March.23.2020
State Attorneys General throughout the country enforce their states’ price gouging and consumer protection laws during a state or national emergency. Enforcement of these laws has been heightened during the COVID-19 pandemic due to numerous complaints against individuals and businesses charging noticeably higher prices for critical goods and services. This post discusses laws in three states: 1) California, which has a price gouging statute that applies during a state of emergency; 2) New York, whose Attorney General has authority to enforce that state’s price gouging law during “abnormal disruption of the market”; and 3) Washington, which like most states does not have a price gouging statute but does have a strong consumer protection act that prohibits “unfair and deceptive acts or practices” including “unconscionable” price increases.
California’s price gouging law provides that for 30 days after a state of emergency is declared, plus additional 30-day periods “as needed,” it is:
unlawful for a person, contractor, business, or other entity to sell or offer to sell any consumer food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels for a price of more than 10 percent greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency.
The law provides an exception if the person or business can prove the price increase was “directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services during the state of emergency.”
Violation of the law is a misdemeanor punishable by imprisonment in county jail up to one year or by a fine of not more than $10,000, or both. A violation also constitutes an “unlawful business practice and an act of unfair competition within” Section 17200 of the Business and Professional Code. The remedies and penalties for both statutes are cumulative.
Attorney General Xavier Becerra, like many other state AGs, has issued a press release and information warning against price gouging and providing information on how the public can submit complaints during the COVID-19 pandemic.
The Office of the Attorney General enforces New York's price gouging law which prohibits businesses from selling goods or services that are “vital to the health, safety or welfare of consumers” for an "unconscionably excessive price" during an “abnormal disruption of the market” caused by “extraordinary adverse circumstances.”
Under the law, whether a price is unconscionably excessive is a question of law for the court, based on two factors: whether “the amount of the excess in price is unconscionably extreme,” and/or there was an “exercise of unfair leverage or unconscionable means.” Like California’s statute, the New York law permits defendants to “rebut a prima facie case with evidence that additional costs not within the control of the defendant were imposed on the defendant for the goods or services.”
Attorney General Letitia James has announced that her office “is actively monitoring retailers for potential incidents of price gouging of necessary goods.”
In addition to the state’s price gouging law, the New York City Department of Consumer Affairs (DCA) has adopted a temporary emergency rule making it illegal to drastically increase prices of certain items in shortage such as face masks, cleaning products and tissues.
Like many states, Washington does not have a price gouging statute. However, the Washington Consumer Protection Act prohibits “unfair or deceptive acts or practices in the conduct of any trade or commerce.” The term “unfair or deceptive” is not defined in the Act, and is generally a question of law that appellate courts review de novo.
Although most cases brought by the Attorney General under the Consumer Protection Act focus on “deceptive” acts or practices, the Act’s prohibition of acts or practices that are “unfair” covers “unconscionable” contract terms including excessive prices during a declared emergency.
Washington Attorney General Bob Ferguson has announced that his office is investigating price gouging complaints and has a separate website page for alleged COVID-19 complaints. Many other state Attorneys General, in Pennsylvania, Michigan and elsewhere, have made similar announcements.
State Attorneys General throughout the country enforce similar price gouging or consumer protection statutes. These statutes, of course, vary state by state. Orrick’s State Attorney General practice works closely with state AG offices and can provide guidance to Orrick clients regarding these issues during the COVID-19 pandemic.