Price-gouging or normal market functioning amid COVID-19?

April 21, 2020

The progression of COVID-19 into a global pandemic and measures taken to flatten the curve have resulted in severe economic disruptions. Illness-winnowed workforces and measures to prevent the spread of the virus have slowed or halted many manufacturing, sales and distribution activities, creating a patchwork of global supply chains that limits the availability of many products. At the same time, demand has skyrocketed for personal protective equipment (e.g., masks and gloves), hand sanitizer, certain health care products (e.g., respirators and test supplies), and essentials for day-to-day living (e.g., toilet paper and cleaning supplies). Demand has further increased due to hoarding of some of these products.

In the midst of these rapidly evolving economic conditions, wide-ranging lawsuits and government investigations in the US have raised concerns of manipulation of prices referred to as price-gouging. What do economics, prior litigation, and agency guidance tell us about the issues involved with ascertaining whether price-gouging, normal market functioning or both are affecting prices?

In this Law360 article, Mary Beth Savio and Timothy Snail discuss the role of economic analysis in assessing price-gouging claims, with particular focus on economic factors that may drive price elevation in states of emergency—such as supply chain interruptions, capacity constraints due to surges in demand, increased bargaining power for suppliers, increased search costs for new supply channels, and costs incurred by new entrants—and provide examples from prior litigation. The authors also discuss the intersection of price-gouging and antitrust.