As companies continue to examine their pricing in light of the ongoing COVID-19 pandemic, state attorneys general and private plaintiffs continue to bring suits under state price gouging laws. The complaints include requests for a range of remedies, including injunctions, disgorgement, restitution, fines, or other financial penalties. With the majority of price gouging laws having now been in effect for almost a year, we have seen businesses and state attorneys general enter into a variety of settlements. These settlements are a useful tool for businesses looking to gauge their risk as it relates to price gouging enforcement and compliance.

In the main, we are seeing three types of financial damages being claimed with respect to alleged violations of state price gouging laws: restitution, penalties per transaction, and other financial penalties such as costs or treble damages.

Restitution: Under many price gouging statutes, companies may be required to refund customers for the amount charged in excess of the permissible amount allowed under the statute.

Penalties per Transaction: In many states, civil penalties are imposed on a “per violation” basis.  In these cases, every sale could count as a separate violation subject to penalty. Penalties range from a minimum of $1,000 to $40,000 maximum. For example, North Carolina, South Carolina, and West Virginia provide for up to $5,000 per violation with no upper limit on the total exposure.  Other states provide for a daily cap on penalties, such as Alabama with up $1,000 per violation with a daily maximum of $25,000.

Other Financial Penalties: In addition to restitution or penalties, other financial penalties could include fees and costs associated with the investigation, or treble damages.

Since the uptick in price gouging enforcement actions, several cases have concluded with settlement agreements. These settlements illustrate the variety of damages and financial liabilities companies face in price gouging suits. For example, the North Carolina Attorney General recently settled a case against a PPE seller for allegedly marking up prices by over 100%. While not admitting wrong-doing, the company agreed to a $150,000 settlement including costs.

  • Similarly, a Colorado company agreed to pay $70,000 in restitution and fees to settle a suit alleging price gouging in the sale of face masks. The Colorado Attorney General’s complaint alleged that the company increased prices, in some cases in excess of 250% of the cost to acquire the PPE.
  • The Idaho Attorney General agreed to a sales credit system to recover restitution from three gas retailers who were accused of violating the state’s price gouging statute. According to the settlement agreement, the companies will provide $1.5 million in restitution through sales credits to consumers over the next year. The companies did not admit to any wrongdoing.
  • In Vermont, a surgical mask seller settled a suit brought by the state Attorney General alleging the company had engaged in price gouging with respect to sales to a medical center. The terms of the settlement agreement require the company to supply 80,000 units of PPE to the medical center and an additional 10,000 units of PPE to the state as restitution.

Enforcement actions and private lawsuits pending in state and federal courts around the country include claims for damages such as restitution, and attorneys’ fees. For example, in a class action lawsuit filed against a gourmet grocer in California, the plaintiffs seek actual damages, restitution, and attorneys’ fees. The suit alleges that “Defendants willfully increased their prices [of food items and other consumer goods] beyond permissible limits after the March 4, 2020 declaration of a state of emergency in California in violation of Penal Code § 396, Executive Order N-44-20, and Executive Order N-78-20.”

In November, the DC Attorney General brought a suit against a local gas retailer for alleged price gouging beginning in March.  Fines for violating D.C.’s price gouging laws are up to $5,000 per violation. The Attorney General’s complaint seeks an injunction, damages and restitution, civil penalties, and attorneys’ fees.

Price gouging suits can be triggered by even a small price increase, bringing the risk of significant financial penalties. However, numerous  justifications and exceptions may permit companies to increase prices in some cases. As an essential part of managing risk, companies should examine their compliance practices and prepare their own internal documentation of costs and justifications.

 

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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 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.