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Defendants on the losing side of a class certification order were recently provided with a roadmap of how to challenge a district court’s analysis on appeal.

On April 12, 2023, the United States Court of Appeals for the Seventh Circuit vacated and remanded a district court’s class certification order because it failed to “rigorously analyze” the prerequisites to certify a class under Federal Rule of Civil Procedure 23. The appellate court held that the district court abused its discretion by failing to “go beyond the pleadings” – in other words, the plaintiffs’ allegations – in its analysis. 

New York Attorney General Letitia James announced new price gouging rules intended to clarify New York’s price gouging law, N.Y. Gen. Bus. Law §396-r, earlier this month.  The proposed rules seek to address many of the perceived limitations of the statute exposed during the COVID-19 pandemic and subsequent economic turbulence triggered by supply chain bottlenecks and record inflation.  Public comments on the proposed rules are due May 1, 2023.

Antitrust claims in a class action case filed against Amazon in U.S. Federal District Court will largely proceed, after the Court allowed most of the consumers’ pricing claims to survive a motion for summary judgment.  The Court dismissed a Sherman Act claim, but allowed most other claims to proceed.  Of particular note, Amazon’s “most favored nation” (MFN) policy will continue to be under scrutiny, despite the fact that courts typically do not find MFNs to be anticompetitive.  It is widely recognized that MFNs, in fact, often serve procompetitive purposes.

On July 11, 2022, the United States District Court for the District of Kansas approved a $264 million settlement against Mylan and certain of its subsidiaries in the case In Re EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices, and Antitrust Litigation in a matter broadly tagged as price-gouging litigation. Plaintiffs filed class action lawsuits against Mylan, the owner of EpiPen, and Pfizer, Inc., a manufacturer and seller of EpiPen, alleging, “anticompetitive conduct including, among other things: engaging in a ‘hard switch’ and selling EpiPens only in packs of two; entering into discount agreements with schools that were conditioned on the schools not purchasing competing products; securing multiple overlapping patents on minor changes to the EpiPen and engaging in ‘sham’ patent litigation to forestall generic competition; and paying excessive rebates to commercial insurance companies, pharmaceutical benefits managers, and state-based Medicaid agencies conditioned on those companies and agencies not reimbursing the use of competing products.” The plaintiffs claimed that the defendants broke various state antitrust laws and the federal civil RICO statute. The suits, filed in the Northern District of Illinois, the District of Kansas, the District of New Jersey, and the Western District of Washington, were joined in August of 2017 in the District of Kansas.

Lawmakers in Washington, D.C., and California have taken recent steps to further protect the infant formula market from price gouging. On June 7, 2022, the D.C. Council passed the “Infant Formula Consumer Protection Emergency Act.” The Act, which will remain in effect for 90 days, targets companies selling baby formula at extremely high prices. The Act provides that companies may be subject to a $5,000 fine, for first-time offenses, or a $10,000 fine, for subsequent offenses, if they sell infant formula at a price greater than 20% of what they previously sold substantially similar formula in the District over the 90-day period prior to February 17, 2022. If the retailer never sold a substantially similar formula product in that 90-day period, they would face fines if they sell infant formula at a price greater than 20% of the average price of substantially similar infant formula product from substantially similar retailers.

On May 24, 2022, the FTC announced a widespread inquiry into the ongoing infant formula shortage. The agency had been tasked by the White House with investigating any price gouging or unfair market practices in the industry. The agency is seeking public comments on “various factors that may have contributed to the infant formula shortage…as well as its impact on families and retailers.”

Two federal price gouging bills were recently introduced in Congress. Senator Elizabeth Warren led the introduction of the Price Gouging Prevention Act of 2022. The bill prohibits “unconscionably excessive price[s]” at any point in a supply chain or distribution network during an “exceptional market shock” triggered by a range of events – including public health emergencies. The law would apply to any good or service offered in commerce, and would authorize the Federal Trade Commission and State Attorneys General to enforce the prohibition.  Additionally, during “exceptional market shocks,” the law would require public companies to disclose and explain changes in pricing and gross margins in quarterly SEC filings—raising the specter of SEC enforcement with respect to those disclosures.

With the Biden administration ramping up scrutiny on supply chains and pricing practices, businesses should take a moment to revisit their COVID-19 price gouging compliance.  As we’ve previously highlighted, risk management with ever-shifting price gouging restrictions requires careful consideration of documentation and oversight of pricing practices and decisions. For reputable companies up and down the national supply chain, compliance with the array of state price gouging laws requires more than intuition and a moral compass. Even with the best intentions, many businesses inadvertently run afoul of price gouging laws. Because price gouging statutes can cover more than obvious bad conduct and point-of-sale pricing to consumers, manufactures and suppliers should consider implementing procedures to assess whether they are required to comply with pricing restrictions, whether they are complying, and how to manage compliance. Below we outline some key considerations for businesses.