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New Jersey’s Aggressive Enforcement of the CFA’s Proscription on Price-Gouging During the COVID-19 State of Emergency

New Jersey’s Aggressive Enforcement of the CFA’s Proscription on Price-Gouging During the COVID-19 State of Emergency

Apr 17, 2020

by Richard A. West, Esq.

The declaration of a state of emergency on March 9, 2020 by Governor Murphy gave the Attorney General and the Division of Consumer Affairs a powerful tool to combat price gouging. Pursuant to New Jersey’s Consumer Fraud Act (CFA), sellers of goods and services are prohibited from implementing “excessive price increases” during a declared state of emergency.

The CFA defines an excessive price increase as one in excess of ten percent of the price that had been offered in the usual course of business prior to the emergency declaration. While sellers and service providers are permitted to pass on increased costs that they themselves face, their mark-ups cannot exceed ten percent of the mark-up applied prior to the declaration of emergency. The price gouging rule continues in full force and effect for thirty (30) days after the termination of the state of emergency.

After the Governor’s declaration, the Attorney General put sellers and service providers on notice of the proscription, and encouraged consumers to report instances of price gouging, https://www.njconsumeraffairs.gov/News/Pages/03112020.aspx.

Shortly thereafter, on March 17th, the Attorney General announced that the Division of Consumer Affairs had issued more than 80 cease and desist letters and had conducted over 150 inspections relating to price gouging complaints, https://www.njconsumeraffairs.gov/News/Pages/03172020.aspx.

The Attorney General, moreover, along with a number of other Attorneys General, transmitted a letter to online retailers including Amazon, eBay, Craigslist and Facebook, demanding that they police their sites against price gouging, https://www.njconsumeraffairs.gov/News/Pages/03252020.aspx.

The Attorney General and Division of Consumer Affairs are continuing their investigations and, in some cases, issuing Subpoenas demanding information about the pricing and costs of products, including surgical masks, hand sanitizers and other goods that are now in great demand. The information being sought is very detailed as to the sellers’ sales practices, including the prices offered, sellers’ costs and refund/return policies. The information requested is also specific as to date of sale, including all sales that took place after 5:53PM on March 9th — the time Governor Murphy declared the state of emergency.

In a press release from April 15th, https://www.njconsumeraffairs.gov/News/Pages/04152020.aspx, the Attorney General and Division of Consumer Affairs announced that they had issued 514 cease and desist letters and 89 subpoenas to businesses that had been reported to consumers. They also noted that thus far, the Division had received 2,978 complaints against approximately 1,800 businesses. Violations of the CFA can carry significant consequences, including the issuance of an injunction prohibiting such practices, as well as significant civil penalties, and the assessment against the violator of the investigative costs and attorney’s fees incurred by the State.

Of course, the best way to avoid any such clam is not to raise prices in violation of the executive Order and CFA under any circumstances. Nevertheless, if contacted by the Attorney General or Division of Consumer Affairs in connection with a price gouging investigation, it is advisable to speak with counsel before speaking with the government. It is also advisable to maintain detailed records of sales transactions, refunds/returns and records of inventory sourcing and pricing.

The Murphy administration, through the Attorney General, has made it clear that it intends to act aggressively to stop unlawful price gouging. This policy is a continuation from past administrations during events such as Hurricane Katrina and Superstorm Sandy. We can expect civil actions and settlements being publicized on the websites of both offices in the near future.

Brown Moskowitz & Kallen counsels businesses facing legal action under the Consumer Fraud Act. If you have questions about business practices related to the Consumer Fraud Act, please contact partner Richard A. West at (973) 376-0909, ext. 1126 or mobile, (973) 229-7928.

This article is for informational purposes only and is not intended to constitute, and does not constitute, legal advice.

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