Since the beginning of the pandemic, many governors have issued executive orders targeted at combating price gouging. However, one California state senator, Senator Thomas Umberg, proposed going a step further. In April 2020, Senator Umberg introduced Senate Bill 1196, which would codify many of the provisions in California Governor Gavin Newsom’s Executive Order N-44-20. On September 30, 2020, Governor Newsom signed the bill into law. In connection with the signing, Senator Umberg stated that “[t]his decisive action ensures that fewer of our neighbors will be victims of price gouging.”

California Penal Code Section 396 prohibits price gouging during a declared state of emergency. Specifically, Section 396 states that “it is unlawful for a person, contractor, business, or other entity to sell or offer to sell . . . [a covered good] for a price of more than 10 percent greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency.” Section 396, however does not address situations where a seller did not sell a product prior to the declaration of emergency. Executive Order N-44-20 closes this loophole. The Executive Orders provides:

If a person or other entity (including, but not limited to, any business enterprise of any kind) did not offer an item for sale on February 4, 2020 … that person or entity shall not-from April 4, 2020 until September 4, 2020 … offer to sell that item for an unconscionably excessive price. [A] price is unconscionably excessive if that price is more than 50 percent greater than whichever of the following applies: a) The amount that the person or entity paid for the item; or b) If the person or entity did not purchase the item, the total cost, to the person or entity, of producing and selling the item.

On September 3, 2020, Governor Newsom extended Executive Order N-44-20 through March 4, 2021.

Similar to Executive Order N-44-20, Senate Bill 1196 amends Section 396 to address sellers that did not offer the product at issue prior to a declared state of emergency. The bill prohibits a seller that did not sell the product prior to the declared state of emergency from charging a price that is 50% greater than the seller’s existing costs. The bill also authorizes the Governor or Legislature to extend the duration of price gouging provisions for periods greater than 30 days. According to San Diego District Attorney Summer Stephan, “[t]his law will close a troubling loophole in California’s price gouging law, and ensure that all sellers — brick-and-mortar stores or online business, previous sellers or new market entrants — are prohibited from preying on our state’s consumers during a declared emergency like the COVID-19 pandemic.”

As the pandemic drags on, and many states continue to extend their pricing restrictions put in place earlier this year, other states may take similar actions to codify executive orders to strengthen existing (or non-existing) price gouging laws. For more information on state price gouging laws and executive orders, view our interactive price gouging map.

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

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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

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating…

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating to competition and antitrust, CFIUS or foreign investment issues.

For more than 25 years, John 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, joint ventures, or price gouging compliance.

John’s practice focuses on the analysis and resolution of CFIUS and antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger CFIUS and HSR notification requirements. He advises clients on issues related to CFIUS national security reviews, and on CFIUS submissions when non-U.S. buyers seek to acquire U.S. businesses that have national security sensitivities.  He also regularly advises clients on international antitrust issues arising in proposed acquisitions and joint ventures, including reportability under the EC Merger Regulation and numerous other foreign merger control regimes.

His knowledge, reputation and extensive experience with the legal, practical, and technical requirements of merger clearance make him a recognized authority on Hart-Scott-Rodino antitrust merger review. John is regularly invited to participate in Federal Trade Commission and bar association meetings and takes on the issues of the day.

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.