Can Businesses Raise Prices Without Violating NJ’s Price Gouging Statute?

COVID-19 Emergency Triggers Consumer Fraud Act’s Price Gouging Provision

Concerns over the Coronavirus (COVID-19) pandemic have resulted in an unprecedented demand for products like toilet paper, hand sanitizer, and face masks. The pandemic has also prompted activation of New Jersey’s strict price gouging statute.

On March 9, 2020, Governor Murphy signed an Executive Order declaring a state of emergency in New Jersey. As referenced in Executive Order 103, New Jersey’s Consumer Fraud Act expressly prohibits excessive price increases during a declared state of emergency, or for 30 days after the termination of the state of emergency.

New Jersey’s Price Gauging Statute

Pursuant to the New Jersey Consumer Fraud Act (N.J.S.A. 56:8-107), businesses are prohibited from imposing excessive price increases during a declared state of emergency for merchandise used as a direct result of an emergency or used to “protect the life, health, safety, or comfort of persons or their property.”  As set forth in the statute:

The Legislature finds and declares 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. While the pricing of merchandise is generally best left to the marketplace under ordinary conditions, when a declared state of emergency results in abnormal disruptions of the market, the public interest requires that excessive and unjustified price increases in the sale of certain merchandise be prohibited. It is the intention of the Legislature to prohibit excessive and unjustified price increases in the sale of certain merchandise during declared states of emergency in New Jersey.

The Consumer Fraud Act defines excessive price increases as more than 10 percent above the price at which merchandise was sold during the normal course of business immediately prior to the state of emergency. New Jersey businesses may raise prices in cases where their supplier imposes higher costs or the merchants otherwise incur additional costs of providing goods or services during the state of emergency. Prices, however, may not exceed 10 percent above the markup from cost applied in the usual course of business prior to the state of emergency.

Violations of the Consumer Fraud Act can be extremely costly. The statute authorizes the Attorney General to prosecute violations and impose monetary fines and other penalties. Businesses face fines up to $10,000 for first violation and up to $20,000 for subsequent violations.  Each product sale constitutes a separate violation. Aggrieved consumers, along with classes of consumers, can also file private suits against businesses. If successful, these actions can result in treble (triple) damages and attorneys’ fees awards.

Attorney General Issues Warning Over Coronavirus Price Gauging

Attorney General Gurbir S. Grewal and the New Jersey Division of Consumer Affairs (Division) are aggressively enforcing the state’s price gouging law. The Division has set up a hotline for price gouging complaints related to COVID-19.

According to a press statement from the Attorney General’s Office, the Division is dedicating significant resources to investigating price gouging complaints. “We are taking an all-hands-on-deck approach to consumer complaints about price gouging and other abuses related to the COVID-19 pandemic,” said Attorney General Grewal. “It’s times like these when the work of the Division of Consumer Affairs is most critical. People are looking to us for guidance and for protection, and it’s our job to be there for them in every way we can. I applaud the dedicated staff at the Division of Consumer Affairs, and their attorneys in the Division of Law, for their efforts to keep consumers safe during this difficult time.”

The Division reports having logged a total of 619 complaints related to alleged COVID-19 price gouging or other consumer protection violations. The complaints include allegations that retailers are unfairly raising prices on surgical masks, hand sanitizers, disinfectant sprays and wipes, food, bottled water, and other items being purchased by consumers worried about protecting themselves from the coronavirus. The Division has sent approximately 82 cease-and-desist or warning letters to businesses, has completed at least 159 inspections and has issued 13 subpoenas for additional information. 

In the wake of Super Storm Sandy, the last time a major disaster struck New Jersey, the state recovered more than a million dollars in civil penalties, consumer restitution, and other fees from entities that violated the New Jersey price gauging statute. While we hope it does not need to be said, we remind New Jersey businesses that trying to capitalize on the pandemic may not only harm your reputation, but also your bottom line.

If you have questions, contact us

If you have any questions or if you would like more information on the Act on price gouging, we encourage you to contact the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.