As Prices Spike Tong Fields Complaints for Price Gouging in Wake of Coronavirus

“We’re seeing it everywhere. It’s not just consumers going to their local store, but also hearing about it and seeing attempts to charge businesses, and in particular hospitals, more for things including masks and personal protective equipment. But, it’s really, really important that people understand that not every price increase is price gouging,” said Connecticut Attorney General William Tong, by phone on Wednesday.

As of April 15, Tong’s office had received 520 complaints concerning 288 businesses in the state and has sent letters of inquiry to 215 of the businesses, including “several to Amazon and eBay retailers, and another 44 letters will go out Friday.” The letters seek information concerning the retailers’ prices and wholesale costs for the items at issue, he said. 

“It’s important to note a couple of things. One is that those are formal complaints and doesn’t include complaints that we see on Facebook and Instagram and Twitter that don’t get formally communicated to us and substantiated. It doesn’t include scams and scam-related issues. It doesn’t necessarily include the travel-related work we’re doing where people are having trips canceled and not able to get their money back,” he said. “So, there’s a ton of consumer protection work being done on top of price gouging.”

The laws only apply to prices charged by retailer and allow for fluctuation in price that “occurs in the normal course of business.”

“It does not require retailers to sell items at a loss or no margin if their wholesale costs go up. Moreover, the statute does not reach wholesale sales,” said Tong in an April 15 email. 

Just four weeks before, in a March 17 release, Tong’s office said it had received 71 complaints regarding price hikes on hand sanitizer, disinfectant wipes and toilet paper. The complaints included retailing reports of 7.5 oz hand sanitizer bottles priced at more than $25,  30-packs of toilet paper for $39.99 and three-packs of disinfectant wipes for nearly $40. Complaints were also made against online vendors, with one selling face masks for nearly $50 plus $200 for shipping. 

Lora Rae Anderson, director of communications for the Connecticut Department of Consumer Affairs, said her office had received numerous complaints since March 10, when Gov. Ned Lamont declared a civil and health emergency in the state. 

“We now have over 100 coronavirus related complaints and more than 50 of those are price-gouging complaints,” said Anderson on April 14. “What we’re finding is that some folks who were selling hand sanitizer for $5 a bottle three weeks ago are now selling it for $7 or $8 but their wholesaler is charging them more, so it’s not necessarily something where the retailer is trying to rip off the consumer. But there are some cases where we’re seeing someone charging $30 for hand sanitizer, which is obviously a red flag. We’re seeing a lot of it online. A lot of people will sell on Amazon or Craigslist where they’re already a third party vendor.” 

Tong said online price gouging continues to be a problem. 

“I’ve joined together with my colleagues across the country and we’ve put a lot of pressure on the major online platforms, including Amazon, Walmart, Facebook, eBay. I’ve received responses from most if not all of them detailing the steps they’ve taken to protect people on their sites,” he said. “That being said you still see and we recently saw exorbitant prices for masks and hand sanitizers on these online platforms so they’ve got to do a better job.”

Hospital costs, CDC guidelines

In a Facebook Live briefing on Friday, Dr. Ajay Kumar, Executive Vice President and Chief Clinical Officer for Hartford HealthCare, said the hospital’s costs for personal protective equipment have risen dramatically, but added it may be due to market pressure rather than price gouging. 

“Definitely the prices have gone up and we are paying up to five times the prices that we thought we would pay for those materials. It’s a significant stressor for any healthcare provider especially for as large a volume buyer as we are and that’s a concern for us,” he said. “Obviously some of that is price and some of that is supply and demand. I understand the market. But this is a concern for us right now that up to five times is a significant amount of impact especially during an economic crisis that all of us are going through.” 

Prices charged to hospitals for some items have risen more than 1000 percent, according to an April 7 report from The Society for Healthcare Organization Procurement Professionals, known as SHOPP, a nonprofit that supports “ the data-driven, ethical evaluation of products and solutions that achieve meaningful and financially responsible healthcare outcomes.”

The report analyzed the pre-COVID-19 cost of personal protective equipment items compared to pricing as of April 6, including gloves, masks, gowns, sanitizer and soap. The analysis used guidelines from the Centers for Disease Control that included increased protocols during COVID-19 for changing protective gear. 

In the report, the cost of vinyl exam gloves increased by 300 percent. N95 masks increased in price by 1513 percent. The cost of isolation gowns increased by 2000 percent and soap prices increased by 184 percent. 

Federal legislation, state laws

In a CT Exporters special topic conference call on April 16, Sen. Richard Blumenthal said he had seen complaints from consumers and hospitals about increases in prices, even on lower quality products including masks. 

“We have also seen markets for ventilators and other essential equipment become difficult and fertile for price gouging,” he said. “There’s a worldwide demand and there just isn’t enough supply right now and that creates the fertile ground for price gouging.” 

There is no federal statute that specifically addresses price gouging, but Blumenthal said he and a number of his colleagues, including Sen. Amy Klobuchar, had proposed a law that would create the authority to take offenders to court to seek injunctive and compensatory relief.

“I think we need more federal action. I am seeking to add that kind of federal protection to the next emergency relief package. My priority is continuing relief to address this emergency and I’m hopeful that we will also protect consumers and frankly the hospitals who need this kind of equipment for the protection of their health care workers who are on the frontlines doing essential work risking their lives because many of them lack enough masks, gowns and personal equipment to do what they need to do,” he said. 

Kendra Berardi, a partner at Robinson & Cole who specializes in business litigation practices, hosted a conference call with Edward Heath, a partner who is chair of the firm’s government enforcement and business litigation practices.  In the call, Berardi explained that there is limited federal law on price gouging and that prosecution is mostly a state issue, with laws varying from state to state.

Businesses, individuals, wholesalers, brick-and-mortar stores and online entities that allow reselling can all be subject to a price gouging claim, Berardi said. Complaints can be brought by state attorneys general or state prosecutors, initiated from a member of the public, either consumer or business, in the supply chain. Private businesses can also bring a complaint in a civil context.

“Understand laws in your state. In Connecticut, the penalty can be incarceration for one year in prison. There can be civil fines. Courts can enjoin businesses from selling the product, which could be temporary for the length of the litigation but it could also be permanent. Businesses can also face revocations of license to do business or loss of federal or state funding,” she said. 

Berardi said the law applies when the governor declares a supply emergency statewide on specific products that the government has found to be in short supply or in danger of being short supply due to an abnormal market disruption. But, normal business and market fluctuations do not apply to price gouging. 

“So, if your costs of producing have gone up then it’s not price gouging [because] it’s not taking advantage of an abnormal market condition to make more money than you were making before the disruption,” she said. 

Heath said justifiable costs included costs of transportation, payroll, materials and shipping as well as “usual and seasonal fluctuations in manufacturing or sales,” among other factors. 

“Here’s the takeaway: If you’re selling something at a price that is noticeably more than it was selling for before the pandemic, you may get investigated and prosecuted,” he said. 

He said compliance is cheaper for businesses than paying penalties and recommended a proactive approach. 

“Identify all states where you sell your product. Get legal counsel on individual states’ price gouging laws. Develop policies on how prices are set. Keep excellent records,” he advised.

Latest from Cate Hewitt