If you own a business operating during a Declared State of Emergency, the government imposes certain price constraints pursuant to the Consumer Fraud Act, N.J.S.A. 56:8-1, et. seq. Generally, the Law prohibits the sale of merchandise at a price 10% greater than prior to the State of Emergency. While the Law is intended to protect consumers from excessive price increases, the enforcement of the Law can unfairly target businesses reacting to market volatility and supplier price increases.
What is Price Gouging?
The current law was enacted in 2002 when the Legislature found that “during emergencies and major disasters, including, but not limited to, earthquakes, fires, floods or civil disturbances, some merchants have taken unfair advantage of consumers by greatly increasing prices for certain merchandise.” N.J.S.A. 56:8-107. In passing the law, the Legislature’s stated intent was to “to prohibit excessive and unjustified price increases in the sale of certain merchandise during declared states of emergency in New Jersey.”
Price Gouging is identified in the Law as “excessive price increases” which is defined as “a price that is excessive as compared to the price at which the consumer 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.” The Law identifies two (2) types of excessive price increases:
- The price exceeds by more than ten percent (10%) 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;
- In those situations where 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 ten percent (10%) 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.
Is All Merchandise Covered by the Price Gouging Law?
Not all merchandise is covered by the Price Gouging law. The Law is specifically limited to “any merchandise which 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.” N.J.S.A. 56:8-109.
Who Enforces the Price Gouging Law?
The Law gives broad enforcement powers to the New Jersey Attorney General. N.J.S.A. 56:8-3. If it “appears” to the Attorney General that a person or entity has engaged in Price Gouging, Law Enforcement can:
- Require such person to file on such forms as are prescribed a statement or report in writing under oath or otherwise, as to all the facts and circumstances concerning the sale or advertisement of merchandise by such person, and such other data and information as he may deem necessary;
- Examine under oath any person in connection with the sale or advertisement of any merchandise;
- Examine any merchandise or sample thereof, record, book, document, account or paper as he may deem necessary; and
- Pursuant to an order of the Superior Court impound any record, book, document, account, paper, or sample of merchandise that is produced in accordance with this act, and retain the same in their possession until the completion of all proceedings in connection with which the same are produced.
A person or entity that fails to comply with the investigation can be held in contempt of court or be banned from selling any merchandise. N.J.S.A. 56:8-6. The investigation can require that individuals produce documents and give statements even if they assert their Fifth Amendment Privilege. N.J.S.A. 56:8-7.
What Can the Government Do if You are Found to be Price Gouging?
The Law has broad and extremely harsh remedies available to the government. If it “appears” to the Attorney General that a person or business is engaged in Price Gouging law enforcement can seek an injunction or event appoint a Receiver for the business. N.J.S.A. 56:8-8. Moreover, law enforcement can seek to ban a person from managing or owning a business and vacate the charter of a business. The government can also revoke certain licenses.
Financial penalties can also be assessed. A person or entity found to be in violation of the Law can be fined up to $10,000.00 for the first violation and up to $20,000.00 for each subsequent violation. N.J.S.A. 56:8-13.
What Should I Do if I Receive a Letter from the Attorney General about Price Gouging?
If you are a business owner and received a letter from the Attorney General demanding records or information relating to a price gouging investigation, speak to an attorney to learn your rights. Do not assume that an increase in the price of merchandise is a violation of the Statute. A comprehensive and detailed analysis is necessary to determine your rights as well as whether or not there is in fact a violation of the statue.
Rosenberg | Perry & Associates has aggressive defense attorneys who provide diligent and compassionate representation. Our team consists of former prosecutors and experienced attorneys who can help you navigate the complex regulatory Price Gouging scheme and ensure that your business is protected from often unfair allegations of illegal conduct.
- New Jersey Consumer Affairs: https://www.njconsumeraffairs.gov/COVID19
- New Jersey Attorney General Statement: https://www.nj.gov/oag/newsreleases20/pr20200317a.html