New Jersey Businesses: Disasters Are Not the Time For Price Gouging

The 2014 hurricane season has been kind to New Jersey so far. However, some New Jersey Businesses are still feeling the repercussions of their conduct in the wake of Superstorm Sandy. So far, the state has recovered a total of $1,080,702.64 in civil penalties, consumer restitution, and other fees from entities accused of having violated the New Jersey price gouging statute.

New Jersey’s Price Gouging Statute

Pursuant to N.J.S.A. 56:8-109, 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.” The law 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. Even then, however, the markup above cost may not exceed 10 percent above the markup from cost applied in the usual course of business prior to the state of emergency. Businesses face fines up to $10,000 for a first violation and up to $20,000 for subsequent violations. Notably, each sale of merchandise is considered a separate event.

Recent Enforcement Actions

In the wake of Superstorm Sandy, the New Jersey Attorney General’s Office has cracked down on businesses, particularly hotels and gas stations, that violated the State’s price gouging statute. According to a press statement by the Division of Consumer Affairs, it has filed 27 enforcement actions, of which 23 have been resolved through settlement.

Most recently, Acting Attorney General John J. Hoffman announced a settlement with Amy Hotels, LLC, d/b/a “Econo Lodge,” in Egg Harbor Township. The hotel has agreed to pay $64,543.96 to resolve allegations that it engaged in 545 instances of unlawful price gouging, which purportedly included raising room rates from $79.00 to $199.99 per night during the state of emergency. An additional $25,000 in civil penalties is suspended but will become payable if the hotel fails to abide by the terms of the settlement within one year.

Early September marks the height of the Atlantic hurricane season, so we may not yet be out of the woods. Should disaster strike, we remind local businesses that trying to capitalize on others’ misfortune may not only harm your reputation, but also your bottom line.

If you have any questions about New Jersey’s price gouging statute or would like to discuss how a disaster may impact your business, please contact me or the Scarinci Hollenbeck attorney with whom you work.