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Price Gouging Spreading as far as the Coronavirus

Would you pay $70 for hand sanitizers? How about $125 per face mask? Although prices inevitably go up as demand rises, some growth may be artificial as panic sets in. States across the country have declared a state of national emergency and made price gouging illegal as a result.

Already several states have issued warnings for price gouging. The Michigan Attorney General issued a cease and desist letter to Menards Home Improvement Store over price gouging allegations. Tennessee has reprimanded two siblings for attempting to hoard and sell hand sanitizers for $70 on Amazon and eBay, which the online retailers have halted. Eight San Diego County residents were arrested and charged with price gouging after undercover sheriff agents were charged exorbitant prices for toilet paper and hand sanitizers.

coronavirusWhat is Price Gouging?

The exact legal definition of price gouging varies across states. For instance, in Michigan price gouging includes:

  • Charging the consumer a price that is grossly in excess of the price at which similar property or services are sold.
  • Causing coercion and duress as the result of the time and nature of a sales presentation.

The California Department of Justice defines price gouging as: sellers trying to take unfair advantage of consumers during an emergency or disaster by greatly increasing prices for essential consumer goods and services.

Although exact definitions may differ, most states agree that “doubling” prices during an emergency or disaster qualifies as price gouging. The emergency or disaster requirement is why Martin Shkreli was not prosecuted for price gouging even though he raised fees on critical AIDS drug up by 5770%.

Since the World Health Organization has declared the Coronavirus a global pandemic and the White House has declared a national emergency, there is no doubt that the “emergency” requirement behind price gouging is official.

Why is Price Gouging Illegal?

Price gouging encourages hoarding by creating an artificial decrease in supply. This is in turn makes it more difficult for medical personnel, law enforcement, and other essential personnel from obtaining them for public consumption. It is especially bad when dealing with a pandemic like the Coronavirus because the best means of overcoming it is ensuring that every person in the United States can be tested and treated. Preventative measures such as hand sanitizers and face masks are not sufficient if they are not available to everyone. Having such items gate kept by a few individuals looking to make a quick profit would only hinder medical and government efforts to stop the virus.

The real issue is how much price raising would be considered price gouging. It’s clear that a 50% markup would be too much. But what about 40%? 10%? .05%? What if the price of toilet paper slowly goes up by $15 over the course of months as the pandemic lingers?

Price gouging is an issue because it creates artificial supply problems. However, as the pandemic continues there may be real supply issues as truck drivers and manufacturers are forced to stay at home. Meanwhile, consumers demand things like toilet paper in extraordinary amounts that businesses are unprepared to meet. Prices must naturally go up in such conditions, but the law may frown on otherwise legal practices.

Do I Need a Lawyer for Price Gouging?

One problem with price gouging is that the consumer may not even be aware that their rights have been violated.  By the time they discover a violation, it may be too late to file a legal claim. If you suspect price gouging, you should contact your state attorney general’s office right away.

If you are accused of price gouging, then a criminal defense attorney can help you resolve any issues with the state and defend you from accusations of price gouging.

Jason Cheung

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