Beyond Essential Goods and Services: Price Gouging Laws Being Applied to a Wide Range of Products

Proskauer - Minding Your Business

The majority of price gouging laws have been activated throughout the country for over a year now, but reports of price gouging continue, along with enforcement and lawsuits. While many are aware that price gouging restrictions apply to essential goods such as medical and emergency supplies, some covered goods are often mistakenly thought not to be covered. As a result, companies should remain vigilant and familiarize themselves with the scope of covered products and services in the states in which they conduct business.

A recent example of a product potentially subject to certain state price gouging restrictions is fertilizer, a product that has reportedly been increasing in price in recent months. A recent report details how the price of anhydrous ammonia, a foundation for all nitrogen fertilizers, has increased almost 60% since the fall, rising to $655 a ton. According to one fertilizer expert, “[y]ou have to go back at least half a decade to see values of where we’re at today. It’s been a stark turnaround compared to where we were last summer.” While not covered by all state price gouging laws, some state laws have broad applicability and thus, while activated, arguably may cover such products.

Another category of goods that some mistakenly believe may be excluded from price gouging prohibitions are building materials. With home improvement projects on the rise during the pandemic, complaints of price gouging have been widespread. Most recently, contractors in Maryland reported that “the cost of building materials in the wake of the pandemic is going to put them out of business.” According to a poll by the Associated General Contractors of America, 93% of respondents claim that they have seen increased costs due to the pandemic. Many state price gouging laws across the country apply to building materials, including Colorado, Iowa, Kansas, Texas, and Virginia, to name a few.

More specifically, a recent CNBC article reports that “[s]oftwood lumber prices are now about 112% higher than they were a year ago,” reportedly jumping just 10% in the week prior to the February article’s posting. However, CNBC reports that it is not just demand driving up prices, but also “because both mill operators and lumber dealers misread the 2020 market.” Consistent with CNBC’s report, an August 2020 Wall Street Journal article similarly reported that “[s]aw mills didn’t see this coming. Lumber prices tumbled in late February as the U.S. economy began to shut down to slow the spread of the deadly Covid-19. An estimated 40% of North American lumber production was curtailed in March and April as millions of people lost their jobs. Futures hit a four-year low April 1. They have been rising ever since. By July, prices had returned to their pre-pandemic level and have subsequently added another 47%.”

While energy prices prompted discussions and investigations in the wake of winter storms, other factors in supply chains could lead to price gouging scrutiny of energy prices. In Michigan, the state is planning a response to energy markets with the potential closure of “Line 5,” a natural gas pipeline in the northern part of the state.  The pipeline serves the Detroit Airport and many consumers who rely on propane for heat. The Michigan Governor expressed concerns that consumers could face price gouging as a result of the pipeline’s closure and the state’s Attorney General has urged the legislature to reconsider amending the state’s price gouging laws to increase enforcement capabilities.

While some states, like California, have begun limiting the scope of their price gouging restrictions, most state price gouging laws remain active and in full force.

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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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