Dear Retail Clients and Friends,
This edition of Morgan Lewis Retail Did You Know? examines the impact of anti–price-gouging efforts by government enforcement officials in the time of the coronavirus (COVID-19) pandemic. Anyone in the supply chain for food, emergency and medical supplies, or consumer goods, whether marketed and sold online or through brick-and-mortar storefronts, ought to monitor and ensure compliance with the relevant laws, many of which may shift during this tenuous time.
Background
Although there is no national price-gouging law, the majority of states have price-gouging laws. States that do not may pursue price-gouging investigations pursuant to consumer protection laws.
While they vary by state, generally, price-gouging statutes (1) are triggered by an emergency declaration or disruption, (2) apply to goods or services that are considered (or perceived to be) necessary to health and welfare, and (3) analyze whether those products are excessively or unconscionably priced.
These statutes are backward looking, comparing the current price of a product to the product’s price before the emergency or disruption. Some statutes have exceptions, such as a justification for a price increase when there is a corresponding increase in the cost of labor and materials or the cost of doing business.
US Attorney General William Barr has issued a directive to all US Attorneys, requiring them to establish COVID-19 fraud issues as a priority and to take proactive measures. Already, many attorneys general have established hotlines or online portals for consumer complaints. Any complaint or enforcement action may be made public.
Practical Implications
Given the intense scrutiny on the pricing of food, emergency or medical supplies, and consumer goods during the COVID-19 pandemic, businesses selling these items should do at least the following:
- Maintain precise historical pricing data
- Document justifications for any price changes, as well as who approved them and why
- Catalogue any increase in the cost of labor, materials, etc.
- Implement a process for pricing approvals
- Ensure appropriate staffing to oversee and manage demand
- Continuously evaluate and alter electronic algorithms, including by human review
- Analyze shipping and other handling costs for third parties to confirm they are not a surreptitious means to increase prices
- Carefully investigate new products or third-party partners that may be ripe for abusive pricing before engaging or selling through your platform or related channels
- Develop, train on, and execute a comprehensive compliance plan to address any deviations in real time by employees or third-party partners, including for any bidding processes
- Monitor ongoing enforcement activity and guidance from government enforcement agencies
