We’ve been closely monitoring the legal landscape to see how law enforcement is pursuing companies and individuals for profiteering during the current pandemic. This article is the second in a series of articles exploring the heightened focus on COVID-19-related hoarding and price gouging. So far through the pandemic, federal and state authorities have primarily relied on three tools to go after hoarders and price gougers: the Defense Production Act (“DPA”), state emergency anti-price gouging and consumer protection statutes, and antitrust laws.

Defense Production Act

The DPA is a federal statute that, amongst other things, allows the President to declare certain items as “scarce” or “threatened scarce” during a national emergency. Once an item receives such a declaration, its accumulation in “excess of reasonable demands of business, personal, or home consumption” or “for the purpose of resale of at prices in excess of prevailing market prices” becomes unlawful.

Before the COVID-19 pandemic, criminal charges had never been brought under the DPA. But it has since been invoked by federal prosecutors in three cases as of the date of this publication. Individuals convicted of violating this statute face penalties of up to a year in prison and up to $10,000 in fines.

State Legislation

Several states have anti-price gouging laws and are suing under those laws to combat profiteers. Sometimes these laws are parts of statutes enacted for the express purpose of targeting hoarders and price gougers and sometimes they are included as provisions in consumer protection legislation. Typically, these laws forbid large price spikes in consumer goods and services after an emergency declaration by a governor or other cabinet-level state official. These statutes often carry some combination of fines and imprisonment.

Ohio has not enacted any explicit anti-price gouging legislation, but it is quickly catching up.

Ohio Attorney General Dave Yost announced that he was working with Ohio lawmakers on Ohio Senate Bill 301. The bill would amend Ohio’s Consumer Sales Practices Act to explicitly make the sale of consumer goods or services at “grossly” excessive prices during an emergency an unlawfully unconscionable act.

Antitrust Laws

Ohio’s Valentine Act and federal antitrust law govern and punish anti-competitive behavior. In a civil lawsuit against an alleged Cleveland-area price gouger, AG Yost claimed that the hoarding and reselling of N95 masks amounted to a violation of the Valentine Act. Although the defendant in that case quickly reached an agreed settlement with the state, he could have faced severe penalties if his conduct was found to violate the statute. Criminal violations of the Valentine Act range from second degree misdemeanors all the way up to fourth degree felonies, which carry up to 18 months in prison and fines as much as $5,000. Claimants can also seek treble damages for civil actions under the Valentine act.

The next article in this series will take an in-depth look at some of the ways that liability could be avoided or mitigated should you or your business become the target of a hoarding or price gouging enforcement action.