January 26, 2021

Volume XI, Number 26

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January 25, 2021

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California Strengthens Penal Code Section 396, Codifies Price Gouging Executive Order

Since the beginning of the pandemic, many governors have issued executive orders targeted at combating price gouging. However, one California state senator, Senator Thomas Umberg, proposed going a step further. In April 2020, Senator Umberg introduced Senate Bill 1196, which would codify many of the provisions in California Governor Gavin Newsom’s Executive Order N-44-20. On September 30, 2020, Governor Newsom signed the bill into law. In connection with the signing, Senator Umberg stated that “[t]his decisive action ensures that fewer of our neighbors will be victims of price gouging.”

California Penal Code Section 396 prohibits price gouging during a declared state of emergency. Specifically, Section 396 states that “it is unlawful for a person, contractor, business, or other entity to sell or offer to sell . . . [a covered good] 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.” Section 396, however does not address situations where a seller did not sell a product prior to the declaration of emergency. Executive Order N-44-20 closes this loophole. The Executive Orders provides:

If a person or other entity (including, but not limited to, any business enterprise of any kind) did not offer an item for sale on February 4, 2020 … that person or entity shall not-from April 4, 2020 until September 4, 2020 … offer to sell that item for an unconscionably excessive price. [A] price is unconscionably excessive if that price is more than 50 percent greater than whichever of the following applies: a) The amount that the person or entity paid for the item; or b) If the person or entity did not purchase the item, the total cost, to the person or entity, of producing and selling the item.

On September 3, 2020, Governor Newsom extended Executive Order N-44-20 through March 4, 2021.

Similar to Executive Order N-44-20, Senate Bill 1196 amends Section 396 to address sellers that did not offer the product at issue prior to a declared state of emergency. The bill prohibits a seller that did not sell the product prior to the declared state of emergency from charging a price that is 50% greater than the seller’s existing costs. The bill also authorizes the Governor or Legislature to extend the duration of price gouging provisions for periods greater than 30 days. According to San Diego District Attorney Summer Stephan, “[t]his law will close a troubling loophole in California’s price gouging law, and ensure that all sellers — brick-and-mortar stores or online business, previous sellers or new market entrants — are prohibited from preying on our state’s consumers during a declared emergency like the COVID-19 pandemic.”

As the pandemic drags on, and many states continue to extend their pricing restrictions put in place earlier this year, other states may take similar actions to codify executive orders to strengthen existing (or non-existing) price gouging laws. For more information on state price gouging laws and executive orders, view our interactive price gouging map.

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© 2020 Proskauer Rose LLP. National Law Review, Volume X, Number 282
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Christopher Ondeck Antitrust Litigator chair of  Proskauer Rose nationwide Antitrust Group
Partner

Chris Ondeck is a partner in the Litigation Department and vice-chair of the Antitrust Group. He focuses his practice on representing clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters for clients in a number of industries, including advertising, aerospace, alcoholic beverages, appliances, building materials, defense, medical devices, metals,...

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John Ingrassia, Antitrust Attorney, Telecommunications, Proskauer Law firm
Special Counsel

John Ingrassia is a special counsel and advises clients on a wide range of antitrust matters in various industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services, health care, and others. His practice includes a significant focus on the analysis of Hart-Scott-Rodino pre-merger notification requirements, the coordination and submission of Hart-Scott-Rodino filings, and the analysis and resolution of antitrust issues related to mergers, acquisitions, and joint ventures. John has extensive experience with the legal, practical,...

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Kelly Landers Hawthorne, Proskauer Law Firm, New York, Litigation Attorney
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Kelly Landers Hawthorne is an attorney in the Litigation Department.

Education

  • Columbia Law School, J.D., 2017

  • George Mason University, M.Ed., 2013

  • University of Richmond, B.A., 2011

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Nathaniel Miller is a Law Clerk in the litigation department. He works for the firm's New York offices. 

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  • New York University School of Law, J.D., 2017
  • Harvard University, B.A., 2014
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Nicollette R. Moser Litigation & Antitrust Proskauer Rose Washington, DC
Associate

Nicollette Moser is an associate in the Litigation Department and a member of the Antitrust Group.

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