The majority of price gouging laws have been activated throughout the country for over a year now, but reports of price gouging continue, along with enforcement and lawsuits. While many are aware that price gouging restrictions apply to essential goods such as medical and emergency supplies, some covered goods are often mistakenly thought not to be covered. As a result, companies should remain vigilant and familiarize themselves with the scope of covered products and services in the states in which they conduct business.
One year after declaring a state of emergency in California due to COVID-19, the California Governor issued a new Executive Order lifting pricing restrictions on most categories of products previously subject to California’s price gouging statute. Governor Gavin Newsom’s 2021 Order comes as states across the nation slowly reopen. This 2021 Executive Order marks a change for businesses in California.
While PPE, toilet paper, and groceries make price gouging headlines, consumer goods are not the only goods covered by price gouging laws in many states. Less publicized, but equally important, lodging or housing may be found on lists of products covered by many price gouging statutes.
A recent case in California offers a glimpse. In California, the statute prohibits selling, or offering for sale, a lengthy list of goods and services “for a price of more than 10% greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency.” Among other things, California’s price gouging statute covers “housing.”
As Texas and other southern states thaw from a frigid winter storm, companies doing business in these states should assess and take steps to minimize the risk of a price gouging claims. As suits are filed in the wake of the storms, companies should prepare now to defend such claims, whether from state attorneys general or from private plaintiffs. In road-mapping a defense strategy, the following information may be helpful.
Almost a year into the business disruptions caused by the pandemic, businesses continue to find ways to adapt and to comply with new pricing restrictions. Some of these changes relate to additional costs that businesses may need to pass along to consumers — at least in part. Given what we have seen in recent months, it is worth revisiting how businesses can implement these surcharges with an eye towards compliance with local price gouging laws.
In the wake of the deep freeze that recently swept the nation, natural gas has taken the forefront among a slew of price gouging allegations. Last week’s winter storms caused natural gas spot market prices to spike, with some reporting up to a 100% percent increase. Reports also surfaced of spot prices for wholesale electricity in Texas’ power grid increasing more than 10,000%. In response, Minnesota Senator Tina Smith (D-MN) has not only encouraged federal regulators to investigate the price spikes, but has also requested regulators to “[i]nvoke, as appropriate, any emergency authorities available, including under the Natural Gas Policy Act, to allocate natural gas supplies at fair prices.” Whether natural gas prices exceeded allowable limits under applicable price gouging statutes currently in effect depends, among other things, on whether natural gas is within the scope of these laws in the first place.
As part of the federal government’s efforts to combat the COVID-19 pandemic, President Biden plans to “fully use” the Defense Production Act (the “DPA”) to compel production of medical and protective equipment, and ensure adequate supplies and distribution of vaccines. On January 21, 2021, the White House released its National Strategy for the COVID-19 Response and Pandemic Preparedness, in which it stated that “the federal government will use its full powers to prevent hoarding and price gouging, including by reviewing and expanding the designated scarce materials under the DPA.” In doing so, the new administration re-committed the federal government to using the DPA to combat price gouging, a practice started by President Trump in March 2020.
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.