The Antitrust/Price-Gouging Intersection in the COVID-19 Era

While the antitrust laws have long protected a merchant’s freedom to charge a price as high as the market will bear so long as it is set unilaterally, price-gouging laws curtail that freedom when a state of emergency has been declared. At both the state and federal level, COVID-19 has given rise to a substantial new focus on pricing practices in an effort to combat price gouging on a broad range of products, including essential supplies like hand sanitizer, food products, and personal protective equipment. On March 25, 2020, 33 state attorneys general sent letters to various online marketplaces tasking them with monitoring and removing third-party listings suspected of price gouging to curtail this practice. Online platforms, however, frequently compete alongside the same purported price gougers they are now being asked to monitor and refer to enforcement authorities for prosecution.

Platform and market operators thus now must grapple with how best to address price complaints asserted against competitors without drawing antitrust scrutiny. To reduce antitrust risk, any price-gouging policy should be:

• Designed and implemented on a strictly unilateral basis
• Set forth in a clear manner with easy to follow triggers and subsequent penalties
• Communicated in advance to platform or marketplace participants
• Enforced consistently and fairly across the board
• Tailored to the unique risks faced by potentially dominant market participants

Depending on the business, price-gouging policies should also take into account and plan for ways that participants may be expected to try to circumvent the policy, for example, by re-listing old products as new ones or by bundling products together to evade comparison to pre-state of emergency pricing.

Market participants likewise must ensure they are pricing competitively while navigating a patchwork of state price-gouging laws and new policies that may restrain their sales regardless of whether they actually violate these laws. Documentation of increased costs justifying the need for increased prices is key for companies who need to increase prices during a state of emergency.

For more a more detailed analysis of price gouging laws and their intersection with antitrust, see our recent Bloomberg Law article.