Under the Collar

Large-scale crises yield large-scale humanitarian responses — from international volunteer efforts and mobilization of national aid organizations to very local and mostly unrecognized community actions.  Every day, I hear of people checking in on elderly neighbors, offering to help each other with errands, and giving away highly-sought-after sanitation products.  Unfortunately, just as sure as most people respond to a crisis with good intentions, there are those who see opportunity and will seize this moment to try to profit from the collective fears and chaos.

“Price gouging” is a term that gets a lot of use in a time like this.  It generally means raising the prices of goods, commodities, or services, and carries a negative connotation suggesting that the increase in price is artificial, unjustified, or designed to take advantage of a serious need for these things. 

The US Attorney’s Offices in West Virginia recently issued a press release announcing a task force, in partnership with the WV Attorney General’s Office, to combat fraud related to COVID-19.  One of the areas of fraud the task force will focus on is price gouging scams. 

The precise legal definition of price gouging differs from state to state, since the illegal act of price gouging is a state construct — there are no federal laws specifically defining and prohibiting price gouging (although there are federal laws that may reach conduct that results in price gouging, like antitrust laws and RICO).  This makes the crime of price gouging out of reach for the US Attorney’s Office, but within the jurisdiction of the State Attorney General.

West Virginia’s prohibition of price gouging is found in WV Code §46A-6J-1, et seq.  This prohibition only comes into play when the Governor declares a State of Emergency or State of Preparedness.  When I was Deputy Counsel to Governor Tomblin, I assisted in drafting the law that defined and enabled a State of Preparedness to enlist emergency protections in advance of a major disruption to avoid an emergency, and price gouging was a major concern. 

On March 4, Governor Justice declared a statewide State of Preparedness, and on March 16, he declared a State of Emergency in response to COVID-19.  As of March 4, it is unlawful for any business or individual to sell food and other essential or emergency items and services to any person in the state at a price that is 10% higher than the price of the same good or service prior to the State of Preparedness and State of Emergency. 

This law is not designed to scare away legitimate businesses from selling essential items in a time of crisis.  There are exceptions to this prohibition that cover price increases due to increase in supply costs or other factors attendant to an emergency.  If you are a business with concerns about potential criminal exposure associated with price changes or selling essential goods and services, contact the Bowles Rice White Collar Defense team at (304) 347-1137 for a consultation.