While price gouging is often discussed in the context of existing products, new products and services may be covered as well. As a result, businesses looking to introduce new products during a price gouging emergency can seek guidance from the relevant price gouging laws before setting a price for their new good or service.

Since not all price gouging regulations cover the same products, a business that plans to bring a new product to market may first want to determine whether that product appears to be subject to their state’s price gouging laws. Many price gouging laws only cover essential goods, though definitions of “essential” vary. Since the range of goods and services covered varies widely, and any pricing constraints would only apply to products that are covered. Analyzing the relevant statutes will be instructive.

Some states have statutes that specifically address the pricing of new products. These statutes fall into several categories:

Considering the costs of production

Some statutes and regulations evaluate pricing for new products by considering the costs incurred in bringing them to market. California’s executive order addresses covered goods that were not offered for sale prior to this emergency, providing that such goods would be sold at an “unconscionably excessive price” if they were priced at more than fifty percent greater than either: (a) the amount an entity paid for them or (b) if the entity did not purchase the goods, then the total costs they bore in producing and selling them. EO N-44-20.

Comparing a new product to similar existing products

Other statutes evaluate pricing for new goods by using the prices of similar goods as a comparison. For example, under Maine’s statute, there is generally a “rebuttable presumption that a price is unconscionable” if it exceeds by more than 15% the price of similar goods offered prior to the state of emergency, plus the “increased cost” due to the market disruption. When considering whether the price of a new product is “unconscionable” for purposes of the statute, Maine considers the prices of “similar goods or services offered for sale by another person similarly situated prior to the abnormal market disruption” as a baseline, allowing for increased costs and the 15% margin above that. Me. Rev. Stat. Ann. Tit. 10, § 1105.

Comparing to other sellers

If the product is new to a seller, but not necessarily new to the market, then some states will consider the prices at which others sold that good. In North Carolina, for example, if the “seller did not sell … or offer to sell” the new good prior to this state of emergency, then “the price at which the goods or service was generally available in the trade area shall be used as a factor in determining if the seller is charging an unreasonably excessive price.” N.C. Gen. Stat. §75-38(a) (emphasis added). Other factors that will be considered include whether there are “additional costs imposed by the seller’s supplier or other costs of providing the good or service during the triggering event,” or whether “[t]he price charged by the seller is attributable to [market] fluctuations,” “or to reasonable expenses and charges for attendant business risk incurred in procuring or selling the goods or services,” all of which may support prices that are higher than the exact price for a similar product.

Statutes that address “similar” products

Even if a statute does not explicitly contemplate the issue of new products, statutory language referring to “similar goods and services” may provide guidance as to how these restrictions may apply to new products and services. For example, Massachusetts considers a price to be unconscionably high when there is a gross disparity between the price charged and “the price at which the same or similar product is readily obtainable from other businesses…” Addendum to Mass Req. tit. 940. § 3.18. Alabama’s statute treats a price markup that is greater than 25% of the price of a similar good as prima facie evidence of an unconscionable price. Ala. Code § 8-31-4. Many states’ price gouging laws include a “similar goods and services” reference, so it would benefit businesses within those states to consider the prices of existing products as potential benchmarks for pricing decisions.

Other considerations when setting prices

Businesses looking to bring new products to the market will likely find such new products treated similarly to other existing products. While not all states have definitive standards for reviewing the prices of new products, the exceptions built into many statutes, such as increased costs justifying high prices, will likely be applicable to new products as well. As previously discussed on this blog, to the extent that prices are increased to reflect cost increases and maintain (or even, in some cases, increase) profit margin, they likely fall within the majority of the allowable exceptions. Companies should nonetheless do their diligence to ensure they comply with the relevant price gouging laws given the wide range of methods that states use to evaluate the fairness of new product pricing.

*      *      *

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

*      *      *

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.