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NEWS JUNE 7, 2021 ■ 15
typically include injunctions, restitution orders and before the emergency declaration—for example, if a
civil penalties. Some states also specify criminal temporary discount period was scheduled to end on
charges for willful acts of price gouging. a specified date—it is crucial to keep records showing
Last month’s pipeline shutdown had a sharp that the increase was planned before an emergency
impact on gasoline supply and prices charged by declaration went into effect. If it is possible to de-
retailers. The demand for gasoline nationwide rose lay the price increase, and thus extend a discount
by 20% the following week and by 40.1% in Florida, period, the long-term goodwill to be gained may
Georgia, the Carolinas and Virginia. Local gasoline outweigh the additional short-term revenue from a
shortages occurred also. For example, 70% of gas higher price.
stations in Charlotte, North Carolina, were report- Businesses should also think twice about rais-
edly out of fuel by May 12. Average gasoline prices ing prices, particularly for essential goods, merely
increased nationwide by 6 cents per gallon, and by because it appears the market will bear temporary
15 cents per gallon in Michigan. emergency-related increases. If such price increases
In addition, there were many anecdotal reports of exceed the threshold set by state law and are not due
extreme price increases at gas stations, giving rise to solely to cost increases, the business will be suscep-
concerns about price gouging. For example, one gas tible to charges of price gouging. This can have legal
station in Richmond, Virginia, reportedly charged consequences and also negatively impact goodwill.
$6.99 per gallon, despite an average price in that Relatedly, the pipeline shutdown also reminds
area of $2.83 per gallon. In North Carolina, the state us of what companies can do if they believe they
attorney general’s office announced 39 complaints of are victims of price gouging by their suppliers.
price gouging. Businesses can file complaints with their state At-
It bears emphasis, however, that these gasoline torney General’s Office, which can often be done
price increases did not necessarily indicate price by telephone. They can also send cease-and-desist
gouging. For example, price hikes on the order of letters to their suppliers that identify the products
even 15 cents per gallon—roughly 6%—would not and prices in question, explain that price gouging
likely be considered price gouging under any cur- is illegal, and demand that prices revert to reason-
rent state law. The same is true for even larger price able or pre-emergency market levels. If a private
spikes if they were rooted in cost increases the seller right of action is available under the state’s unfair
passed on to the consumer. In contrast, doubling trade practices law, businesses can file lawsuits for
the price per gallon, particularly if other sellers in injunctive relief and damages, in addition to refer-
the same area did not do so, would tend to indicate ring the price gouging to state authorities. For large
price gouging because the price increases presum- companies, it may be effective to submit complaints
ably were not caused by increased costs to the seller. to their state legislators or members of Congress,
The pipeline shutdown and its attendant price who are typically eager to publicize and investigate
increases provide several key reminders for com- price gougers.
panies. Most importantly, businesses that consider Ultimately, consumer-facing companies should
raising prices for goods during an emergency, par- heed the lessons of the East Coast pipeline shut-
ticularly while emergency declarations are still in down. They should take the time to examine their
effect, should bear in mind that they may be vulner- states’ laws and ensure their own compliance or take
able to complaints of price gouging. Although state action if they themselves were victimized by price
laws differ, it is advisable to raise prices—if at all— gouging. ■
only to the extent necessary to offset increased costs
of production or distribution. Such increases often Jason A. Levine is a business litigation and antitrust
fall within safe harbors in price-gouging laws. partner in the Washington, D.C., office of Alston &
Further, any such cost increases should be doc- Bird. He has advised many clients on price-gouging
umented in detail. If a price increase was planned issues.
CONNECTICUT
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