What Price Gouging Laws Do

Price gouging laws are state statutes that restrict price increases on specified goods and services during declared emergencies. The basic premise is that when a natural disaster, public health emergency, or other crisis creates sudden scarcity of essential goods — bottled water, gasoline, food, generators, medical supplies, shelter — ordinary market mechanisms that would eventually correct the scarcity are too slow to prevent exploitation of consumers who have no choice but to pay whatever is being charged. Price gouging laws impose a legal ceiling on price increases during emergency periods to protect consumers from this exploitation.

Price gouging laws have been controversial among economists, with many arguing that allowing prices to rise during emergencies encourages increased supply and efficient allocation. Regardless of the economic debate, these laws are politically popular and have been enacted in the vast majority of states. During major emergencies — the COVID-19 pandemic, hurricanes, winter storms, wildfires — state AGs receive large volumes of price gouging complaints, enforcement is active, and news coverage of prosecutions is substantial. For businesses that sell goods or services that fall within the scope of price gouging statutes, understanding when the laws apply and what they permit is operationally essential during emergency conditions.

Triggering Events and Duration

Most state price gouging laws are triggered by a formal government declaration — a state of emergency, a disaster declaration, or a similar official proclamation by the governor or other specified authority. The law typically takes effect when the declaration is issued and remains in effect for the duration of the declared emergency, which may be extended multiple times. Some state price gouging laws cover a fixed period of days after the triggering event rather than the entire declared emergency period.

It is important for businesses to monitor emergency declarations in the states where they operate and to identify immediately whether any declaration triggers an applicable price gouging law. During the COVID-19 pandemic, many businesses were surprised to find that state price gouging laws applied to a wide range of products beyond those typically associated with natural disaster emergencies, including hand sanitizer, face masks, and disinfectant products. The breadth of covered goods and services varies by state, and the scope is often interpreted expansively during active enforcement.

What Price Increases Are Prohibited

The specific price increase threshold that triggers price gouging liability varies considerably among states. Some states use a percentage-based threshold — typically 10 to 25 percent above the pre-emergency price — and any price increase above that threshold is presumptively unlawful unless the seller can justify it based on increased costs. Other states use a more general reasonableness standard, prohibiting excessive or unconscionable price increases without specifying a precise percentage. A few states require that the seller’s price not exceed cost plus a reasonable markup, leaving the determination of what is reasonable to be resolved in enforcement proceedings or litigation.

The reference price against which increases are measured is the seller’s price immediately before the emergency declaration, or in some states the price during a specified look-back period before the emergency. For businesses that have cost-based justifications for price increases — genuine increases in their cost of goods sold, transportation costs, or other direct costs caused by the emergency — many state laws provide an exception that permits price increases that reflect cost increases. However, the cost justification must be documented and must be genuinely tied to the seller’s actual costs, not simply to the fact that market prices have risen.

Covered Products and Services

State price gouging laws typically cover a defined list of products and services that are considered essential during emergencies. The covered categories most commonly include food, water, ice, fuel, generators, building materials, housing and lodging, medical supplies, pharmaceuticals, and transportation. Several states have expanded their covered categories in response to specific emergencies: many states added personal protective equipment and cleaning supplies to their price gouging statutes during or after the COVID-19 pandemic.

Online sellers, including marketplace platforms and third-party sellers, have been a significant focus of price gouging enforcement in recent emergencies. Amazon, Walmart, and other major platforms have removed listings and banned sellers who were found to be engaging in price gouging on their platforms, often in advance of formal government enforcement. Third-party marketplace sellers who raise prices on covered goods during emergencies may face enforcement from state AGs, from the FTC, and from the platform itself, in addition to reputational damage from public identification as price gougers.

Penalties and Enforcement

Violations of state price gouging laws can result in civil penalties, criminal prosecution in some states, and civil remedies including restitution to affected consumers. The severity of penalties varies by state, with some states imposing per-violation penalties in the thousands or tens of thousands of dollars for each unlawful transaction. During the COVID-19 pandemic, state AGs pursued enforcement against thousands of sellers and obtained substantial restitution and penalties in the aggregate.

The FTC has also asserted a role in price gouging enforcement under its unfair or deceptive practices authority, arguing that extreme price gouging on essential goods during emergencies constitutes an unfair practice under Section 5 of the FTC Act. While federal price gouging law is not as well-developed as state law, FTC interest in the area adds another layer of enforcement risk for businesses that sell covered goods nationally during declared emergencies.

Practical Guidance for Businesses

Businesses that sell products or services that could be covered by price gouging laws should establish monitoring protocols that identify emergency declarations in states where they operate and trigger immediate pricing review when applicable. Pricing decisions during emergency periods should be documented, should reflect actual cost changes, and should be reviewed by counsel. Businesses that need to raise prices during emergencies due to genuine cost increases should document those costs carefully, as cost-justification defenses are typically available under most state price gouging laws but require supporting evidence.

For businesses that use dynamic pricing — algorithms that automatically adjust prices based on demand signals — the price gouging implications of emergency surges deserve particular attention. A dynamic pricing algorithm that automatically raises prices on covered goods when demand surges during an emergency may be operating in violation of applicable price gouging law without any human decision-maker specifically choosing to gouge. Businesses with dynamic pricing systems should build price gouging compliance controls into those systems, including triggers that alert human reviewers when pricing on covered goods reaches levels that may implicate applicable state laws.