As the COVID-19 pandemic continues and the triggering states of emergencies are largely extended, companies are increasingly focused on compliance with state price gouging statutes. State attorneys generals have launched investigations and brought lawsuits, and several class actions have been filed by consumers against companies for alleged price gouging, up and down the supply chain. The relief sought in these actions highlights the risk that violators of price gouging statutes could find themselves facing hefty damages claims—perhaps to a greater extent than immediately obvious.

Depending on the state, damages could arise from enforcement actions by the state attorney general or by private rights of action; some states provide for damages under both enforcement mechanisms.

The categories of damages permitted vary widely. As an example of the range of relief sought in a single action, the New York Attorney General recently filed suit against a wholesale grocery distributor based on increased wholesale prices for the sale of Lysol disinfectant products to New York grocery and discount stores, and her complaint seeks a permanent injunction, an accounting, disgorgement of profits and restitution to consumers, as well as a civil penalty and costs.

Restitution: Many price gouging statutes include restitution as a penalty, with the expectation that companies refund customers any amounts those customers paid in excess of the permissible prices. But even if companies faced with price gouging lawsuits or investigations provide that restitution to customers, they can nevertheless face additional—and potentially quite onerous—financial penalties.

Penalties per transaction: Dozens of states allow for civil penalties to be imposed on a “per violation” basis, meaning that each and every sale could be tallied for purposes of determining damages. Some states impose a daily cap on potential liability, such as Utah, which allows for up to $1,000 per violation, with a maximum of $10,000 per day, and Alabama and Rhode Island, which allow for up to $1,000 per violation, with a maximum of $25,000 per day. Rather than capping penalties on a daily basis, Vermont’s attorney general can seek up to $10,000 per violation, up to a maximum of $1,000,000 for a company.

Other states provide no caps for civil penalties, including:

  • Indiana and Tennessee (up to $1,000 per violation)
  • North Carolina, South Carolina and West Virginia (up to $5,000 per violation)
  • Washington (up to $2,000 per violation)
  • California and Virginia (up to $2,500 per violation)
  • Delaware, Maryland, Pennsylvania, and Texas (up to $10,000 per violation)
  • Colorado (up to $20,000 per violation)
  • Alaska, Michigan, and Oregon (up to $25,000 per violation)
  • Iowa (up to $40,000 per violation)

Other financial penalties: A variety of other forms of financial penalties may be available in addition to those “per violation” penalties. Some statutes allow for fees and costs incurred in investigating the price gouging at issue to be shifted, such as Delaware and Pennsylvania. Others allow for the appointment of a receiver (Georgia, Illinois, Montana), revocation of business licenses (Kansas, Mississippi, South Carolina), or corporate dissolution (Rhode Island, Illinois, Massachusetts) to be ordered if non-compliance is determined. Delaware even permits treble damages.

Other relief: In some extreme cases, depending on the circumstances, violators could be jailed for up to thirty days (South Carolina), or even for up to one year (California, Connecticut, or West Virginia), five years (Mississippi), or ten years (Oklahoma).

Some states also have special protections in place if the customers affected include senior citizens. In New Jersey, the statute provides for up to twice the amount of normal restitution to be repaid to senior citizens. In Illinois, the attorney general may seek a civil penalty of up to $50,000 per violation if there was intent to defraud, but if the violation was committed against a person 65 years or older, that ceiling on civil penalties is raised and up to an additional $10,000 per violation may be imposed.

While even a small price increase could result in such penalties, there are many justifications and exceptions that permit some price increases. To avoid these risks, companies will benefit from reliance on their compliance practices and their own internal documentation of costs and justifications. This post does not cover all the damages that may be sought, nor does it address every state whose statutes may be implicated if a price increase does not fall within those exceptions. Rather, it illustrates the most common forms of damages available to enforcers and private plaintiffs, which should counsel caution in pricing movements for the duration of the emergency.

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Visit Proskauer on Price Gouging for antitrust insights on COVID-19.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

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 Kelly Landers Hawthorne Kelly Landers Hawthorne

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as…

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as a judicial intern for the Honorable Sandra Townes of the United States District Court for the Eastern District of New York.

Kelly is a Teach For America alumnus and taught middle school special education and math in Washington, D.C. prior to law school.

Photo of Nathaniel Miller Nathaniel Miller

Nat Miller is an associate in the Litigation Department.

Nat earned a J.D. degree from NYU School of Law, where he was a Managing Editor of the Journal of Law & Business, and a B.A. from Harvard University. While at NYU Law, he…

Nat Miller is an associate in the Litigation Department.

Nat earned a J.D. degree from NYU School of Law, where he was a Managing Editor of the Journal of Law & Business, and a B.A. from Harvard University. While at NYU Law, he worked as a research assistant for Professor Arthur R. Miller on his treatise, Federal Practice and Procedure. After law school, Nat served as a law clerk to the Honorable Claria Horn Boom of the Eastern and Western Districts of Kentucky.

Photo of Nicollette R. Moser Nicollette R. Moser

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

Nicollette represents clients on matters related to mergers and acquisitions, allegations related to unlawful conspiracy and anticompetitive agreements, price fixing claims and…

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

Nicollette represents clients on matters related to mergers and acquisitions, allegations related to unlawful conspiracy and anticompetitive agreements, price fixing claims and price gouging class actions. She also counsels clients on state Attorneys General and Department of Justice investigations regarding price gouging allegations.

Nicollette is a regular contributor to Proskauer’s commercial litigation blog, Minding Your Business.

Nicollette earned her J.D. from Georgetown University Law Center, where she was as an editor of the Georgetown Journal of Law & Public Policy. While at Georgetown, she served as an intern to the Hon. Craig Iscoe of the Superior Court of the District of Columbia. In addition, Nicollette was a law clerk with the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law.

Photo of Jennifer Tarr Jennifer Tarr

Jennifer E. Tarr is a senior associate in the Litigation Department, and a member of Proskauer’s Sports Law and Antitrust Groups. She regularly litigates on behalf of sports leagues and counsels clients active in the sports industry on a variety of matters, including…

Jennifer E. Tarr is a senior associate in the Litigation Department, and a member of Proskauer’s Sports Law and Antitrust Groups. She regularly litigates on behalf of sports leagues and counsels clients active in the sports industry on a variety of matters, including issues pertaining to antitrust, team relocation, league governance, contract disputes, sponsorship and fan-league relationships.

In addition to sports antitrust work, Jennifer also has experience counseling and defending clients on issues related to mergers and acquisitions, claims related to unlawful conspiracy and anticompetitive agreements, monopolization claims, and price fixing claims. Jennifer is also a member of the firm’s price gouging team.

In 2019, she was a panelist on the Environmental Law Institute’s Managing Private Sector Environmental Initiatives panel, where she spoke about the Antitrust Implications of Corporate Environmental Collaborations.

Jennifer maintains an active pro bono practice and is a member of the Firm’s Pro Bono Committee. She received Proskauer’s Golden Gavel Award for excellence in pro bono work in 2018 and 2019.

Prior to joining Proskauer, Jennifer clerked for the Honorable Lorna G. Schofield on the United States District Court for the Southern District of New York. She also was a Staff Attorney at the Environmental Law & Policy Center, where she represented clients as lead counsel in litigation before multiple federal district and appellate courts and in federal mediation.

While in law school, Jennifer was a member of the Harvard Legal Aid Bureau, one of three honors societies at the law school and the nation’s oldest student-run legal services center. In that capacity, she argued and won a case of first impression before the Massachusetts Supreme Judicial Court. She also argued over 20 motions in state trial court and successfully represented clients in federal mediation and before federal administrative tribunals.