Robbins: Price gouging in the time of coronavirus
COVID-19 got you spooked?
With three confirmed cases in Eagle County, what’s a body to do?
Well … eat healthy, get plenty of sleep, stay active, wash your hands, keep a safe distance from others, and, between visits to the loo, keep yourself well-slathered in hand sanitizer.
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Which brings me to the subject of this column.
Since the store shelves are as bereft of wipes, hand sanitizers and protective masks as Mother Hubbard’s cupboards, maybe your wanderings have taken you to Amazon.
A couple of days ago, I saw this on the site: two large bottles of Purell hand sanitizer, normally about nine bucks were selling for — I kid you not — $299.98. You’ve simply got to love the 98 cents added to the outrage. Worse, four boxes of surgical masks — in sane times selling for about $20 were listed for the low, low price of $1,198. These were neither typos nor mistakes. On the particular day I looked, I could not find a couple of small bottles of alcohol-based hand sanitizer for less than $89.
What this raises is the ugly specter of price gouging. Aren’t there laws to deal with this sort of thing?!
Well, yeah, there are. Price gouging is illegal. But first, what is it?
It is not high prices alone.
High prices do not necessarily mean that price gouging has taken place. If it did, Givenchy, Lululemon and a rash of others would be criminal concerns. As a general precept of our thriving capitalistic system, businesses are generally left alone to determine the freight a particular product will bear. However, if a disaster has been declared and businesses raise the price of their products to exorbitant or excessive rates, then if it walks, quacks and swims like the duck, gouging is likely taking place. One other thing deserves quick mention: If in the face of a crisis, Lululemon raises the price of its Studio Flare Pant by a multiple of twenty, that’s not price gouging. That’s just comfy clothing at a premium.
Gouging is generally defined as selling or leasing fuel, food, medicine, lodging, building materials, construction tools, or other necessities at an exorbitant or excessive price.
Sorry, Lulu lovers, while it may seem so when you hold them dear, Studio Flare Pants ain’t exactly a necessity. However, in the maelstrom of a global pandemic, hand sanitizer, wipes and face masks are a horse of a different — albeit perhaps a less aesthetically flattering — color.
Unlike Lulus, which I believe are guaranteed to never rub, with price gouging laws, there is a rub or two. First, there must be a natural disaster or another calamity that leads to the rocketing of price. If a Purell reseller wants to raise its price a thousand-fold in normal times, the consumer will simply turn up his or her nose, curse under his/her breath, and walk away. Second, the item in question must be construed under the dictates of the moment to be a necessity. Designer clothes and accessories seldom are. Food, water, medicines, etc.? Well, yes indeed!
There’s a law for that
As of January of last year, 34 states have price-gouging laws on the books. Price gouging is often defined in terms of the three criteria:
- It must be a period of emergency.
- The item must be a necessity.
- The sale of the item exceeds the limit the particular law has set as the maximum that may be charged for a given good.
In the majority of states, price-gouging laws apply only to price shifts during a declared state of emergency or disaster. Go back and read that last sentence again; unless a disaster or state of emergency has been declared, a vendor can generally be any kind of exploitive jerk he or she wants to be and gouging laws will not apply. By the way, Colorado is one of the “other” states. In the Centennial State, so long as the price is fully disclosed, it’s simply buyer beware.
States have legislated different requirements for who must declare a state of emergency for the price protections to go into effect. Some state statutes protect against price increases only once the President of the United States or the state’s governor has declared a state of emergency in the impacted region. Other states permit emergency proclamations by certain designated officials, boards, and other governing bodies.
States laws also vary on what price increases are permitted during a declared disaster. California, for example, permits a 10% ceiling on price increases. Florida prohibits a price increase “that grossly exceeds the average price” of that same item in the 30 days leading up to the emergency declaration.
Some state laws do not define what constitutes a “gross disparity,” making it difficult to determine when price gouging has occurred. The various state laws often include exceptions for price increases that can be justified in terms of the increased cost of supply, transportation, demand or storage. In the present circumstances, for example, if the price of manufacturing goes up because factories in China are on lockdown, then the increased costs may be fairly passed along.
What about the feds? In short, state laws reign supreme.
So what about $300 bottles of Purell? Well, for now, if not exactly OK, except in states where a disaster has been declared, it is not illegal. But as to reckoning with one’s God? I’ll leave that to theologians, ethicists, and the opportunists to wrestle with their consciences.
Rohn K. Robbins is an attorney licensed before the bars of Colorado and California who practices in the Vail Valley with the law firm of Stevens, Littman, Biddison, Tharp & Weinberg LLC. His practice areas include business and commercial transactions, real estate and development, family law, custody and divorce and civil litigation. Robbins may be reached at 970-926-4461 or at his email address, firstname.lastname@example.org.
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