Price gouging enforcement can apply to businesses at all levels of the supply chain, from manufacturers and producers, to wholesalers and even service providers. Without a federal price gouging statute, individual states have established their own price limits and enforcement policies, and they vary greatly. This can require companies to be well versed in statutes across all states in which they are active. Proskauer’s Antitrust Group has created an overview of individual state rules in our Proskauer on Price Gouging: A Coast-to-Coast Reference Guide. To help spot price gouging issues before they arise, below are Dos and Don’ts for use by businesses that operate on a multistate basis.

Dos:

  1. Identify all the states that may be covered by price gouging laws in which you sell products or services, and whether those laws are activated.
  2. Determine whether your goods and services are covered. Most price gouging statutes apply to essentials such as food, fuel, batteries, and medicine, but many also include critical services.
  3. Know the range of permitted price increases so you can monitor price gouging risks. State price gouging rules can use either an objective or subjective standard for determining whether price gouging has occurred, and some states have exceptions where input costs also increased.
  4. Track your baseline reference price(s). Price gouging statutes typically compare price increases during an emergency to prices from a previous period. Tracking these baseline reference price(s) may help you track your compliance with price gouging statutes.
  5. Track your costs and prices in order to assist with demonstrating that they fall within relevant exceptions to the price gouging statutes if the question ever arises.
  6. Document the reasons for price increases, and encourage employees to assess price gouging restrictions when sourcing inputs.

Don’ts:

  1. Don’t assume that price increases are not subject to price gouging statutes.
  2. Don’t assume that a bad motive is required to run afoul of the price gouging statutes. Most statutes do not require an unlawful motive; instead, they are triggered by certain price increases that exceed the baseline reference price from before the emergency.
  3. Don’t let index-based pricing run un-checked. Even states with exceptions for increased costs do not specifically permit exceptions for index-based pricing.
  4. Don’t let algorithms run amok. Many states permit price increases only where attributable to increased costs. Sellers may consider suspending or monitoring pricing algorithms for covered goods during the current state of emergency.
  5. Don’t hand control of pricing to agents or other downstream entities. State price gouging statutes can target sales regardless of whether they are made by the company or its agents, so companies may want to train sales forces and agents on compliance with price gouging rules.
  6. Don’t ignore early warning signs. Cases against supply chain companies often start with retailers pointing to upstream costs.  Monitor early warning signs, such as consumer complaints, statements from state and local enforcers, newspaper articles, and other commentary about price gouging.

Price gouging compliance is not intuitive. Careful consideration and efforts are necessary to ensure large or small businesses are in compliance nationwide. Failure to do so can expose a company to unnecessary risk of monetary penalties and other enforcement measures.

Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents 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…

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents 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, consumer products, defense, franchise, medical devices, metals, mining, natural resources, oil and gas, packaging, pharmaceuticals, software and telecommunications. He also has developed substantial experience advising clients regarding the application of the antitrust laws to the pharmaceutical industry, the agriculture industry, trade associations and the energy industry.

Photo of John R. Ingrassia John R. Ingrassia

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years has counselled businesses facing the most challenging antitrust issues and…

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years has counselled businesses facing the most challenging antitrust issues and helped them stay out of the crosshairs — whether its distribution, pricing, channel management, mergers, acquisitions or joint ventures.

John is a senior counsel at the Firm, advising on the full range of antitrust matters in diverse industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services and health care, among others.  His practice focuses on the analysis and resolution of antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger notification requirements. John has extensive experience with the legal, practical, and technical requirements of merger clearance and is regularly invited to participate in Federal Trade Commission and bar association meetings regarding Hart-Scott-Rodino practice issues.

Photo of Nicollette R. Moser Nicollette R. Moser

Nicollette Moser is an associate in the Litigation Department and a member of the Antitrust Group.

Photo of Jennifer Tarr Jennifer Tarr

Jennifer E. Tarr is an associate in the Litigation Department.