By mid-March 2020, as the COVID-19 pandemic developed, Maryland’s Consumer Protection Division began to see a significant number of consumer complaints about the dramatic rise in price for everyday essentials. At that time, Maryland did not have a specific anti-price gouging statute in place. Motivated by these and other complaints, the Maryland General Assembly acted quickly, writing and, on March 19, 2020, passing the state’s first anti-price gouging bill as emergency legislation. Maryland Governor Larry Hogan signed the bill into law and, four days later, on March 23, 2020, issued an Executive Order (No. 20-03-23-03) invoking it.
Maryland officials have taken a hard line against price gouging during the current crisis, creating easy methods for consumers to report price gouging concerns, including an online complaint form and a consumer hotline. In late March, Maryland Attorney General Brian Frosh joined a coalition of 33 attorneys general urging online retailers like Amazon, Facebook, Craigslist, and eBay to more rigorously monitor price gouging by online sellers using their platforms. Baltimore City Council President Brandon M. Scott’s office has issued guidance to Baltimore City residents, advising them to take three steps if they believe a store is price gouging in response to the COVID-19 emergency: (1) photograph the product and price; (2) provide and document details (date, store location, etc.); and (3) call or email the state’s consumer hotline.
By April 16, Attorney General Frosh reported that his office had received hundreds of complaints of price gouging and issued more than one hundred warning letters to local businesses accused of improper practices during the COVID-19 pandemic. The Attorney General’s office has reported that it plans, at least for now, to continue to give accused businesses an initial chance to comply with the law through informal warnings before jumping into more formal legal action.
Could your business be the target of a price gouging complaint or investigation? Here is the “who, what, and when” you need to know about Maryland’s new anti-price gouging law.
1. WHAT are the basics of the new law? Under the law and Executive Order, unless exempted by an applicable federal law, a business that sells or rents certain identified consumer goods and services in Maryland (see below) is prohibited from raising the price on such items in a way that increases corporate profits by more than 10% while an emergency declared by the Governor is in effect.
2. WHEN does the new anti-price gouging law apply? The new law applies to any sale or lease that occurs after Governor Hogan’s March 23, 2020 Order was signed and while the COVID-19 emergency declared by the Governor (or any other later-declared emergency) remains in effect. Businesses can determine if any declaration of emergency is in effect through public announcements, Governor’s office press releases, and by visiting the Governor’s website (www.governor.maryland.gov).
3. WHO does the law apply to? – The law applies to retailers of every size. If your business sells or rents applicable goods and services to customers in Maryland, whether by brick and mortar store or internet sales, the law applies to you. This includes online retailers of all kinds and sizes. In a March 25, 2020 press release, Attorney General Frosh warned online retailers that if they sell products or services to Maryland consumers, they must comply with Maryland’s anti-price gouging law.
4. WHAT goods and services are covered by the law? The new law applies only to certain goods and services, which are specifically enumerated by Governor Hogan’s March 23, 2020 Executive Order. The covered goods and services are: (1) food and beverages (including water and ice); (2) fuel; (3) medicine and medical supplies and equipment; (4) hygiene and personal care products; (5) cleaning products; (6) pet food and veterinary care; (7) motor vehicle parts and repair services; (8) building supplies, building equipment, and home improvement and maintenance services; (9) storage space; (10) delivery services, including shipping and handling; (11) computers, related electronic devices, software programs, video streaming services, website hosting services, and internet, telephone, and telecommunications services; (12) batteries and energy sources; and (13) child care.
While most of these items are straightforward, the inclusion of “shipping and handling” (#10) would appear to broadly subject any company that ships products or goods to customers, regardless of the specific product or good shipped, to the law. Businesses that ship goods should exercise appropriate precautions and preserve critical documentation (including any evidence of increased third-party shipping costs and fees that are passed through to the customer) accordingly.
In addition, the emergency legislation that authorizes Governor Hogan’s Executive Order allows the Governor to apply the anti-price gouging rules to any good or service. As a result, what is and what is not covered by the new price gouging law is subject to change. Businesses should monitor Governor’s office press releases for any modifications or additions to the list of covered goods and services.
5. WHAT are the penalties? Proven violations of the new law are violations of the state Consumer Protection Act. Businesses may be subject to injunctive relief, mandatory disgorgement, consumer restitution, and civil penalties of $10,000 per violation. A violation may also be criminally prosecuted as a misdemeanor.
6. WHAT IF there’s an explanation for the price increase? According to guidance from the Maryland Attorney General’s office, a retailer who can prove that a price increase is “directly attributable to increases in the cost of labor or materials needed to provide the good or service” may not be liable under the anti-price gouging law. To protect themselves, and to build a defense to any potential claim of price gouging, businesses whose prices increase during the COVID-19 pandemic should preserve documentation, including: (1) historic and current internal pricing information; and (2) historic and current third-party supplier, shipper, partner, and subcontractor rate information, including invoices, notices, time sheets, purchase orders, and communications, among other potentially relevant evidence.
7. WHAT IF my business gets a warning letter from the Attorney General? Attorney General Frosh’s office has indicated a willingness to work cooperatively with businesses and to allow them an opportunity to remedy or explain any concerns of price gouging before pursuing formal legal action. To date, his office has done this by issuing warning letters. These letters require written responses.
The Ansa Assuncao LLP team stands ready to help your business respond to any warning letter, or more formal legal process, regarding price gouging investigations and will help interface with investigating authorities to work toward bringing any investigation to a swift resolution.