As part of the federal government’s efforts to combat the COVID-19 pandemic, President Biden plans to “fully use” the Defense Production Act (the “DPA”) to compel production of medical and protective equipment, and ensure adequate supplies and distribution of vaccines. On January 21, 2021, the White House released its National Strategy for the COVID-19 Response and Pandemic Preparedness, in which it stated that “the federal government will use its full powers to prevent hoarding and price gouging, including by reviewing and expanding the designated scarce materials under the DPA.” In doing so, the new administration re-committed the federal government to using the DPA to combat price gouging, a practice started by President Trump in March 2020.

As previously covered, the DPA grants the President the power to command private industry in the name of national defense, by doing such things as compelling private companies to accept and prioritize contracts, or diverting production or materials to specified buyers. The DPA also criminalizes accumulating goods deemed “scarce” either (1) in excess of the reasonable demands of business, personal, or home consumption, or (2) for the purposes of resale in excess of prevailing market prices. The DPA is different from state price gouging laws in that it adds a requirement of “accumulation” in addition to sale at an inflated price. It remains unclear what a court would consider the reasonable demands of business or personal consumption, or what method it would use to calculate what exactly constitutes charging a price “in excess of prevailing market prices.”

Some have raised questions about the general efficacy of the Trump administration’s invocation of the DPA, including a July 28, 2020 report by the Congressional Research Service stating that the administration’s implementation of the Act was “sporadic and relatively narrow” and that it was “unclear which executive agency leads overall efforts under DPA authority, in response to the pandemic.” To the extent federal criminal charges were brought under the DPA, it was for clear acts of price gouging (including one seller charging mark-ups of up to 1,328%) that failed to shed light on the more nuanced questions surrounding the act.

Accordingly, the Biden administration will be painting on a relatively clean canvas under the DPA as it relates to price gouging enforcement. And while it is likely that the majority of the Biden administration’s efforts under the DPA will be focused on the act’s main purpose – directing the production and distribution of necessary goods, businesses can expect an expanded list of materials deemed scarce pursuant to the Act, as well as a renewed interest and focus by federal investigators. Accordingly, companies should continue to monitor the Biden administration’s use of the DPA to combat price gouging, and should continue to closely monitor their own compliance efforts.

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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

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.