Don’t Get in Trouble for Price Gouging

To many business owners, the concept of price gouging can be confusing. On the one hand, price gouging seems like just a simple response to supply and demand; as demand goes up, shouldn’t the cost of a good or service also increase? That seems to be a basic economic and very legal, not to mention a very good, business practice.

But price gouging in Florida is a bit different than just supply and demand.

What is Price Gouging?

Price gouging is charging an excessive amount for a commodity, in response to an emergency—usually during a state-declared state of emergency.

To see if you are price gouging, the law looks at what you charged for the good or service, for 30 days prior to the declared emergency and compares it to what you are charging during the emergency. If you are charging a grossly higher amount during the emergency than before it, you may be price gouging.

By “higher,” that doesn’t mean prices can’t increase moderately—the law prohibits prices from being raised to an “unconscionable” level.

Testing for Price Gouging

One way to see if price gouging exists is to see if profit margin significantly increases on a per item or service basis, pre and during the emergency, and to compare the price of what is being sold to the same good or service being sold by others.

The more vital the item or service, the more likely it is that raising prices will be seen as price gouging.

What is a “Commodity” for the Purpose of Price Gouging?

Price gouging doesn’t apply to all items—but it applies to a lot of them.

Any item or service which is in demand as a direct result of the emergency, is an item or service protected by the price gouging laws. The item must be a necessity, not a luxury. So, for example, water after a hurricane might be protected, but alcohol or candy bars would not.

Commodities are often thought of as personal items, like water or food, but they can be anything—even housing or rental units or construction materials.  They also include services, like installation or repair of properties, or cleanup services, or transportation services.

When Can You Charge More?

There are times when you can charge more for a commodity during an emergency than you did previously, if you can show that the price of making or obtaining the goods has increased.

That is sometimes the case, in emergencies. But it means that you should keep all documentation, and be ready to justify and support your price increases, in the event a consumer complains about price gouging.

Different States

There is no uniform federal price gouging law; price gouging laws vary from state to state, so if you do business in multiple states, make sure you’re following the law of whatever state you’re increasing your prices in, to keep you out of trouble.

Doing business legally? We can help you do just  that. Call our Fort Lauderdale business attorneys at Sweeney Law P.A. at 954-440-3993 for help.

Sources:

myfloridalegal.com/price-gouging-hotline/price-gouging-frequently-asked-questions

fox35orlando.com/news/florida-price-gouging-hotline-how-works-how-file-complaint