Attorney General Bonta to Congress: A Federal Price Gouging Prohibition Protects Families, Small Businesses

OAKLAND - California Attorney General Rob Bonta today joined 16 attorneys general in supporting a federal prohibition on price gouging. While 40 states across the country, including California, ban price gouging, there is no federal price gouging prohibition. Because so many product supply chains are nationwide, states face heightened challenges when protecting consumers from price gouging. A complementary federal price gouging prohibition would provide critical partnership to state enforcement, protect both consumers and small businesses, and strengthen existing state laws.

"During and after a crisis, it is unfair - and harmful to our economy -for companies to reap higher profits for selling goods and services that families need to survive. That is why California's price gouging law protects Californians during and after wildfires, severe weather storms, and other emergencies," said Attorney General Bonta. "A federal price gouging prohibition that complements state law would build on successful partnerships between states and the federal government to protect consumers by making it easier to enforce price gouging prohibitions nationally, up the supply chain. This would benefit California consumers and small businesses who currently bear the brunt of their suppliers' price setting."

Price gouging refers to sellers who take unfair advantage of consumers during an emergency or disaster by greatly increasing prices for essential consumer goods and services. Price gouging prohibitions are not price caps; prohibitions place temporary limits on a business's ability to raise its profits on essential goods in a crisis. Price gouging prohibitions allow businesses to raise prices to cover costs, but those price increases should not result in an increase in their profits.

In the letter, the attorneys general explain that the current gap in federal regulations allows larger companies outside of state control to raise prices and pass down costs to smaller businesses. Without a federal prohibition, consumer-facing retailers - often small businesses - bear the burden of reputational and legal consequences of crisis-induced higher prices, even when the most significant price gouging activity may be happening up the supply chain. A federal price gouging prohibition that complemented state prohibitions would allow federal enforcement agencies, such as the Federal Trade Commission, to identify and restrain irrational price increases throughout the entire supply chain.

In the letter, the attorneys general argue that price gouging laws have key benefits that strengthen the economy. Price gouging laws:

• Prevent inefficient pricing overreactions in the heat of a crisis. Setting prices too high may damage a business's reputation and harm long-term profitability.
• Encourage the production of essential supplies. Increasing production and selling more products, instead of selling the same amount at a higher price, allows businesses to increase their gross profits but not their profit margins and helps ensure people have enough essential supplies at reasonable costs.
• Prevent hoarding. Encourages businesses to directly limit inefficient over-consumption.
• Keep prices competitive. If consumers have no choice but to buy an essential product from one particular seller, price gouging prohibitions can restrain high prices for products where there is very little competition.

In sending today's letter, Attorney General Bonta joined the attorneys general of New York, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Oregon, New Jersey, New Mexico, Pennsylvania, Vermont, and the District of Columbia.

In California, price gouging during a state of emergency is illegal under Penal Code Section 396. Californians who believe they have been the victim of price gouging should report it to their local authorities or to the Attorney General at oag.ca.gov/report.

For additional information, please see DOJ's FAQs on price gouging here.

A copy of the letter can be found here.