While there is no federal law prohibiting price gouging, many states have laws deeming price gouging during a time of emergency to be a violation of unfair or deceptive trade practices. Most of these state laws provide for civil (monetary) penalties – Pennsylvania and New Jersey both utilize civil remedies for violations – although some states, like California, also enforce criminal penalties for price gouging. As explained below, in Pennsylvania, a twenty percent (20%) increase during an emergency generally is deemed unlawful, although some lesser price increases could be unlawful, depending on the circumstances. In New Jersey, a ten percent (10%) price increase during an emergency generally is deemed unlawful. Both Pennsylvania and New Jersey price gouging laws take effect where the government has declared states of emergency, which now has formally occurred in both states. Both states’ laws are explained below.
Pennsylvania’s law regulating price gouging during an emergency, 73 Pa.Stat. § 232.4, requires the following:
See 73 Pa.Stat. § 232.4(a)-(e). Any violation of Pennsylvania law regarding price gouging exposes the violator to a civil penalty up to $10,000 for each violation, as well as other relief, including injunctive relief, restitution, and costs. 73 P.S. § 232.5.
Notably, the PA AG’s Office has already seen a significant number of reports of price gouging related to the COVID-19 coronavirus pandemic as of the time of this publication: a total of 373 reports have been made, resulting in the PA AG’s Office issuing 24 cease and desist letters to date.
NJ’s Consumer Fraud Act, N.J.S.A. 56:8-107 et seq., makes it unlawful to sell merchandise at an “excessive price” during an emergency as follows:
The NJ Attorney General has indicated that claims of price gouging will be thoroughly investigated, with significant resources being assigned to guard against consumer abuse. Approximately 270 reports of price gouging have been reported to the NJ AG as of the time of this publication.
Businesses Should Protect Themselves In The Event Of Legitimate Price Increases
PA and NJ businesses that plan to implement legitimate price increases should consider the impact to reputation and customer goodwill in doing so during the COVID-19 coronavirus pandemic.
Being accused of price gouging by state authorities during or after the COVID-19 pandemic could bring long-term brand and reputational damage – whether warranted or not – along with serious financial consequences in the event of a state investigation and/or enforcement action. Being aware of state laws regarding price gouging is important – and following such laws is paramount. If your business plans to increase prices, your business should follow the following guidance:
These are unprecedented and scary times for everyone – businesses and business owners included. Businesses must do what they can to continue to operate and earn profit – but they must be careful to do so without inviting price gouging scrutiny and related reputational harm, along with potential investigative and/or enforcement action by state authorities. In the event that your business has questions or concerns regarding compliance with PA or NJ laws pertaining to price gouging, please contact the author for guidance and compliance-related legal advice.
The Coronavirus Task Force at Klehr Harrison stands ready to assist you in your business and legal needs. We will continue to provide additional information and guidance as the COVID-19 situation develops.