States Crack Down on Price Gouging Amid Coronavirus Outbreak

March 18, 2020 Updated: March 18, 2020
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A 40 oz. bottle of hand sanitizer is selling at $80. And a 19 oz. bottle of disinfectant spray is priced at $15.

These are some examples of price gouging New York Attorney General Letitia James is working hard to crack down on amid the coronavirus outbreak. James has so far issued dozens of cease and desist letters to merchants demanding that they stop charging consumer excessive prices on vital products such as hand sanitizers and disinfectant sprays.

New York, like many states, is asking residents to look out for retailers that are attempting to profit off the fear of the pandemic and report any suspicion of price gouging to the state attorney general office. Price gouging is when vendors raise prices of goods and services to levels much higher than what is deemed fair and reasonable, and is widely viewed as exploitative.

The New York attorney general office told The Epoch Times that it has so far received dozens of complaints mainly about face masks, hand sanitizers, and disinfectant sprays. These complaints are being assessed to see whether the state’s price gouging law applies. Under New York law, vendors are prohibited from taking unfair advantage of consumers by selling goods or services that are “vital to the health, safety or welfare of consumers” for “unconscionably excessive prices” during a time period of market disruption or a state of emergency. The state declared a state of emergency on March 7.

While hand sanitizer and disinfectant sprays are considered vital and necessary for the health and safety of consumers, face masks do not fall under that category under the law, according to the attorney general office. Federal agencies such as the Centers for Disease Control and Prevention do not recommend the general public to wear face masks or an N95 respirator, saying that there is no added health benefit in wearing such devices at this time. Instead, they advise that the best way to prevent the illness is by hand washing and other preventive actions. The New York State Department of Health has provided similar advice, saying that people who are not sick do not need to wear a face mask, so that the masks can be reserved for the health care system.

Meanwhile, on March 17, New York City’s Department of Consumer and Worker Protection (DCWP) Commissioner Lorelei Salas announced an emergency rule that makes price gouging illegal for “any personal or household good or any service that is needed to prevent or limit the spread of or treat new coronavirus.” The rule will make it illegal for any vendors to increase prices by 10 percent or more. These items include face masks, hand sanitizer, and disinfectant wipes, which are currently in short supply in the city.

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A bottle of hand-sanitizer is seen in Union Square in New York City on March 9, 2020. There are now 20 confirmed coronavirus cases in the city including a 7-year-old girl in the Bronx. (Jeenah Moon/Getty Images)

“Now is the time for us to come together, not take advantage of each other for a profit, but we continue to hear about and see empty shelves and price gouging,” said DCWP Commissioner Lorelei Salas said in a statement. The emergency rule came into effect on March 16 and will be in effect for 60 days with an option for extension.

Like New York, other state attorneys general are taking similar measures to protect consumers from unfair business practices. In California, Attorney General Xavier Becerra issued a price-gouging alert following a state public health emergency declaration in response to the coronavirus.

“Californians shouldn’t have to worry about being cheated while dealing with the effects of coronavirus. Our state’s price gouging law protects people impacted by an emergency from illegal price gouging on medical supplies, food, gas, and other essential supplies,” Becerra said in a statement.

Under Californian law, vendors are prohibited from charging a price that exceeds, by more than 10 percent, the price of an item after a state or local declaration of emergency. These items include emergency supplies, medicine, and medical supplies, and food and drink. Violators of the state’s price gouging law are subjected to criminal prosecution that could land them in prison for a year or be fined up to $10,000.

The Californian attorney general office told The Epoch Times that it has not announced any legal actions so far.

However, not all states have specific price gouging laws to protect consumers from price gouging. According to FindLaw, only two-third of states across the United States have laws that specifically prohibit the act of price gouging.

But that does not mean states without separate price gouging laws will not take enforcement action against price gouging. Washington State Attorney General Bob Ferguson told CNBC in an interview they will be relying on their state’s Consumer Protection Act to go after businesses that engage such unfair business practices. He said that in his view, increasing the price of common items during a public health crisis constitutes “an unfair business practice” under the law.

Ferguson said his office is currently taking formal actions such as subpoenaing for information to investigate complaints about price gouging in the state, including from online vendors.

Online Vendors

eCommerce markets such as Amazon and eBay have taken a number of steps to ensure their vendors comply with state price-gouging laws and have cracked down on vendors who are trying to profit from the fear amid the coronavirus.

Amazon said it has removed more than 1 million products for misleading claims and tens of thousands of items for price gouging.

“We’re also working to ensure that no one artificially raises prices on basic need products during this pandemic and have blocked or removed tens of thousands of items, in line with our long-standing policy. We actively monitor our store and remove offers that violate our policy,” the company said in a statement.

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A sign is posted outside of the eBay headquarters in San Jose, Calif., on Feb. 24, 2010. (Justin Sullivan/Getty Images)

eBay has taken similar measures by removing listings of face masks and hand sanitizers due to concerns that the inflated prices may violate applicable laws or regulations. The company has also employed a combination of digital and manual surveillance tools to remove products marketed with the term “coronavirus” and encourage consumers to report listings that are concerning.

“Like so many companies, we have been closely monitoring the coronavirus issue as it continues to develop,” an eBay spokesperson told The Epoch Times in an emailed statement. “As always, our first priority is to ensure the safety of our employees and customers around the world. eBay is taking significant measures to block or quickly remove items on our marketplace that make false health claims. We are making every effort to ensure that anyone who sells on our platform follows local laws and eBay policies.”

Retailers

Meanwhile, President of the New York Association of Convenience Stores, Jim Calvin, said the increased prices for certain household products are partly caused by the unprecedented demand for those products, which has driven wholesale prices “sharply higher.” He said a vast majority of the New York retailers have proportionately passed on these higher costs to consumers.

“They know the ground rules during an emergency, and they act responsibly,” Calvin told The Epoch Times in an emailed statement. “It appears, however, that a small number of irresponsible shopkeepers exploited the situation.”

He said he has reminded members of his association, which consists of about 100 companies that operate more than 1,600 store locations across New York State, about pricing restraints and the importance of documenting price changes.

Federal Response

The Justice Department is also warning businesses wanting to take advantage of the public panic caused by the virus, citing antitrust violations.

The department has cautioned that individuals and companies who fix prices or rig bids on items such as sterile gloves, protective masks, and other personal protective equipment could face criminal prosecution. It also warned against allocating consumers of public health products among competitors.

“The Department of Justice stands ready to make sure that bad actors do not take advantage of emergency response efforts, healthcare providers, or the American people during this crucial time,” U.S. Attorney General William Barr said in a statement on March 10. “I am committed to ensuring that the department’s resources are available to combat any wrongdoing and protect the public.”

According to the Federal Trade Commission (FTC), price-fixing is an agreement among competitors to raise, lower, or stabilize prices or competitive terms of any product or service. This conduct is illegal because it restricts competition and often results in higher prices.

In a memo on March 16, he instructed U.S. attorneys across the country to prioritize prosecutions and investigations of scammers and fraudsters who seek to take advantage of the public fear during the crisis. Some of these individuals and businesses are trying to sell fake cures for COVID-19, the disease the virus causes, online and are engaging in other forms of fraud including using phishing emails while posing as the Centers for Disease Control and Prevention or the World Health Organization, Barr said.

“The pandemic is dangerous enough without wrongdoers seeking to profit from public panic, and this sort of conduct cannot be tolerated,” Barr wrote. “Every U.S. attorney’s office is thus hereby directed to prioritize the detection, investigation, and prosecution of all criminal conduct related to the current pandemic.”

Some states such as New York have already taken action against companies that are fraudulently marketing treatments for the virus. New York Attorney General Letitia James sent letters to two companies on March 11 ordering them to immediately stop selling colloidal silver products marketed as a cure for coronavirus. There are currently no Food and Drug Administration (FDA)-approved vaccine to prevent the disease or treatment to cure the illness.

Follow Janita on Twitter: @janitakan