As the COVID-19 pandemic worsens, public pressure has led to increased efforts to investigate and punish those engaging in hoarding and price gouging of essential items across the country.

The Authorities and Civil Plaintiffs Have Relied on Creative Means to Target Perceived Price Gouging

On March 24, 2020, United States Attorney General William P. Barr announced the creation of the COVID-19 Hoarding and Price Gouging Task Force. Since then, federal prosecutors in New York have filed the first ever cases charging defendants under the 1950 Defense Production Act (“DPA”) which makes it a federal crime to resell scarce essential items, as declared by the President, in excess of prevailing market prices.

In Tennessee and Ohio, the state Attorneys General brought civil claims against would be entrepreneurs trying to make a quick buck by reselling cleaning and medical supplies at excessive markups on the internet. Both cases resulted in quick settlements.

Seeking bigger fish, the Texas Attorney General recently filed a price gouging lawsuit against Cal-Maine Foods, the nation’s largest egg producer. The lawsuit alleges that Cal-Maine illegally sold eggs at more than 300% of their normal cost in violation of Texas’s deceptive trade practices statute. Similarly, a putative class action price gouging lawsuit was recently filed in the Northern District of California against some of the nation’s largest grocers.

This is a Relatively Underdeveloped Area of Law

Because there has not been a nationwide crisis of this scale in recent memory, the law in the area of price gouging is underdeveloped. As a result, recent actions have been brought under a wide variety of novel and untested legal theories, including as violations of state anti-price gouging, consumer sales protection, and even antitrust statutes.

If you find yourself or your company the target of a hoarding or price gouging action, there are ways to fight back. Many of the anti-price gouging statutes have imprecise definitions of key terms such as excessive or exorbitant. Others, like the DPA, have no statutory definition of those terms at all, making them vulnerable to arguments that they are unconstitutionally vague.

Claims under consumer sales protection statutes, on the other hand, generally are expressly limited to transactions between suppliers and consumers for the purchase of personal, family, or household items. So, as an example, it seems to follow that no liability would lie under those statutes for transactions between merchants and non-consumer purchasers, such as healthcare professionals or businesses.

If you or your business becomes the subject of a hoarding or price gouging claim, contact Thompson Hine LLP’s white-collar criminal practice group.