Congress Considering New Federal Price Gouging Laws

Ballard Spahr LLP

Congress has begun igniting its legislative engine to create a federal framework to prohibit price gouging during the COVID-19 pandemic. Until now, price gouging has mainly been the province of state laws. See this alert for more detail on those laws.

Largely modeled on existing state laws, the four federal proposals introduced to date each address the problem from a slightly different angle. However, the existence of proposals from both the House and Senate and both sides of the aisle indicates that this issue may be ripe for Congressional action.

Three of the proposals would prohibit price gouging during any declared state of emergency, not limited to the COVID-19 pandemic:

  • H.R. 6264: Sponsored by Rep. Jason Smith [R-MO-8]: Tasks the Secretary of Health and Human Services with identifying products and services for which sales at an “unconscionably excessive price” would result in a relatively moderate fine of up to $1,000 or five years imprisonment.
  • S. 3574: Sponsored by Sen. Thom Tillis [R-NC]: Specifically empowers the Federal Trade Commission (FTC) and Attorney General with the enforcement of civil penalties of up to 10 times the amount of profits for goods and services that “grossly exceed” the average price, as well as criminal penalties up to $500 million.
  • H.R. 6450: Sponsored by Rep. Joe Neguse [D-CO-2] and co-sponsored by Rep. Ted Lieu [D-CA-33]: based on CA Penal Code Section 396, this bill prohibits raising the price of certain consumer goods and services by more than 10% after an emergency has been declared, and empowers the FTC with enforcement.

This elevated level of Congressional concern suggests that one of these bills may bypass the typical committee process and be inserted in one of the COVID-19 response spending bills. The price gouging bill most likely to be included would be the one that is narrowest in scope and has the most co-sponsors. That is H.R. 6472, the “COVID-19 Price Gouging Prevention Act,” sponsored by Rep. Jan Schakowsky [D-IL-9] and co-sponsored by five other Democrats, including Rep. Frank Pallone [D-NJ-6], the Chairman of the Energy and Commerce Committee, to which the bill was referred. The bill’s key provisions include the following:

  • Pricing restrictions are limited to the “the duration of the public health emergency” related to COVID-19 and any renewal of this emergency declaration.
  • It prohibits prices for goods or services that are “unconscionably excessive” and “indicates the seller is using the circumstances related to such public health emergency to increase prices unreasonably” based on recent price history, but does not specifically define “unconscionably excessive” or “unreasonable.”
  • Enforcement of the bill is under the purview of the FTC, and the bill affords all state Attorneys General the opportunity to bring an action in federal court, in addition to any authority they may have to bring an action under state law.

The United States has not seen a disaster like this before, where every state is affected and goods and services that are integral to health and safety are in short supply across the entire country. Given those realities, the time may be ripe for a unified federal right of action that provides for federal jurisdiction over price gouging and an avenue for State Attorneys General who lack a means to prosecute such acts—or another avenue for those who already do.

 

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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