California’s protections against price gouging during a state of emergency

In light of the recent health risks in southern California, there has been a shocking increase in supply and demand for basic household essentials. However, there are rules set forth to protect Californians from price gouging of a range of basic goods and services in order to prevent an unjustifiable price increase for the essentials vital to the health, safety, and welfare of the population.

Likewise, California businesses should be aware of anti-price-gouging laws and avoid drastic increases in the cost of consumer goods unless they can demonstrate an increased cost in the supply chain.

During a state of emergency, it is illegal to sell goods and services for more than 10% of its ordinary price. Cal. Penal Code § 396(a). This prohibition generally lasts for 30 days from the declaration of the state of emergency. A state of emergency is a natural disaster (i.e., earthquakes, floods, fires, droughts), manmade disaster, disease or infestation. The state of emergency is declared by the President of the United States, the Governor of California, or by the Mayor of San Diego. Cal. Penal Code § 396(j)(1-2).


What is Price Gouging?

 The California Penal Code prohibits the increase of prices for goods and services by 10% of the ordinary price. Ordinary prices are the prices charged immediately before the declaration of a state of emergency. The California government implemented these rules in order to protect the public from an unjustifiable increase in prices of essentials needed during a time of emergency. Cal. Penal Code § 396(a).

There are very few exceptions to the price gouging rule. These include business and other entities that can increase prices on goods and services where they can prove the increase was a direct result of cost increases in labor or materials needed to price the goods or services.


Goods and Services Protected

 Goods are considered anything for personal, family or household purposes. Cal. Civ. Code § 1689.5(c). Therefore, the goods protected include food, toiletries, cleaning supplies, and other household basics.

Services protected include work, labor, and anything in connection with repairs, restoration, alteration or improvement regardless of the purpose of the thing being serviced. Contractors cannot markup their costs by more than the customary price for the work in the usual course of business. Other protected services include financial services, insurance, or any services used for emergency cleanup. Cal. Civ. Code § 1689.5(d).

In addition, it is unlawful to increase the pricing for goods used for emergency cleanup, emergency supplies, medical supplies, home heating essentials, building materials, housing, transportation, freight, storage services, or gas. Cal. Penal Code § 396(c).


Tenant and Occupant’s Rights

During the time period of a state of emergency, landlords and hotels cannot increase the price for any tenants or guests staying on their property.

Owners and operators of hotels and motels are prohibited from increasing the nightly rate by more than 10% as advertised immediately before the declaration of a state of emergency. Cal. Penal Code § 396(d).

A landlord cannot evict a tenant for the 30 days following a declaration of a state of emergency unless the eviction process began prior to the declaration. Further, a landlord may not increase rent more than 10% of the price before the state of emergency was declared, unless the lease states otherwise. Cal. Penal Code § 396(j)(11)(A-D). These tenant rights extend to occupants of mobile homes.


Relief from Any Illegal Price Gouging

The California Attorney General and the California Penal Code state that any conduct of illegal price gouging is a misdemeanor punishable by imprisonment in a county jail for a period of up to one year, or by a fine up to $10,000, or by both that fine and imprisonment. Cal. Penal Code § 396(h).

In addition, a violation of price increasing constitutes an unlawful business practice and an act of unfair competition. Violators will be subject to additional civil penalties of up to $2,500 for each violation, injunctive relief, and mandatory restitution. Bus. & Prof. Code § 17206(a).

If you believe you have been a victim of price gouging, please contact the office of the Attorney General.  Anyone who has been the victim of price gouging, or who has information regarding potential price gouging, is encouraged to immediately file a complaint with the Attorney General’s Office by going to the Attorney General’s website or by calling (800) 952-5225.