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New Jersey Is Actively Enforcing the Price Gouging Law During COVID-19 Emergency

April 8, 2020Alerts

Within two weeks of the declared state of emergency, NJ Attorney General Gurbir Grewal said the state had received about 1,500 consumer complaints of price gouging involving about 1,000 business locations. These led to more than 375 inspections, the issuance of 167 cease-and-desist letters instructing businesses to cease any unlawful pricing, and 32 subpoenas.

Those statistics, released on March 23, have surely increased by now.

The state of emergency – and the price gouging law – will remain in place until at least early May following Gov. Phil Murphy's decision on April 7 to extend it another 30 days.

The complaints alleged unfair price hikes on surgical masks, hand sanitizer, disinfectant sprays and wipes, food, bottled water and other items – some of which were being offered for sale in online marketplaces that received the Attorney Generals’ letter.

Businesses that receive a subpoena or warning letter should seek legal guidance before responding.

Price gouging violations are punishable by up to a $10,000 fine for the first violation and $20,000 for the second and subsequent violations. Businesses that violate the law may also be required to pay consumer restitution, attorney’s fees and investigative fees. Importantly, each sale of merchandise is considered a separate violation.

The Price Gouging Law

The price gouging law is a provision of New Jersey’s Consumer Fraud Act. It makes it unlawful to sell merchandise at an “excessive price” during a declared emergency.

The law precludes sellers from charging prices that are more than 10 percent higher than the price at which the good or service was sold or offered for sale by the seller in the usual course of business prior to a declared state of emergency.

For the COVID-19 state of emergency, such merchandise includes items being purchased by consumers worried about protecting themselves from the coronavirus, such as surgical masks, hand sanitizers, disinfectant sprays and wipes, certain foods and bottled water.

Scope of the Law and Key Terms

During a state of emergency, or within 30 days of the end of a state of emergency, in the area for which the state of emergency has been declared, it is unlawful for “any person” to sell or offer to sell any merchandise that is consumed or used as a direct result of an emergency, or which is consumed or used to preserve, protect, or sustain the life, health, safety or comfort of persons or their property, for a price that constitutes an “excessive price increase.”

An “excessive price increase” is defined as one that occurs where:

  1. the price exceeds by more than 10 percent the price at which the good or service was sold or offered for sale by the seller in the usual course of business immediately prior to the state of emergency – unless the price charged by the seller is attributable to additional costs imposed by the seller’s supplier or other costs of providing the good or service during the state of emergency; or
  2. the increase in price is attributable to additional costs imposed by the seller’s supplier or additional costs of providing the good or service during the state of emergency, the price represents an increase of more than 10 percent in the amount of markup from cost, compared to the markup customarily applied by the seller in the usual course of business immediately prior to the state of emergency.

Businesses facing possible inspections or subpoenas as a result of a consumer complaint should consult counsel to ensure the proper response to investigators. If you have any questions about this alert or the price gouging law, please contact Marissa Koblitz Kingman at 973.548.3316 or [email protected], or any member of Fox Rothschild’s White-Collar Criminal Defense & Regulatory Compliance Practice Group.