Emergency Management Act of 1976

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Companies that sell consumer products worldwide should note the growing convergence between Brazil and the United States for the use of anticompetitive practices laws to prosecute price gouging.  The Brazilian Competition Law (Law No. 12,529/2011) prohibits a non-exhaustive list of anticompetitive practices, including engaging in acts that “arbitrarily increase profits.”  Brazil’s antitrust authority, Conselho Administrativo de Defesa Econômica (“CADE”), however, has not traditionally investigated claims of price gouging as a standalone theory of harm, recognizing the difficulty of demonstrating that a price increase was “arbitrary” as opposed to a legitimate reaction to market developments.  Instead, CADE typically has enforced the prohibition against price gouging as part of broader proceedings involving other anticompetitive practices.

On November 12, 2020, D.C. Attorney General Karl Racine filed a lawsuit against Capitol Petroleum Group, LLC (“CPG”), a retailer and distributor of gasoline in the District. According to Attorney General Racine, CPG overcharged its customers for gasoline in violation of the Natural Disaster Consumer Protection Act (“NDCPA”). This is the latest example of aggressive attorneys general investigating price gouging allegations that go well beyond personal protective equipment and other staples.

Out-of-network providers appear to be inflating the price of COVID-19 diagnostic and antibody tests, according to a recent America’s Health Insurance Plans (AHIP) survey. The October 2020 survey reports that out-of-network providers, as a whole, were charging higher prices for nearly half of the COVID-19 diagnostic tests and a third of antibody and antigen tests—a 10% increase since July. As the AHIP reports, nearly half of all out-of-network diagnostic testing exceeded $185, with between 9% and 16% of out-of-network test claims charging “more than $390 (three times the average cost).”) The amount of COVID-19 tests administered out of network has also increased since July, by 14%.

China has a very different approach to price gouging restrictions than the state level system in place in the United States. As the Chinese market is of particular importance to our readers and their businesses, operators may benefit from unpacking the anti-price gouging rules contained in national laws and the reinforcing measures against price gouging adopted by Chinese regulators since the outbreak of the COVID-19.

Although much of the coverage relating to price gouging enforcement has focused on bad actors hoarding pandemic-related goods, businesses that make good faith efforts to comply with the panoply of price gouging restrictions may nevertheless find themselves in the crosshairs. The relevant statutes typically impose a form of strict liability, and do not take motive into account as we have discussed. Even if we assume that states should be able to freeze prices out of their desire to protect their citizens, it is not clear that states should impose strict criminal liability for price gouging violations.

We continue to cover the patchwork of price gouging laws and enforcement actions brought under them, providing an overview of the current legal landscape. We are also following and will report on the application of price gouging restrictions outside the U.S. In this post, we provide an overview of price gouging restrictions applied by several jurisdictions that may be important to our readers.

As mentioned in our previous post, the legality of state Governors’ emergency powers have come under scrutiny during the pandemic. Michigan’s Supreme Court, for example, recently struck down Governor Gretchen Whitmer’s emergency powers. The Hawaii Circuit Court, however, recently dismissed a legal challenge to Hawaii Governor David Ige’s emergency powers. In response to the victory, Hawaii Attorney General Clare Connors stated “[t]his decision sends an important message at an important time—the Governor’s emergency proclamations are lawful. By continuing to follow these rules, all residents and visitors protect each other and promote public health during this pandemic crisis.”

If there is a silver lining to the extended application of most state price gouging laws, it is that we now know more about their ramifications. State attorneys general have launched numerous investigations and brought many lawsuits, and several class actions have been filed by consumers against companies for alleged price gouging up and down the supply chain. Insights can be gleaned from these price gouging-related suits to understand the “anatomy” of these suits, including what they allege, how to avoid them, and, when necessary, how to defend against them.