A Note of Caution: Inflation, Price Increases, and the Lingering States of Emergencies

Proskauer - Minding Your Business

Many companies have increased prices in recent months.  Reportedly, across the economy, prices “rose by 5 percent in May compared with a year ago.”  Restaurants are raising prices to cover the cost of increases in wages in a tight labor market.  The prices of used and rental cars are quickly rising, due to low inventory and higher demand.  Gasoline prices have risen, and not just as a result of the recent cyberattack.

While this may be a positive sign for the economy, it is happening at a time when many state price gouging laws remain activated.  What will happen if consumers object to these higher prices, and either report them to their local attorneys general or explore legal action on their own?

This is no time for companies to let their guard downs and become the target for such suits.  Some states have ended the states of emergencies that trigger price limits, but many more have not yet taken that step.  Additionally, over two dozen states’ price gouging laws recognize a private right of action, and many of those states’ laws are still activated.

That said, prices alone may not tell the whole story, and the usual caveats apply.  Many state price gouging statutes incorporate justifications and exceptions that act as a complete defense where, for example, the seller can prove the price increase was directly attributable to its own rising costs. Undoubtedly, many of the escalations we have seen in recent months are responsive to increases in raw materials, energy, and transportation.  Businesses understandably would like to recoup some of the increase in costs.

When considering price increases, the sensible approach is still to consider what constraints might apply, including:

  • Whether relevant state price gouging laws are still in effect,
  • Whether your goods or services are covered by any effective laws,
  • How price gouging is determined under those laws,
  • Who has authority to sue for violations, and
  • What justifications and defenses might be available.

Price gouging violations at the tail end of the pandemic are just as actionable as those during the more uncertain days.  By keeping common sense price gouging compliance and documenting at the forefront, companies can remain prepared and in control in the event claims are made or investigations are initiated for price increases as the country and the economy opens back up.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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