SACRAMENTO, Calif. — The Governor’s Office issued an executive order, which was issued to support existing laws regarding the price gouging as well as expand protections to include unconscionable profiteering which took effect on April 4.
The District Attorney’s Office has investigated more than 60 complaints of price gouging allegations over the past several weeks.
Understanding the difference between price gouging and profiteering is conducive to explaining the problem and why the executive order is necessary.
1. Price Gouging occurs when a person or business who already sold included items prior to a state of emergency raises prices after the state of emergency by more than 10%.
2. Profiteering occurs when a person or business did not sell the included items prior to the state of emergency, but obtains and places the items for sale during the state of emergency, for purposes of selling them at a high profit due to increased demand.
The effect of the executive order upon specific areas is summarized below:
Re: Price Gouging
1. Clarifies that the price-gouging prohibitions extend through Sept. 4.
2. Clarifies that price increases of more than 10% on the specified items from the price sold by a business on February 4, 2020 is “price gouging” unless:
The price increase is directly attributable to added costs on the seller by suppliers of the item, and the price set is not more than 10 percent greater than the total cost to the seller plus the customary markup that was applied by the seller in the course of business on February 4, 2020, or
1. Prohibits profiteering with unconscionably excessive pricing from April 4 through Sept. 4.
2. If a person or business did not offer an item for sale on Feb. 4, 2020, and the item is a food item, consumer good, medical supplies or emergency supplies and a person or business began selling the item after Feb. 4 its against the law to sell or offer to sell that item for an excessive price beginning April 4.
A price is “unconscionably excessive” if:
1. The price is more than 50%t greater than amount the person or business paid for the item,
2. The price is more than 50% greater than the total cost to the person or business of producing and selling the item.
Both price gouging and profiteering by selling at an “unconscionably excessive price” are misdemeanors under the executive order. Price gouging is punishable by up to a year in jail and a $10,000 fine. Violations of the profiteering executive order are punishable by up to six months in jail and a $1,000 fine. The punishments can apply multiple times if there are multiple violations identified.
“The executive order on profiteering and price gouging provides greater ability for law enforcement to protect both consumers and businesses. The existing statute prohibiting price gouging was not written to cover supply issues on the scale that Covid-19 has caused, and this new order provides clear guidance to businesses on how to comply with the law. By expanding the law to cover profiteering and prohibiting unconscionably excessive prices, the order increases our ability to protect businesses and consumers alike from unfair competition practices,” said District Attorney Cynthia Zimmer.