Coronavirus Enforcement Alert:
Price Gouging and Hoarding
We all have seen the headlines: $11 masks; $100 hand sanitizers; $500 thermometers. But in an “emergency,” it is illegal to take advantage with “excessive” or “exorbitant” prices. One legal fall-out of the coronavirus crisis will be a wave of government investigations and prosecutions for “price gouging” and “hoarding.”
On the federal level, both the President and the Attorney General have called on law enforcement to police anyone “exploiting” the pandemic for personal economic gain. First, on March 23, President Trump issued an Executive Order prohibiting the hoarding of scarce healthcare and medical supplies. His order would make it a crime for designated items to be accumulated in excess or sold above prevailing market prices. The next day, Attorney General Barr created a task force to address market manipulation, hoarding and price gouging. Most recently, on April 8, four House Democrats proposed the “COVID-19 Price Gouging Prevention Act,” a law that would prohibit the sale of goods and services during the current public health emergency at “grossly” higher levels than before the pandemic.
In addition, 35 states have statutes criminalizing price gouging during declared disasters. More states are passing laws during the current epidemic. In Texas, even before COVID-19, section 17.4625 of the “Business & Commerce Code” prohibited:
- (A) selling or leasing fuel, food, medicine, lodging, building materials, construction tools, or another necessity at an exorbitant or excessive price; or
- (B) demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine, lodging, building materials, construction tools, or another necessity.
The statute applies during a state or federally declared disaster and for the 30 days after the declaration ends. Texas’s governor declared a disaster on March 13, and President Trump declared one on March 25. The law provides stiff civil penalties and remedies, not criminal ones, although failure to comply with an investigation can result in jail time. The Texas AG filed his first civil suit on March 26 in Houston against “Auctions Unlimited,” for offering masks and other equipment at prices “greatly exceeding the normal and reasonable price.” Even online retailers like e-bay or companies that provide an auction-like marketplace must be diligent about the prices charged on their sites.
People selling in this market should know that federal and local prosecutors are devoting significant resources to pursuing cases of coronavirus “fraud.” Those prosecutors will review with hindsight whether prices were exorbitant or excessive. Among other factors, enforcers will be able to see pre- and post-pandemic prices, pre- and post-pandemic margins or profits, and what justifications were made at the time for both.