Coronavirus Emergency Declarations Trigger Anti-Pricing Gouging Laws
At the time of publication, at least twenty four states, plus Washington D.C. have declared states of emergency related to the novel coronavirus (“COVID-19”), with that number growing by the hour. In addition to making more resources available to residents, in many cases, the declarations also trigger additional protections to consumers in the form of anti-price gouging laws. These laws, which automatically go into effect, are intended to prevent merchants from significantly increasing the cost of consumer goods and services during a crisis.
For instance, in New Jersey a ten percent (10%) price increase during an emergency would be unlawful under most circumstances. In Pennsylvania, there is an assumption that a twenty percent (20%) increase is unlawful, but lower price increases could be deemed unlawful depending on the circumstances.
Even in states without anti-price gouging laws, the declaration of a state of emergency can result in emergency legislation. For example, Maryland does not currently have an anti-price gouging law in effect, but shortly after the Governor declared a state of emergency, both houses of the General Assembly introduced legislation aimed at limiting increases in consumer goods and services during the emergency to no more than ten percent (10%).
The particulars of the laws vary with each state. Some states set a percentage above which the merchant cannot increase the price. Others simply state the price increase cannot be “unconscionable.” Some laws apply to any party in the distribution chain, whereas others make allowances for increases if the party is simply passing along its own increased cost. As a result of the differences, ensuring compliance with these laws can be challenging for businesses that provide consumer goods and services in different states, as a one-size-fits all approach will likely not work. Violations can range from hundreds to tens of thousands of dollars in penalties, injunctions, lawsuits, criminal penalties and/or other measures.
Thus, in addition to balancing all of the other concerns created by the current crisis, employers will also have to be diligent about managing prices for products and services to ensure that they do not run afoul of the emergency anti-price gouging laws that are being triggered by the emergency declarations prompted by the threat of the coronavirus. This can be challenging where employers sell goods or services in multiple states.