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Sellers Beware: Price Gouging Liability in the Age of the Coronavirus

The ever-increasing threat of the coronavirus (COVID-19) pandemic has driven consumers into a frenzy over common sanitation and disinfecting products, in addition to gloves, masks, and other personal protective equipment. As a result, businesses that offer such products could see the increasing demand as an opportunity to augment their profit margins by charging higher prices. However, it is imperative that these businesses be fully informed of the consequences and liability that could result from this type of conduct, otherwise known as price gouging. Each state regulates price gouging differently, so businesses should be aware of the price gouging laws for each state in which they do business. This article will discuss in detail price gouging in the State of Florida.

On March 9, 2020, Florida Governor Ron DeSantis declared a state of emergency due to the spread of the coronavirus, triggering Florida’s Price Gouging Law, Section 501.160, Florida Statutes. According to Florida’s First District Court of Appeal, the Price Gouging Law was passed to prevent dramatic increases in the prices of certain essential commodities during certain periods of disaster. The Law prohibits unconscionable price increases, which it defines as a “gross disparity” between the average cost of the commodity 30 days prior to a declared state of emergency and the current price of the commodity. However, the Law exempts price increases attributable to “additional costs or regional, national or international market trends.” The essential commodities covered under Florida’s Price Gouging Law are constantly changing, so companies doing business in Florida must stay apprised of any modifications that could potentially affect their operations. At this time, the essential commodities covered under Florida’s Price Gouging Law are the following:

•Protective masks used to protect you from others if you are sick;
•Sanitizing and disinfecting supplies, such as hand sanitizer, gel, wipes, cleaning supplies for surface cleaning, and all
commercial cleaning supplies;
•All personal protective equipment (PPE), including gowns, booties, gloves and other protective gear;
•COVID-19 test kits, swabs and related consumable medical supplies used in administering tests.

Accordingly, if you are a business that sells any of the enumerated essential commodities above, it is imperative that your prices for existing inventory remain consistent with what they were 30 days prior to Florida’s declaration of emergency to be in compliance with Florida’s Price Gouging Law. As costs increase when acquiring new inventory, you may be able to raise prices to account for additional costs so long as your profit margin remains consistent in accordance with the exemption for additional costs or market trends. For instance, if a merchant 30 days prior to the declaration of emergency had inventory of latex gloves purchased at $.25 per pair, and it sells those gloves at $.30 per pair or at a 20% mark up, it should continue to sell out its inventory at the same price. However, if the same merchant, after selling out its inventory has to go out in the market and pay $1.00 per pair, then it can sell those gloves at $1.20 per pair because its profit margin would remain at 20%, and the increase in price was attributable to additional costs incurred in connection with the sale of the gloves. If the merchant were to increase its prices for the latex gloves outside of the bounds of Florida’s Price Gouging Law illustrated above to obtain a larger profit, it could be subject to significant penalties from Florida’s Attorney General, in addition to being liable to any consumers or companies that bought essential commodities at inflated prices under Florida’s Deceptive and Unfair Trade Practices Act, which could result in the payment of the consumer’s attorneys’ fees in addition to any damages suffered.

The coronavirus pandemic, as well as the government regulations to control the spread of the virus, have continued to test businesses throughout Florida and the rest of the United States, and many of these businesses have demonstrated extreme resolve and creativity in order to survive in the current climate. Reacting to emergency situations in these uncertain times requires expertise from commercial attorneys who understand both the law and the effect of the emergency on commerce. The attorneys at Stok Kon + Braverman have substantial business and legal experience, understand the market forces that drive price variations, and can help you navigate through the pricing of goods in a volatile market. Therefore, if you are a Florida business seeking guidance regarding product pricing to avoid liability under the laws of Florida or any other state in which you do business, or if you have been harmed as a result of a supplier’s improper price gouging tactics, be sure you have the maximum protection possible by retaining the skilled commercial litigation attorneys at Stok Kon + Braverman.

For further information and guidance regarding pricing or price gouging liability and how they relate to your business or personal circumstance contact the lawyers at Stok Kon + Braverman online at www.stoklaw.com or by telephone at (954) 237-1777 to schedule your consultation.

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