As companies continue to examine their pricing in light of the ongoing COVID-19 pandemic, state attorneys general and private plaintiffs continue to bring suits under state price gouging laws. The complaints include requests for a range of remedies, including injunctions, disgorgement, restitution, fines, or other financial penalties. With the majority of price gouging laws having now been in effect for almost a year, we have seen businesses and state attorneys general enter into a variety of settlements. These settlements are a useful tool for businesses looking to gauge their risk as it relates to price gouging enforcement and compliance.

In the main, we are seeing three types of financial damages being claimed with respect to alleged violations of state price gouging laws: restitution, penalties per transaction, and other financial penalties such as costs or treble damages.

Restitution: Under many price gouging statutes, companies may be required to refund customers for the amount charged in excess of the permissible amount allowed under the statute.

Penalties per Transaction: In many states, civil penalties are imposed on a “per violation” basis.  In these cases, every sale could count as a separate violation subject to penalty. Penalties range from a minimum of $1,000 to $40,000 maximum. For example, North Carolina, South Carolina, and West Virginia provide for up to $5,000 per violation with no upper limit on the total exposure.  Other states provide for a daily cap on penalties, such as Alabama with up $1,000 per violation with a daily maximum of $25,000.

Other Financial Penalties: In addition to restitution or penalties, other financial penalties could include fees and costs associated with the investigation, or treble damages.

Since the uptick in price gouging enforcement actions, several cases have concluded with settlement agreements. These settlements illustrate the variety of damages and financial liabilities companies face in price gouging suits. For example, the North Carolina Attorney General recently settled a case against a PPE seller for allegedly marking up prices by over 100%. While not admitting wrong-doing, the company agreed to a $150,000 settlement including costs.

  • Similarly, a Colorado company agreed to pay $70,000 in restitution and fees to settle a suit alleging price gouging in the sale of face masks. The Colorado Attorney General’s complaint alleged that the company increased prices, in some cases in excess of 250% of the cost to acquire the PPE.
  • The Idaho Attorney General agreed to a sales credit system to recover restitution from three gas retailers who were accused of violating the state’s price gouging statute. According to the settlement agreement, the companies will provide $1.5 million in restitution through sales credits to consumers over the next year. The companies did not admit to any wrongdoing.
  • In Vermont, a surgical mask seller settled a suit brought by the state Attorney General alleging the company had engaged in price gouging with respect to sales to a medical center. The terms of the settlement agreement require the company to supply 80,000 units of PPE to the medical center and an additional 10,000 units of PPE to the state as restitution.

Enforcement actions and private lawsuits pending in state and federal courts around the country include claims for damages such as restitution, and attorneys’ fees. For example, in a class action lawsuit filed against a gourmet grocer in California, the plaintiffs seek actual damages, restitution, and attorneys’ fees. The suit alleges that “Defendants willfully increased their prices [of food items and other consumer goods] beyond permissible limits after the March 4, 2020 declaration of a state of emergency in California in violation of Penal Code § 396, Executive Order N-44-20, and Executive Order N-78-20.”

In November, the DC Attorney General brought a suit against a local gas retailer for alleged price gouging beginning in March.  Fines for violating D.C.’s price gouging laws are up to $5,000 per violation. The Attorney General’s complaint seeks an injunction, damages and restitution, civil penalties, and attorneys’ fees.

Price gouging suits can be triggered by even a small price increase, bringing the risk of significant financial penalties. However, numerous  justifications and exceptions may permit companies to increase prices in some cases. As an essential part of managing risk, companies should examine their compliance practices and prepare their own internal documentation of costs and justifications.

 

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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 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.

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 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.