By: Michael Farmer
The novel coronavirus (COVID-19) is spreading its way through the United States.[1] As of March 7, 2020, five states have declared a state of emergency in response to the spread of the virus.[2] Currently, there is a world-wide shortage of medical supplies necessary for those who treat patients diagnosed with COVID-19.[3]
Enter price gouging. The demand for masks has created an opportunity for entities with “less-than-ideal” morals. Price gouging is legally defined as “charging an unconscionable price for an essential commodity during a state of emergency.”[4] Simply put, price gouging occurs when businesses take advantage of a state of emergency, commonly a natural disaster, by raising prices on necessities. Price gouging is currently happening with the world’s supply of medical masks.[5]
Normally, a box of basic sanitary masks will cost about $4.21.[6] As media attention on the coronavirus has gained traction, the price on boxes of basic sanitary masks jumped to $14.99, nearly a 300% price increase.[7] Other, more expensive, types of masks followed suit.[8] Hospitals are already having trouble in securing enough masks because of high demand and prices. The inability to secure masks is putting staff and patients at risk, including not only patients suffering from the coronavirus but all patients within the hospital.[9] This would seem to be the exact situation that price gouging legislation is supposed to prevent; however, as several cases have shown, the intended purpose of these statutes is often defeated when put into practice.[10]
For example, Martin Shkreli, the infamous “Pharma bro,” was never prosecuted for inexplicably raising HIV pharmaceutical prices.[11] He was prosecuted for securities fraud pertaining to his use of funds from his pharmaceutical company, Retrophin, to settle his personal debts and the debts of his hedge fund, MSMB Capital.[12] No punishment outside of his reputation within the public came from his pharmaceutical endeavors.
Despite price gouging statutes existing in most states, these cases are hard to prove and are borderline unconstitutional.[13] As Edward Page and Min Cho note in their analysis of Florida’s price gouging prosecutions after the historic 2004 hurricane season, these statutes are overly broad and leave businesses without notice on what constitutes illegal behavior.[14] In Association for Accessible Medicines, the Fourth Circuit held that Maryland’s price gouging statute violated the dormant Commerce Clause and was ultimately unconstitutional.[15] Additionally, corporations regularly argue diversity jurisdiction to transfer the case to federal jurisdiction.[16] These motions, even when dismissed, increase the cost and time the state must spend in complex litigation.[17]
[1] Dalvin Brown, Medical Mask Prices Surge on Amazon After CDC Comments on Coronavirus in the U.S., USA Today (Feb. 26, 2020), https://www.usatoday.com/story/money/2020/02/26/coronavirus-prices-masks-amazon-surging/4878653002/.
[2] Li Cohen, New York Joins 4 Other States in Declaring State of Emergency Amid Coronavirus Outbreak, CBS News (Mar. 7. 2020), https://www.cbsnews.com/news/new-york-joins-4-other-states-in-declaring-state-of-emergency-amid-coronavirus-outbreak-2020-03-07/.
[3] Brown, supra note 1.
[4] Florida v. Exxon Mobil Corp., No. 4:10cv21–RH/WCS, 2010 WL 11579390, at *1 (N.D. Fla. Apr. 16, 2010).
[5] Brown, supra note 1.
[6] Id.
[7] See id. (noting Keepa, a company that tracks price trends on Amazon, noted significant increases in the medical mask market).
[8] See id. (discussing the upward trend in prices amongst a variety of masks, including the medical-grade N95 respirator mask which increased from $38 to $81 within just a couple of days).
[9] Maria Cramer & Knvul Sheikh, Surgeon General Urges the Public to Stop Buying Face Masks, N.Y. Times (Mar. 5, 2020), https://www.nytimes.com/2020/02/29/health/coronavirus-n95-face-masks.html.
[10] Edward J. Page & Min K. Cho, Price Gouging 101: A Call to Florida Lawmakers to Perfect Florida’s Price Gouging Law, 80 Fla. B. J. 49 (Apr. 2006), https://www.floridabar.org/the-florida-bar-journal/price-gouging-101-a-call-to-florida-lawmakers-to-perfect-floridas-price-gouging-law/.
[11] David Goldman, Who is Martin Shkreli? A Timeline, CNN Business (Dec. 18, 2015, 1:35 PM), https://money.cnn.com/2015/12/18/news/companies/martin-shkreli/index.html.
[12] Id.
[13] Page & Cho, supra note 10.
[14] See id. (noting several cases that ultimately settled and the difficulty in prosecuting price gouging cases).
[15] Association for Accessible Medicines v. Frosh, 887 F.3d 664, 670 (4th Cir. 2018) (“[T]he Act, if similarly enacted by other states, would impose a significant burden on interstate commerce[.]”).
[16] See Florida v. Exxon Mobil Corp., 2010 WL 11579390, at *1 (showing Exxon arguing diversity jurisdiction to transfer the case to federal jurisdiction).
[17] See id. (noting the unconstitutionality of such statutes).
