January 19, 2022

Volume XII, Number 19

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January 18, 2022

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Idaho Says Pandemic Margin Boosts Are Lawful When Prices Fall

State legislatures are still continuing to enact new changes to their states’ price gouging statutes.  Some are expanding the scope of their laws, while others are tailoring the law or emergency orders in response to new issues that have arisen during the course of the COVID-19 pandemic.  Idaho took a third tack and limited limit overbroad enforcement so that its law applied only to price increase, and not to price decreases that are deemed to be insufficient.

In November 2020, the Idaho Attorney General entered into a headline-grabbing settlement agreement with three gasoline retailers following an investigation into alleged price gouging.  Attorney General Wasden alleged that the retailers sold gasoline at an “exorbitant or excessive price” in violation of Idaho’s price gouging statute.

The Attorney General’s investigation was unique because the restitution structure it created was based on the retailers’ margins.  While some jurisdictions, such as the District of Columbia, use margins as a factor in analysis, the Idaho statute is silent on this point.  It only referred to selling at “exorbitant or excessive prices.”

According to documents from the investigation, obtained by the Idaho Statesman, Attorney General Wasden focused primarily on the profit margin of the gas retailers.  In early 2020 as the country began responding to the pandemic, wholesale gas prices fell by approximately $1.00 between February and April.  The average retail gas prices in Idaho, however, remained relatively stable, falling only $0.50 from February to April 2020.  This served as the predicate for the Attorney General’s investigation focusing on the gas retailers’ increased profit margin, even while price was falling.  The retailers responded by pointing out that they lost 50% of their fuel sales during that period.  Without admitting wrongdoing, the retailers agreed to a consumer restitution structure under which the retailers earn credits for selling gas at lower profit margins.

The Idaho Legislature took issue with the settlement, and on March 17, 2021, Governor Brad Little signed SB 1041 into law, amending the state’s price gouging statute.  The legislation clarifies that only price increases are covered by the price gouging prohibition – not price decreases that are deemed insufficient.  Second, the amendments stipulate that for the analysis of whether the price increase is “exorbitant or excessive,” courts “shall not consider any increase in the margin earned.”  However, courts will continue to use other factors in the analysis: i) prices from before the emergency, ii) increased costs, iii) the duration of the emergency, and iv) a newly added provision for loss of sales or volume as a result of the emergency.  These amendments appear to respond directly to the concerns raised by the gas retailers – using profit margins as the benchmark and ignoring significant decreased sales.  The new law would prohibit investigations predicated solely on increased profit margins, like the 2020 retail gas sales investigation.

Idaho is not alone in updating its price gouging restrictions.  States, such as California, have amended their price gouging rules as they grapple with applying statutes and emergency orders to changing conditions.  We expect state enforcers to continue pursuing price gouging enforcement actions.  Businesses should therefore continue to evaluate the factors states use in evaluating price increases, and should adopt best practices for documenting the bases for any price increases.

© 2022 Proskauer Rose LLP. National Law Review, Volume XI, Number 84
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About this Author

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,...

202-416-5865
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,...

202.416.6869
Law Clerk

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

Education

  • New York University School of Law, J.D., 2017
  • Harvard University, B.A., 2014
212-969-354
Shannon D. McGowan Litigation Attorney Proskauer Rose Washington, DC
Associate

Shannon McGowan earned her J.D. from the University of Virginia School of Law, where she captained the school's Philip C. Jessup International Law Moot Court team.

Prior to law school, Shannon served as a legislative assistant to state representatives at the Oklahoma State House of Representatives.

202-416-6824
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