Avoiding Allegations of Price Gouging
Because we live in hurricane prone Florida, you may already be familiar with the concept of price gouging. Price gouging investigations conducted by the attorney general’s office often occur after hurricanes, when businesses artificially inflate the price of goods that are necessary, life saving, and in demand, after a storm.
But COVID has also made certain goods scarce, and led to an increase in the price of otherwise affordable goods. How can your business avoid getting into trouble for raising prices on necessities during the COVID crisis?
Items That Are Covered by Price Gouging Laws
Price gouging laws apply to all businesses that sell what are defined as essential goods. The law includes things like water, ice, gas, or lumber, but that list is not exhaustive or complete—in fact, COVID has made items in demand that we never thought would be in demand.
The Florida Attorney General has put out a list of items that are considered essential for COVID purposes, and if you sell or resell any of these goods, you should be aware of what they are. They include masks, hand sanitizer, wipes, and any product that cleans or disinfects surfaces.
As you may imagine, the list also includes personal protective equipment, such as masks, medical supplies, anything used for COVID testing, and gowns.
Although not specifically listed, items like toilet paper, hand soap, or cough medicine would be included.
However, just because something is selling out doesn’t make it a necessity. During the height of the COVID crisis, many people were baking at home, leading to shortages of cookie dough. That would not make cookie dough a necessity, where price gouging would be an issue.
How to Safely Raise Prices
If the government thinks that you may be price gouging, it will look at whatever price the product sold at for the previous 30 days, and compare that to what you are selling it for right now. If there is a “gross disparity,” the state will assume that you are price gouging. This is how the state differentiates between sudden increases to make money off of a crisis, as opposed to normal, gradual increases in pricing, which are perfectly legal.
As a practical matter, it means that you should keep records of your prices on a routine basis. This way, you can justify any price increase as being “normal,” and not a reaction to the declared state of emergency, if the state gets suspicious of price gouging.
Because we are in a pandemic, you can expect government regulators to be on the lookout for people who are price gouging. Now is probably not the time to be significantly raising the prices of essential goods, but if you are targeted for investigation by the state, we can help.
Call the West Palm Beach business litigation lawyers at Pike & Lustig for help if your business needs legal help, or if you have a business litigation case that needs prosecuting or defending.