A Guide to Price-Gouging Laws During COVID-19 and Beyond

What kinds of price increases are considered price gouging? That depends on many factors, including your location. Find out how to avoid overcharging (or overpaying) for essential goods.

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Emergencies such as the COVID-19 pandemic throw markets into chaos. Depending on your industry, you may have seen demand go through the roof or drop through the floor. Many businesses continue to struggle with availability and prices of supplies.

At what point do price increases become illegal price gouging? Find out what price gouging is, how to know if you're charging or paying too much for an essential resource, and how to minimize your risk of price-gouging claims.


Overview: What is price gouging?

Price gouging occurs when sellers overcharge customers for essential goods and services during a crisis. Unfortunately, examples of price gouging are common right now, such as the Manhattan hardware store that raised prices for hand sanitizer to $79 per bottle in March 2020.

Many states have long-standing laws against price gouging, and others have enacted laws in response to the coronavirus pandemic.

While there isn't a federal price-gouging law, the Defense Production Act of 1950 (DPA) allows the U.S. president to protect certain supplies from hoarding in times of crisis. President Trump issued an executive order in March prohibiting hoarding and price gouging for resources needed to combat COVID-19.

In the wake of the COVID-19 outbreak, numerous bills have been introduced to prohibit price gouging at the federal level. It's very likely we'll see a federal law enacted during the next year or two.

While state price-gouging laws vary, they generally:

  • Are triggered when a state of emergency is declared
  • Protect specific types of goods or services
  • Set a benchmark price at some point before the crisis
  • Set a percentage increase above that price as the price-gouging threshold
  • Make allowances for increases in incurred costs

Profiteering is similar to price gouging. It involves hoarding goods during an emergency to resell them at exorbitant prices.

An example is the New York sporting goods retailer who bought more than 5.6 tons of masks, surgical gowns, hand sanitizer, gloves, and other critical supplies in March and April to sell in a dedicated section of his store. He became the first person prosecuted under the DPA and faces up to one year in prison if convicted.

Potential penalties for price gouging are severe, including fines, license revocation, and jail time. With a sound pricing strategy, you can avoid claims of predatory pricing.


Price-gouging laws by state

More than 30 states have made price gouging illegal. In states without a prices law, consumer protection laws may be used to pursue claims of unfair pricing.

Here are some highlights of what the laws cover.

State Trigger Covered Resources Benchmark Price Gouging Threshold
Alabama State of emergency Any commodity or rental facility Average price during preceding 30 days 25%
Alaska COVID-19 Related supplies Normal prices before pandemic 10%
Arizona No law n/a n/a n/a
Arkansas State of emergency Essential goods and services Pre-emergency price 10%
California State of emergency Emergency supplies and services Price immediately prior 10%
Colorado Consumer protection laws n/a n/a n/a
Connecticut State of emergency Retail items within the disaster area; any scarce good or service Usual prices charged Any increase
Delaware COVID-19 Goods or services Usual prices charged 10%
District of Columbia Health emergency or natural disaster Any merchandise or service Normal average retail price 10%
Florida State of emergency Essential commodities and rental facilities Average price during preceding 30 days Gross disparity
Georgia State of emergency Essential goods and services Price immediately prior Any increase
Hawaii State of emergency Any essential commodity Not defined Any increase
Idaho State of emergency Fuel, food, pharmaceuticals, and water Price immediately before and after Exorbitant or excessive
Illinois State of emergency Fuel and other products and services Usual price immediately prior Unconscionably high
Indiana State of emergency Fuel and other consumer goods Average price during preceding 7 days Unconscionable
Iowa State of emergency Goods and services needed by victims Usual price immediately prior Excessive
Kansas State of emergency Any necessary property or service Usual price immediately prior 25% or gross excess
Kentucky State of emergency Specified essential goods and services Price immediately prior 10%
Louisiana State of emergency Goods and services Usual price immediately prior Gross excess
Maine Any abnormal market disruption Necessities and rental facilities Price immediately prior 15%
Maryland COVID-19 Specified essential goods and services Price immediately prior 10% increase in profits
Massachusetts State of Emergency Fuel and goods necessary for public health Usual price immediately prior Gross disparity
Michigan Unlimited Property and services Purchase price or price immediately prior Gross excess or 20%
Minnesota COVID-19 Essential consumer goods or services Usual price during preceding 30 days Gross disparity or 20%
Mississippi State of emergency All goods and services Ordinary market prices immediately prior Any excess
Missouri Declaration of disaster area Any necessity Usual price Excessive
Montana Consumer protection laws n/a n/a n/a
Nebraska No law n/a n/a n/a
Nevada Fraud and antitrust laws n/a n/a n/a
New Hampshire Consumer protection laws n/a n/a n/a
New Jersey State of emergency Emergency goods Usual price immediately prior 10%
New Mexico COVID-19 under consumer protection laws Any goods or services Usual price Unreasonable increase
New York Abnormal market disruption Consumer goods and services Usual price immediately prior Gross disparity
North Carolina State of emergency Any emergency goods or services Average price during prior 60 days Unreasonably excessive
North Dakota No law n/a n/a n/a
Ohio COVID-19 under consumer protection laws Any sales Prices for similar goods and services Unconscionable
Oklahoma State of emergency All goods, services, and rental facilities Price immediately prior 10%
Oregon Abnormal market disruption Essential consumer goods and services Usual price immediately prior 15%
Pennsylvania State of emergency Consumer goods and services Usual price 7 days prior 20%
Rhode Island State of emergency Essential commodities Average usual price during preceding 30 days Gross disparity
South Carolina State of emergency Essential goods, services, and rental facilities Average usual price during preceding 30 days Gross disparity
South Dakota No law n/a n/a n/a
Tennessee Abnormal economic disruption Specified emergency goods and services Usual price Gross excess
Texas Disaster declaration Specified goods and services Not defined Exorbitant or excessive
Utah State of emergency Retail goods and services Average price during preceding 30 days 10%
Vermont Market emergency Fuel, but the state is enforcing price protections under consumer law Usual price immediately prior Gross disparity
Virginia State of emergency Necessary goods and services Usual price during preceding 10 days Unconscionable
Washington COVID-19 under consumer protection laws Undefined Undefined Undefined
West Virginia State of emergency Essential and emergency goods and services Price 10 days prior 10%
Wisconsin Abnormal economic disruption Consumer goods and services, wholesale and retail Highest price during preceding 60 days 15%
Wyoming COVID-19 under consumer laws n/a n/a n/a

Best practices to avoid price-gouging claims

When prices fluctuate in emergencies, you may need to raise your prices in turn. As long as your price changes are driven by rising input costs, and your profit margins are within the usual range, you should be able to defend your prices. These best practices will help:

  • Closely track and document changes in supplies and other input costs
  • If supply costs increase, shop around for better deals and document your findings
  • Report excessive prices you encounter to your state attorney general's office
  • Document pricing before the emergency began to defend your baseline pricing
  • Maintain your normal profit margins throughout a crisis

A robust point-of-sale system can capture and track many of these data points for you.


Frequently asked questions about price gouging

How can I control prices when my costs are spiking?

Most state price-gouging laws make allowances for market fluctuations that drive up your prices. As long as you're maintaining normal profit margins, you should be able to defend your pricing. However, you need thorough documentation of your costs and profit margins.

How do I report price gouging?

Price-gouging laws are designed to protect consumers and businesses. If you encounter predatory pricing at the wholesale or retail level, you should report it to your state attorney general’s office or to the National Center for Disaster Fraud at 1-886-720-5721.

What states allow price gouging?

As you can see from the table above, most states outlaw price gouging during emergencies. In addition to specific price-gouging laws, many states have broad consumer protection laws to prevent fraud and other deceptive practices. States may apply those laws to prosecute reported price gouging.

What is another term for price gouging?

Unfair pricing practices may be called price gouging, profiteering, and predatory pricing. Price gouging may also be prosecuted as a type of fraud or deceptive practice.

Why is price gouging illegal?

Some people argue that raising prices during a disaster is a legitimate response to free market forces, not a crime. Price-gouging laws operate on the premise that the government should protect public health and security over private profit interests during disasters.


Profits at a price

Hard times, even more than good times, are opportunities. Businesses that see them as merely an opportunity for boosting profits lose in the long run, whether through citations or ill will or just bad karma.

On the other hand, those that try to help their customers weather the storms build assets money can't buy in the form of good will, loyalty, and a reputation for fair dealing.

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