Protecting Democracy

Price Gouging After a Disaster

September 2001

Arkansas has made legislative notice of the fact that some merchants have taken unfair advantage of consumers by greatly increasing prices for essential consumer goods and services. Although the Legislature would leave determination of the cost of goods and services to the marketplace, during a state of emergency the public interest requires the prohibition of excessive and unjustified price increases for essential consumer goods and services. After a declaration of an emergency and for 30 days following, it is unlawful for a person, contractor, business or other entity to sell food items, cleanup goods or services, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, storage services, gasoline or other motor fuels for a price more than 10 percent above the price charged immediately prior to the emergency. An exception is provided if the seller can prove that the increase is the result of: additional costs for labor or materials to provide the service; increased costs from the supplier; increased costs to provide the goods or services during the state of emergency; and that the increase is no more than 10 percent above the total of the cost to the seller, plus a customary markup. Another exception is provided if the goods in question were on sale immediately prior to the emergency proclamation; the seller may calculate the 10 percent increase from the price at which the item usually is sold.

For 180 days after a disaster is declared, contractors may not sell repair or reconstruction services or emergency cleanup services for a price greater than 10 percent above the price immediately prior to the emergency. The same exception applies as outlined above.

Either the state legislature or a local governing body can extend this statute in increments of 30 days if such action is necessary to protect the lives, property or welfare of citizens. Penalties include a maximum fine of $1,000 and maximum misdemeanor imprisonment of one year, or both. Ark. Stat. Ann. sec. 4-88-301-305 (1997)

The California Legislature has made similar legislative notice and requirements. However, the misdemeanor violation can be punished by a maximum county jail term of one year or a maximum fine of $10,000, or both a fine and imprisonment. Cal. Penal Code sec. 396 (West 1997)

In Connecticut, the governor may declare a supply emergency exists as a result of a natural disaster, strike, civil disorder or other extraordinary adverse circumstance. The governor then can declare a product or service to be in short supply and may impose price restrictions or rationing. The governor shall make written findings regarding the market disruption, that the product is in short supply and that the product or service is essential to the health, safety and welfare of the people (e.g., food, clothing, shelter and products to protect life or property) and that imposing price restrictions or rationing is necessary to protect the health, safety and welfare of the people. The proclamation is then filed with the secretary of state and the clerks of the state Senate and House of Representatives; the proclamation remains in effect for 90 days or until the end of the emergency, whichever occurs first. The General Assembly can disapprove the proclamation by a majority vote in each house. The commissioner of consumer protection adopts regulations concerning rationing of products and services.

During a supply emergency, no person shall sell a product or service at a price that exceeds the price charged before the emergency. An exception is provided for the additional costs incurred in connection with acquisition, production, distribution or sale of an energy resource. A violation of the statute results in a maximum fine of $1,000 or a maximum imprisonment of one year, or both, for each offense. If a person intentionally violates the statute or engages in a pattern of activity of repeated violations, the penalty increases to a maximum of $5,000 and a jail term of up to five years, or both, for each offense. Each violation and each day on which a violation occurs or continues shall be a separate offense. Conn. Gen. Stat. Ann. sec. 42-231-233 (1998)

The District of Columbia defines the normal average retail price as not more that 10 percent more than the price of similar services sold or offered in the Washington metropolitan area during the previous 90-day period. After the mayor declares a state of emergency, it is unlawful to charge more than the normal average retail price for any merchandise or service sold during the emergency. Anyone who violates the statutes is subject to a maximum fine of $1,000 and the mayor may revoke, suspend or limit the license, permit or certificate of occupancy of a person who violates the statute. D.C. Code Ann. sec. 28-4101-4103 (1996)

Florida provides a list of essential commodities during a state of emergency (food, water, ice, chemicals, petroleum products and lumber). It is prima facie evidence that the price in unconscionable if the amount charged is grossly disparate with prices charged for the commodity or dwelling unit or self-storage facility within the last 30 days prior to the emergency and the increase is not attributable to additional costs incurred in connection with selling or renting the commodities, dwelling unit or storage facility, or a national or international market trend. Another measure that can be applied is whether the amount charged grossly exceeds the average price for the commodity during the previous 30 days and the increase is not attributable to additional costs incurred. A price increase approved by an appropriate government agency does not violate the statute. An exception is provided to growers, producers or processors of food products, but not to retailers. A maximum civil penalty of $1,000 per violation with an aggregate maximum total of $25,000 for any 24-hour period can be imposed. Penalties collected under the statute shall accrue to the enforcing authority to further consumer enforcement efforts. Fla. Stat. Ann. sec. 501.160-501.164 (West 1997)

Georgia prohibits a person, firm or corporation from selling or offering at retail any goods or services necessary to preserve, protect, or sustain the life, health or safety of persons or their property at a price higher than the price charged immediately prior to the declaration of a state of emergency. The prices may be increased only by the amount that accurately reflects an increase in the cost of the goods or services to the retailer or an increase in the cost of transporting the goods or services to the area. Georgia specifically allows the retailer or installer of lumber, plywood and other lumber products to increase the price of such products to replenish the daily stock at current market rates (and maintain the same markup percentage applied prior to the state of emergency). Ga. Code Ann. sec. 10-1-393.4 (1997)

Hawaii has passed legislation that prohibits an increase in the selling price of any commodity (retail or wholesale) in an area subject to a disaster declaration. No landlord can terminate a rental agreement except for a breach of a material term of the rental agreement or because the unit is unfit for occupancy. Any additional operating expenses incurred by the seller or landlord because of the disaster (and that can be documented) can be passed on to the consumer. These prohibitions remain in effect until the disaster declaration is altered or revoked by the governor. Defenses available to the merchant, landlord or other business owner include: the violation of the price limitation was unintentional; there was a voluntary rollback of the price after discovering this statute had been violated; or a price restitution program has been instituted for all consumers who may have paid excessive prices. Civil penalties apply and each item sold at a prohibited price constitutes a separate violation. Hawaii Rev. State. sec. 209-9 (1997)

Louisiana has decreed that the value of goods and services may not exceed the prices established at or immediately before a state of emergency declared by the governor or parish president. However, the value may include reasonable expenses an a charge for any business risk in addition to the cost of the goods and services. Each sale or offer for sale in a separate offense under the states and the penalties include both a civil fine and attorney's fees. La. Rev. Stat. Ann. sec. 29:732 (West 1997)

Contact Cheryl Runyon in the NCSL Denver office (303) 364-7700, if NCSL can be of further assistance.