Today I was contacted by an investigative reporter wanting to interview me about businesses that are charging Covid-19 surcharges and increasing fees for providing services. The reporter wanted to know (1) if this is something to be expected, (2) if this is legal, and (3) what can affect (a) consumers or (b) businesses do about it.
Here are my responses:
1. Should We Expect Businesses to Raise Their Rates During COVID-19?
Yes, we should expect this. There are many reasons. Some businesses are suffering from a loss in demand for their products and services. Whether it is due to a mandated reduction in hours, an inability to serve customers or a change in attitude from the public, many businesses are seeing demand go down and they are trying to find new streams of income. Also, business’ expenses may be going up – employees may be demanding more to show up, supply chains are disrupted, less people can be served at various locations or there are new costs for doing business (such as PPE for employees). Additionally, some businesses which provide certain services or products may believe that demand has increased enough to charge a higher fee. All in all, the shifts in the market mean that we should expect many businesses will try to increase their rates or add surcharges.
2. Is it Legal for Businesses to Raise Their Rates During COVID-19?
It depends. The context of making this determination is found within Fla. Stat. 501.160, which is the statute that prohibits the practice known as “price gouging”. The statute prohibits businesses from charging “unconscionable” prices for commodities or for the rental or lease of any dwelling or storage facility during a declared state of emergency. So, the issue is whether the businesses’ products or services are within the scope of the statute. The second is whether the price increase is ‘unconscionable’ (meaning shocking to the conscience) or grossly disparate from the price that it was sold at during the 30 days prior to the emergency. “Commodities” in the context of the statute basically includes any goods or services that are necessary for consumption as a result of the emergency. Some items that would very likely be included in the current applicable definition would be masks, cleaning supplies, and protective gear (and many other goods). The second question is whether the size of the price increase actually violates the statute. A slight or reasonable increase or surcharge is not sufficient to violate the statute. Further, even if the price increase was shocking and it applied to a commodity, businesses do have some defenses for this behavior. The statute allows for businesses to defend such increases if they were attributable to additional costs incurred in connection with the sale of the goods or lease of the unit and/or are based on a regional, national or international market trend. Given that many areas of the world are suffering from the same or similar effects as are occurring in Florida and many supply chains have been disrupted, it can be expected that many businesses will seek to defend price increases based on these provisions. Whether they are successful is yet unknown.
3(a). What Can a Consumer Do If S/he Is a Victim of Price Gouging?
The prohibition against price gouging is generally enforced by the Attorney General, and any affected consumer can call the AG’s Office or make a report online. Given the widespread and costly enforcement of such claims during this time, it is likely that many borderline or unclear cases may not result in filed complaints. Affected consumers may also want to hire or consult with a private attorney as certain related business practices may establish class-action claims or claims for deceptive trade practices or misleading advertising.
3(b). How Should a Business Price Its Services During Covid-19?
Businesses are dealing with a significant amount of legal and financial uncertainty. Many businesses that raise their prices or charge a surcharge may receive complaints or subpoenas to preserve records. It is important that any business that has received a complaint or subpoena consult with their business attorney. If a business is considering changing its practices or prices during or in response to Florida’s declared state of emergency or to COVID-19, it should consult with a Florida business attorney before doing so to understand the risks and to implement best practices.
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