With the federal government’s increasing focus on enforcing price gouging compliance, attention has turned to the Defense Production Act (the “DPA”). Passed in 1950 in response to the Korean War, the DPA is modelled on the War Powers Acts of 1941 and 1942 and gives the President, among other things, sweeping power to control the domestic economy during times of crisis. Despite these origins, the DPA is routinely invoked in a variety of circumstances, including in response to natural disasters like Hurricane Katrina and now COVID-19 (the DPA as later amended in 1988 is also the basis for the president’s authority to block certain foreign investment into the U.S. on national security grounds through the Committee of Foreign Investment in the U.S. – or CFIUS).
Federal Enforcement
Federal Price Gouging Enforcement Update
While the majority of price gouging enforcement has occurred at the state level (see Proskauer on Price Gouging — A Coast-to-Coast Reference Guide), the federal government has also been active, and several federal price gouging bills have been introduced, though none have been signed into law. See, e.g., S. 3574 (empowers the FTC and Attorney General to enforce civil and criminal penalties for price gouging); H.R. 6472 (prohibits “unconscionably excessive” pricing “indicating the seller is using the circumstances related to” the emergency to increase prices); H.R. 6264 (creates a new criminal offense for price gouging during a state of emergency); H.R. 6450 (based on California law, limits raising price of consumer goods to no more than 10% after an emergency declaration).
Price Gouging Laws and the Dormant Commerce Clause?
During the pandemic, businesses are asking about their potential price gouging liability in states that they do not sell into directly but where their products might end up. At least one federal circuit court addressed this question in examining a Maryland price gouging law that covered pharmaceuticals (outside the emergency context), ultimately striking down the law as a violation of the dormant Commerce Clause in a split decision.
Clearance to Reduce Capacity May Not Be Clearance to Raise Prices: Can Business Review Letters Impact Price Gouging Compliance?
In response to the current pandemic, antitrust enforcers at the Department of Justice have been issuing business review letters at record pace. One of these business review letters addressed an inquiry from the pork industry about reducing supply based on the COVID pandemic disruption. This raises the question as to whether the DOJ letter about antitrust has any application to increases in price and price gouging statutes.
The House Targets Price Gouging, Again
Even though states are leading the way on price gouging enforcement, recent action in Congress may lead to overlapping federal government enforcement. Recent Congressional letters, statements, and proposed bills show a strong appetite for action on price gouging. House Democrats tried but failed to add price gouging language to the coronavirus relief package in March. Senators Klobuchar and Tillis have both introduced price gouging bills in the past month. This week, Representatives Schakowsky, Pallone, Cicilline, and Nadler introduced a standalone bill to create a federal price gouging regime for the current state of emergency.