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Coronavirus

Price Gouging Concerns in the COVID-19 Era

Over 4,000 price gouging complaints have been made since the state of emergency was declared.

On March 11th, the World Health Organization officially classified the new strain of coronavirus, COVID-19, as a pandemic (a worldwide spread of a new disease). Shortly thereafter, on March 13th, Texas Governor Greg Abbott declared a state of disaster for all counties in Texas.

During this uncertain time, many of the medical supplies and equipment necessary to combat the rapid spread of the COVID-19 virus, along with basic living essentials, have become difficult, or even impossible, to find in Texas. These items include face masks and screens, hand sanitizer, gloves, respirators, and even simple necessities like toilet paper and cleaning products.

As a result of the shortages, state authorities have issued stern warnings about price gouging in this time of disaster. When the governor in Texas declares a state of disaster, the Office of the Attorney General is given the authority to prosecute those that engage in price gouging while the state of disaster remains in effect.

Price gouging, simply put, is when a seller increases the prices of goods to a rate that is exorbitant or excessive (there is no set definition in Texas for what amounts to “exorbitant or excessive”). High prices alone do not equate to price gouging as sellers are allowed to set the prices of their products.

In Texas, individuals and corporations should be aware of § 17.46(b) of the Texas Deceptive Trade Practices-Consumer Protection Act (“DTPA”), which provides that it is a false or deceptive act or practice to take advantage of a disaster declared by the governor under Chapter 418, Government Code, or by the President by:

  1. Selling or leasing fuel, food, medicine, lodging, building materials, construction tools, or another necessity at an exorbitant or excessive price; or
  2. Demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine, lodging, building materials, construction tools, or another necessity. [1]

As of April 1st, over 4,000 price-gouging complaints have been filed with the Texas Attorney General’s Office since state of emergency was declared on March 13th, and this number is expected to steadily increase. In the DFW area, numerous complaints on price gouging of products such as hand sanitizer, toilet paper and bottled water have been made. Based on the last state of emergency declared in Texas during Hurricane Harvey, it is likely that the Attorney General’s Office will file suit on legitimate claims. In fact, on March 26th, a price gouging lawsuit under the DTPA was filed against Auctions Unlimited, a Houston-based company. The lawsuit alleges that Auctions Unlimited was selling boxes of 16 medical-grade face masks for as high as $180 a box. Generally, these boxes cost $10-$20 each.

If a consumer in Texas feels that he or she has fallen victim to price gouging, the consumer should file an official complaint with the Texas Attorney General’s Office. The Attorney General’s Office will then review the complaint and determine what next steps, if any, should be taken. Filing a complaint does not guarantee an investigation will be opened or a lawsuit will be filed.

On the flip side, individuals and businesses should always be mindful of the requirements of the antitrust laws to ensure that their conduct does not run afoul of them. This is especially the case at a time such as this, when the spotlight will focus more intently on perceived illegal conduct. This concern is even more acute for those purchasing and selling health care products.

If a seller is concerned about price gouging accusations, it is imperative that he or she work with experienced counsel who can advise on the complex, and highly nuanced, antitrust laws as they relate to a seller’s particular products and sales. Experienced counsel can give guidance regarding the sometimes hidden pitfalls relating to price fixing, collusion, and gouging, which is especially important during this time of increased scrutiny. Competent regulatory counsel can provide invaluable guidance in navigating the complex waters of antitrust regulation and enforcement.

Jeffrey J. Ansley is a partner and Arianna G. Goodman and Katherine M. Devlin are associates at the Dallas-based law firm Bell Nunnally.

[1] If a consumer prevails after filing a lawsuit under § 17.46(b) of the DTPA, a variety of remedies are provided under § 17.50.

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