California Price Gouging Law
What is a price gouging law? It may seem intuitive to some, but many are surprised that there is such as thing in California. The penalties can be steep if violated and there are many different kinds of goods or services that qualify under the law. If you or someone you know is involved in such a case, the following may provide some basic information on how to navigate it. If immediate help is needed Contact Us.
What is the Price Gouging Law?
In simple terms, price gouging has to do with taking advantage of consumers by increasing costs on essential goods while there is an emergency or disaster. The amount that the prices are raised can differ depending on where the law is. However, in California, the benchmark is 10% over the normal price. It’s very important to keep in mind that local laws (such as your city or your county) may also have their own regulation.
For reasons stated below, the price gouging law does not just apply to retailers. Any person (such as someone selling on eBay or Amazon) and any wholesaler or manufacturer is covered under the statute [whether or not the goods/services are sold directly to a retailer or consumers.
What is the typical punishment for California’s Price Gouging Law?
The penalty can be harsh. A violation of the law can be imprisonment in a county jail for up to a year and a fine up to $10,000. Beyond the direct consequences faced, the one who violates price gouging laws can also be subject to additional legal liability under unfair competition statutes and unlawful business practices.
There are also civil penalties that can be added such as $5,000 per violation, mandatory restitution, as well as injunctive relief. Therefore, any consumer can bring a private right of action against someone who violates the price gouging law. Simultaneously, the local District Attorneys office or the state Attorney General may bring a separate action as well.
What kinds of emergencies qualify under price gouging laws?
In California, the law is pretty clear in defining the kind of emergencies: Earthquake, Flood, Riot, Storm, Drought, Animal infestation, Plant infestation, Disease, or even manmade disasters.
Is housing covered under California’s price gouging law?
Yes, but it depends on whether the rental value is one that was advertised on a daily/monthly basis prior to the emergency or not. A different rule applies in each scenario. If the housing was advertised prior to the declaration of emergency, it must abide by the 10% benchmark rule. For housing that was not rented or advertised prior to the declaration of emergency, the rental price cannot exceed 160% of whatever the FMV (fair market value) as per the US Department of Housing and Urban Development.
What is the reasons behind price gouging laws?
Under normal conditions, governments (both national and local) prefer the market determines pricing. However, when the market is disrupted by an abnormal event, it is in the interest of the public that essential items and services are not offered at excessive or unjustified prices.
What kinds of good/items are protected?
Goods (or services) that are vital and necessary for the health, safety, and welfare of consumers. The list can be lengthy, but here are the general categories:
• Medical Supplies
• Food Items
• Home Heating Oil
• First Aid Products
• Emergency Supplies
• Storage Services
• Cleaning Supplies
• Building Materials
• Construction Tools
Is there a defense for someone who didn’t intend to violate the law?
Yes. In normal market conditions, there are always fixed and adjustable costs. The same goes for when there is a state of emergency regardless of the jurisdiction level. Therefore, there is a defense to price gouging law where it can be shown that the increase in the price was directly attributable to the additional costs that were imposed on the supply of the goods or the costs for labor and/or materials used for the service. Keep in mind that the price cannot be more than 10 percent greater than the total costs to the seller or service provider in addition to the markup that is customarily applied by the seller in the usual course of business.
What about if the price was lower before the emergency, but then raised to the normal price after the state of emergency was imposed?
Interestingly, the law is flexible in this scenario. For example, once prices are established back to what they typically would have been absent an emergency, the price gouging law will evaluate the emergency price according to the same 10% rule.
Timeline for Statute
In California, the price gouging law is triggered after a declaration of emergency and lasts for 30 days unless extended by the jurisdiction making the declaration. However, for emergency cleanup and reconstruction services, the statute is applied for 180 days.
Price gouging laws can be tricky and nothing is clear during a time of crisis. Therefore, if you or someone has been exposed to this kind of case, it’s best to get a team involved to find a solution quickly.