Price Gouging During a Pandemic: What’s in the law?

Price Gouging During a Pandemic: What’s in the law?

Both online and in stores, shoppers are finding that many needed items are in short supply. Initial surges in panic buying due to the COVID-19 pandemic left shelves bare in supermarkets and other shops across the country. Some shoppers have since been unable to stock up on basic necessities such as toilet paper, cleaning supplies, and many healthcare products. To make matters worse, some see the crisis as an opportunity to take advantage of and profit from shoppers’ fear and uncertainty. 

Unreasonable pricing is a practice that pre-dates the COVID-19 pandemic. Not unlike war profiteering, price gouging takes advantage of consumers in crisis by increasing prices on essential goods and services far beyond what is considered fair or appropriate. 

What is price gouging?

If you’ve tried to purchase cleaning products, over-the-counter cold medicines, or other household necessities during the COVID-19 pandemic, you may already be familiar with unfair pricing.  If you haven’t personally agonized over whether to pay $50 for hand sanitizer, you’ve likely seen news of price gougers hoarding medical supplies in hopes of turning a considerable profit.   

Predatory pricing is the practice of significantly raising the price of goods or services. It typically occurs when there is limited supply and increased demand due to an emergency. In the US,  price gouging laws vary by state but generally apply similar criteria: 

1. The laws apply only once a state of emergency or disaster has been declared. 
2. They apply only to specific categories of goods and services, typically those deemed necessary for survival.
3. They include a price ceiling for necessary goods. 

These laws ensure that designated state bodies can investigate and charge those who seek to exploit consumers during an emergency. 

In the aftermath of 2012’s Superstorm Sandy, for example, more than two million households in New Jersey were without power for several weeks. During the extended power outages that can occur in hurricane season, many families and businesses in the state rely on gas generators to power their homes and essential appliances. With more than 60% of the state’s gas stations unable to operate without electricity, some merchants saw an opportunity to raise gas prices as much as 30% in one day. This rate hike put them in direct violation with NJ’s anti-overcharging laws, which prohibit price increases of more than 10% in an emergency. 

What are the Arizona Laws?

Thirty-four states have laws against extortionate pricing. Unfortunately, Arizona is not one of them. Arizona Governor Doug Ducey signed an executive order in March that, he states, allows the Attorney General to prosecute those engaged in unfair pricing under the state’s Consumer Fraud Act.  However, an aide in the AG’s office has raised concerns that the existing consumer protection laws do not authorize enforcement of anti-profiteering protections.

Arizona law defines consumer fraud as “any deception, unfair act or practice, false statement, false pretense, false promise or misrepresentation made by a seller or advertiser of merchandise. In addition, concealment, suppression, or failure to disclose a material fact may be consumer fraud if it is done with the intent that others rely on such concealment, suppression, or nondisclosure.” 

Though profiteering is considered by many to be an “unfair act or practice,” the law does not explicitly address or forbid it. Moreover, the state Attorney General’s website states, “Arizona does not have laws prohibiting price gouging or charging high prices. Absent evidence of fraud, collusion, or other anti-competitive behavior, the Attorney General’s Office cannot take legal action against retailers who may legally charge what they think the market will bear.” 

What do other states do about excessive pricing?

Not only do consumer protections against unreasonable pricing vary from state to state, but even the definition of price gouging differs by jurisdiction. For example: 

In Utah, it is unlawful to charge excessive prices for consumer goods after a declared emergency. The law defines “excessive” as 10% higher than what was charged before the emergency, or 30% higher for products and services that were not being sold immediately before the crisis. Violators may be served a cease and desist and be required to pay penalties of up to $10,000 per day.  

Oklahoma prohibits, “selling, renting, or leasing goods, services, dwelling units, or storage space after the declaration of an emergency at a price of more than 10% above the rate charged before the declaration.” Those found to be in violation may be charged under the Oklahoma Consumer Protection Act and fined up to $10,000. Certain offenses may also be prosecuted as misdemeanors, punishable with fines up to $1000 and one year in jail, or as felonies with penalties of up to $5000 and up to ten years in prison. 

California Penal Code prohibits raising the sale of many consumer goods more than 10% after a declaration of emergency. It also restricts increasing prices more than 10% for other necessities, such as lodging (including motels, hotels, mobile homes, and rental properties), gasoline, transportation services, home heating oil, and many other goods and services.  

Some states without specific legislation to curb profiteering may still investigate it under existing consumer protection laws. Others, such as New Mexico, have released consumer advisory warnings [pdf] as a result of the COVID-19 pandemic. The advisory outlines New Mexico’s plans to prosecute anyone found to be illegally profiting from sales of medical supplies or other necessities. 

Exorbitant prices may regulate hoarding, but it hurts vulnerable populations

While many critics of anti-price gouging legislation are quick to point out that raising prices can reduce fear-based hoarding, this observation fails to acknowledge the harm done to vulnerable populations. 

Some economists believe that overpricing ensures that resources will go to those with the greatest need, as they’ll be willing to pay higher prices to obtain them. Others argue that sellers should always be permitted to charge whatever the market will bear, and anti-price gouging legislation disrupts the law of supply and demand. 

However, typical economic patterns don’t hold in an emergency, and many consumers will take on more than they can bear. Excessive pricing may make panic-buying and hoarding cost-prohibitive. Still, it disproportionately harms low-income earners and their families, who may no longer be able to afford essential goods and services as a result.  For these and other reasons, lawmakers who support anti-predatory pricing measures feel it is unethical to allow the exploitation of consumer desperation.  

Conclusion

Absent state legislation to introduce or clarify predatory pricing protections, Arizona consumers have little recourse under current state law. Consumers may lodge complaints online with the non-profit Better Business Bureau for suspected price gouging. You may also be able to directly report extortionate pricing by third-party sellers to online retailers such as Amazon and eBay.

Our team of dedicated trial attorneys at Antol & Sherman, PC, have more than 60 years of combined legal experience and a strong track record of providing successful legal counsel. We have been practicing criminal, family and divorce, drug and DUI, and accident law in Flagstaff, Arizona and surrounding northern Arizona cities including Camp Verde, Sedona, Williams, Holbrook, Winslow, Cottonwood, Mayer, Seligman, Kingman, Page, St. Johns and more for over 30 years. Antol & Sherman, PC, and their staff of lawyers would love to sit down and discuss your legal needs. Please call us at 928-241-6339, stop in today at Antol & Sherman, PC, 150 N Verde St Suite 102, Flagstaff, AZ 86001, or visit us at flagazlaw.com.