediately prior to the time of disaster, the price at which the supplier usually offers the good or service shall be used as the benchmark for these purposes.”  Va. Code Ann. §59-1-527, (emphasis added).

In states that do not specifically address promotional pricing, businesses may nonetheless have available defenses.  Some states prohibit price increases that are excessive or unconscionable based on the price charged the day before the emergency was declared.  Under these standards, to the extent a pre-emergency price was a promotional or temporary price, it may not trigger the price increase prohibitions.  If a business was running a promotional price for instance the day before the emergency of $20 – a 20% discount from its typical and customary price of $25 – documentation showing this may help justify the reasons for what might appear to be a 20% increase following the declaration of emergency.

Some states also provide that the baseline price is not based on the day before the emergency, but rather an average over a certain period of time.  Pennsylvania, for example, considers the “average price . . . during the last seven days immediately prior to the declared state of emergency.”  Penn P.L. 1201, No. 133 §4(b).  Other states provide a more generous time period for calculating average prices such as Alabama (30 days) or Washington, D.C. (90 days).  For short-term promotional discounts in place immediately preceding a state of emergency, states that consider longer periods of time in calculating average baseline prices may be more favorable.

As price gouging laws continue to remain in effect under states of emergency, additional guidance on how promotional pricing and temporary discounts factor into the analysis may arise.  In the meantime, businesses should maintain well documented evidence of any promotional pricing or other discount prices in effect pre- and post-emergency declarations.

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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.

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Photo of Kelly Landers Hawthorne Kelly Landers Hawthorne

Kelly Landers Hawthorne is an associate in the Litigation Department and a member of the Antitrust and Product Liability groups. She represents clients in litigations and due diligence across a range of industries, including consumer products, life sciences, healthcare, education, hospitality, sports and…

Kelly Landers Hawthorne is an associate in the Litigation Department and a member of the Antitrust and Product Liability groups. She represents clients in litigations and due diligence across a range of industries, including consumer products, life sciences, healthcare, education, hospitality, sports and entertainment.

Kelly also maintains a diverse pro bono practice. She received Proskauer’s Golden Gavel Award for excellence in pro bono work in 2019.

She is a frequent contributor to Proskauer’s Minding Your Business blog, where she authors articles related to price gouging issues.

Kelly is also a member of the Proskauer Women’s Alliance Steering Committee, where she serves on subcommittees focused on highlighting and providing professional development opportunities for women at the firm.

Prior to her legal career, Kelly was a Teach For America corps member and taught middle school in Washington, DC.

While at Columbia Law School, Kelly served as an articles editor of the Columbia Journal of Law & the Arts and interned for the Honorable Sandra Townes of the U.S. District Court for the Eastern District of New York.

Photo of John R. Ingrassia John R. Ingrassia

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating…

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating to competition and antitrust, CFIUS or foreign investment issues.

For more than 25 years, John has counselled businesses facing the most challenging antitrust issues and helped them stay out of the crosshairs — whether its distribution, pricing, channel management, mergers, acquisitions, joint ventures, or price gouging compliance.

John’s practice focuses on the analysis and resolution of CFIUS and antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger CFIUS and HSR notification requirements. He advises clients on issues related to CFIUS national security reviews, and on CFIUS submissions when non-U.S. buyers seek to acquire U.S. businesses that have national security sensitivities.  He also regularly advises clients on international antitrust issues arising in proposed acquisitions and joint ventures, including reportability under the EC Merger Regulation and numerous other foreign merger control regimes.

His knowledge, reputation and extensive experience with the legal, practical, and technical requirements of merger clearance make him a recognized authority on Hart-Scott-Rodino antitrust merger review. John is regularly invited to participate in Federal Trade Commission and bar association meetings and takes on the issues of the day.

Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s Antitrust Group and co-head of the Washington DC office. He represents clients in complex antitrust and consumer protection litigation, defends mergers and acquisitions before the U.S. antitrust agencies, represents companies involved in government investigations, and counsels…

Chris Ondeck is co-chair of the Firm’s Antitrust Group and co-head of the Washington DC office. He represents clients in complex antitrust and consumer protection litigation, defends mergers and acquisitions before the U.S. antitrust agencies, represents companies involved in government investigations, and counsels on antitrust compliance. Chris is also the founder and leader of the firm’s Price Gouging Practice, and is one of the key thought leaders in this space.

Chris handles antitrust matters for clients in a number of industries, including food and agriculture, financial services, media, telecom, technology, e-commerce, consumer products, natural resources, oil and gas, chemicals, and pharmaceuticals.  He also serves as outside counsel to a large number of industry groups, including trade associations and cooperatives.

Chris has been recognized as a leading antitrust practitioner by Chambers, noting that clients describe him as “our primary thought partner – he’s very good at explaining the complex issues and making them easy to understand” and praising “his strong advocacy skills”; by The National Law Review as a “Go To Thought Leader 2020”; by Acritas as a “Star” in multiple years; by Benchmark Litigation as a National Litigation Star 2021; and by The Legal 500 United States for Antitrust: Civil Litigation/Class Actions.