The COVID-19 epidemic has led to panic buying, including the alarming image of empty shelves at local grocery stores and supermarkets. There has been a surging demand, and a corresponding depressed supply, for certain products including hand sanitizers, face masks, and toilet paper. This in turn has led to sharp increases in prices. Against this backdrop, the U.S. Attorney General and Attorneys General of states including California, New York and Washington have announced their intent to take action against unfair price gouging. Businesses should accordingly be cautious of running afoul of state laws prohibiting “price gouging”—i.e., significantly increasing the price for certain goods and services during a state of emergency or disaster without justification.
The precise contours of price gouging laws vary state-by-state. Generally speaking, price gouging laws are triggered by a state of emergency (like that declared by President Trump and many Governors in response to pandemic-level incidences of COVID-19). These statutes typically prohibit selling goods like commodities, fuel, and food with “unconscionable” or “excessive” price increases. Often, there is a presumption that, in the face of a triggering event, a price increase of greater than 10% constitutes price gouging. While most historical examples of price gouging have involved natural disasters like hurricanes, earthquakes, and fires, the statutory prohibitions against price gouging may also apply to the current COVID-19 outbreak.
The following article seeks to address some of the common issues businesses are likely to face relating to price gouging as a result of the novel Coronavirus. Although these issues are likely to be fact- and state-specific, we focus primarily on the laws of New York and California as examples of the considerations raised by price gouging laws generally.
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