Although much of the coverage relating to price gouging enforcement has focused on bad actors hoarding pandemic-related goods, businesses that make good faith efforts to comply with the panoply of price gouging restrictions may nevertheless find themselves in the crosshairs. The relevant statutes typically impose a form of strict liability, and do not take motive into account as we have discussed. Even if we assume that states should be able to freeze prices out of their desire to protect their citizens, it is not clear that states should impose strict criminal liability for price gouging violations.

Criminal offenses tend to have two essential part: the actus reus, or prohibited act, and the mens rea, or required mental state. The Supreme Court has observed that this intent requirement reflects a sense of culpability:

The contention that an injury can amount to a crime only when inflicted by intention is no provincial or transient notion. It is as universal and persistent in mature systems of law as belief in freedom of the human will and a consequent ability and duty of the normal individual to choose between good and evil.

Though a mens rea requirement, our justice system attempts to differentiate between an actor who did not mean to commit a crime and an actor who intentionally or recklessly committed one.

There are some exceptions to this general rule, including for strict liability laws. Strict liability is a standard under which an actor who did not intend to commit a crime can nonetheless be held liable. A common example of a strict liability crime is a traffic offense, like speeding.

Some criminal price gouging laws impose this kind of strict liability. For example, only “knowing and willful” price gouging in Mississippi can lead to felony charges and up to 5 years imprisonment. However, other states, like California, have no such qualifying intent language, and nonetheless contemplate fines of up to $10,000 and/or imprisonment of up to one year. (Note: these maximums are per “violation.”)

The decision to treat price gouging as a strict liability offense is a judgment call; it reflects a weighing of the burdens on business activities and their possible damages. Courts are typically reluctant to hold industries strictly liable for possible harms caused by their activities, out of concern that this kind of liability would lead a disproportionate impairment of business. Other standards, like negligence, may allow more room for businesses to operate, while still allowing for injured parties to seek redress when appropriate.

The strict standards imposed in the majority of the price gouging laws presently in place are not likely to change midstream. But, should the federal government ultimately pass a price gouging law, and as local governments evaluate the impact of their laws and contemplate revisions, strong consideration must be given to the standards applicable to liability under these type of broad pricing restrictions.

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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.