NJ State of Emergency for Coronavirus Triggers Strict Rules to Curb Price Gouging

Retailers who violate law are subject to stiff fines; attorney general also warns companies against making false claims about supposed cure for any disease
Credit: Edwin J. Torres/ Governor's Office (CC BY-NC 2.0)
AG Gurbir Grewal: “We have a simple message to businesses seeking to profit from public health fears — don’t do it.”

The strongest anti-price gouging provisions of New Jersey’s strict consumer-protection law are now in effect, thanks to the state of emergency that Gov. Phil Murphy issued in response to the ongoing outbreak of coronavirus.

State officials had already begun to issue warnings to retailers about jacking up prices too high as products like hand sanitizers and surgical masks have been flying off the shelves in the wake of the outbreak, which so far has led to 15 people in the state testing positive for coronavirus disease, or COVID-19, and one fatality.

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But Monday evening’s state of emergency declaration now puts a firm lid on how much retailers can increase prices, at least throughout the duration of the emergency. New Jersey retailers who run afoul of the law are also exposed to stiff fines that the state can assess in response to any clear violations.

The number of confirmed COVID-19 cases in New Jersey has risen quickly in recent days — as public health experts predicted — prompting state officials to focus additional attention on strategies to mitigate the impact of the virus on local communities, in addition to continuing their efforts to prevent or contain its spread entirely.

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The state of emergency declaration and an associated public-health emergency designation for all 21 counties provides the state with greater flexibility and additional resources for the ongoing response. Murphy said in a statement that New Jersey was “deploying every available resource, across all levels of government,” to combat the spread of the disease.

Consumer Fraud Act

New Jersey’s Consumer Fraud Act already makes it illegal to engage in any unreasonable price inflation in the wake of a major public-health event, such as a disease outbreak, according to the state attorney general’s office. Last week, state officials announced that “warning letters” had been sent to 10 retailers, both online and brick-and-mortar, in response to cases where they suspected prices for certain products had been significantly increased in direct connection to coronavirus.

In addition to protecting against price gouging, the attorney general also warned that state law bans companies from making false claims about the effectiveness of a product as a cure for, or a prevention of, any disease.

The formal declaration of a state of emergency triggers additional consumer safeguards that are embedded in state law, including an explicit ban against the increasing of prices on products for sale to consumers by more than 10% compared to what the price of the same product was “immediately prior to the state of emergency.” The only exception to the strict price control is if an increase is caused by “additional costs imposed by the seller’s supplier or other costs of providing the good or service during the state of emergency.”

The lid on price increases stays in effect for the duration of the emergency and also within 30 days of its termination, according to the law. Retailers are subject to fines of $10,000 for an initial offense of violating the law, and $20,000 for each subsequent offense.

Like aftermath of Superstorm Sandy

A major flexing of this law occurred in 2012 in the wake of Superstorm Sandy, when state officials launched 200 separate investigations about price increases on everything from the sale of power generators to gas prices at the pump. The nightly charge for hotel rooms was also closely watched by the state as many residents fled their homes due to severe damage and widespread power outages.

The state ultimately filed lawsuits against 27 different businesses, and collected over $1 million in civil penalties, cost reimbursements and restitution for consumers. In addition, the state Division of Criminal Justice assessed some criminal penalties in fraud and price-gouging cases in the wake of Sandy, according to the attorney general’s office.

“We have a simple message to businesses seeking to profit from public health fears — don’t do it,” Attorney General Gurbir Grewal said last week. “If you do, we will hold you accountable.”

Anyone who believes they have been targeted by a scheme related to coronavirus, or were victimized by unreasonable price increases, is being encouraged by Gurbir and other state officials to file a complaint, either online at www.njconsumeraffairs.gov, or by calling 973-504-6240.