LawFlash

Price Gouging in the Time of COVID-19

Retail Did You Know?

March 23, 2020

Dear Retail Clients and Friends,

This edition of Morgan Lewis Retail Did You Know? examines the impact of anti–price-gouging efforts by government enforcement officials in the time of the coronavirus (COVID-19) pandemic. Anyone in the supply chain for food, emergency and medical supplies, or consumer goods, whether marketed and sold online or through brick-and-mortar storefronts, ought to monitor and ensure compliance with the relevant laws, many of which may shift during this tenuous time.

Background

Although there is no national price-gouging law, the majority of states have price-gouging laws. States that do not may pursue price-gouging investigations pursuant to consumer protection laws.

While they vary by state, generally, price-gouging statutes (1) are triggered by an emergency declaration or disruption, (2) apply to goods or services that are considered (or perceived to be) necessary to health and welfare, and (3) analyze whether those products are excessively or unconscionably priced.

These statutes are backward looking, comparing the current price of a product to the product’s price before the emergency or disruption. Some statutes have exceptions, such as a justification for a price increase when there is a corresponding increase in the cost of labor and materials or the cost of doing business.

US Attorney General William Barr has issued a directive to all US Attorneys, requiring them to establish COVID-19 fraud issues as a priority and to take proactive measures. Already, many attorneys general have established hotlines or online portals for consumer complaints. Any complaint or enforcement action may be made public.

Practical Implications

Given the intense scrutiny on the pricing of food, emergency or medical supplies, and consumer goods during the COVID-19 pandemic, businesses selling these items should do at least the following:

  • Maintain precise historical pricing data
  • Document justifications for any price changes, as well as who approved them and why
  • Catalogue any increase in the cost of labor, materials, etc.
  • Implement a process for pricing approvals
  • Ensure appropriate staffing to oversee and manage demand
  • Continuously evaluate and alter electronic algorithms, including by human review
  • Analyze shipping and other handling costs for third parties to confirm they are not a surreptitious means to increase prices
  • Carefully investigate new products or third-party partners that may be ripe for abusive pricing before engaging or selling through your platform or related channels
  • Develop, train on, and execute a comprehensive compliance plan to address any deviations in real time by employees or third-party partners, including for any bidding processes
  • Monitor ongoing enforcement activity and guidance from government enforcement agencies

How We Can Help

Our combined retail, white collar, and government investigations teams can work with you to become compliant with all relevant laws and regulations to prevent issues from occurring, and also to address issues immediately as they arise. We have experience representing clients across industry sectors in government investigations and litigation, involving individual attorneys general and multistate task forces in all jurisdictions.

We routinely negotiate and deal with both front-line career prosecutors and senior policy officials, as well as attorneys general themselves. We participate in all of the major state attorney general organizations, including the National Association of Attorneys General, the Conference of Western Attorneys General, the Republican Attorneys General Association, and the Democratic Attorneys General Association, and routinely interface with those organizations’ staff.

Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.

Contacts

If you have any questions or would like more information on the issues discussed in this Retail Did You Know?, please reach out to your Morgan Lewis contact, the article authors, or any of our retail team leaders:

Retail Team Leaders

Gregory T. Parks (Philadelphia)
Anne Marie Estevez (Miami)
Christina E. Melendi (New York)

Philadelphia
Rebecca Hillyer
Emily Kimmelman
Eric Sitarchuk
Kenneth Polite

Washington, DC
Nicholas Gess
Matthew Miner
Amanda Robinson

New York City
Kelly Moore
Daniel Tehrani
Martha Stolley