State of Emergency and Price Gouging in California

State of Emergency in California

A state of emergency is an official declaration that suspends regular governmental and constitutional procedures in response to a disease, earthquake, fire, flood, storm, riot, drought, infestation, or other natural or human-made disasters.

Generally, the declaration remains effective for thirty days and, if necessary, can be extended for an additional thirty-day period. On March 4, 2020 in response to COVID-19 pandemic, Governor Gavin Newsom declared a California-wide state of emergency.

Price Gouging

Price gouging refers to sellers trying to take illegal benefits of consumers during a disaster and emergency by significantly increasing prices for important consumer services and goods.

California Penal Code Section 396(a) prohibits “excessive and unjustified increases” on a range of basic goods and services.

What is Considered an Excessive Increase?

An excessive increase is an increase of more than 10 percent above the price charged by the person in question for the same goods or services immediately before the declaration of emergency.

The law applies just after the President, the Governor, or city or county executive officer declares a state of emergency.

Though, an emergency declaration can cover a specific geographic area, the price gouging law is applicable anywhere in the state of California, where consumer demand increases as a result of that emergency.

Who Is Subject to the Statute?

All businesses, individuals, and other entities are obliged to comply with the statute. The statute applies to all sellers, including:

• Manufacturers
• Wholesalers
• Distributors
• Retailers

California Penal Code Section 396(h)(4) regulates transportation, freight, and storage services, including towing; and repairs or reconstruction to residential or commercial property.

According to California Penal Code Section 396(c) for 180 days following a declaration, a contractor cannot offer or sell any reconstruction, repair or emergency cleanup services for a price greater than 10% above the price charged by that person for those services immediately before the declaration of emergency.

According to California Business and Professions Code Section 17568.5, hotel and motel room rates can’t exceed 10% above the regular rates advertised immediately before the declaration of emergency.

List of Items Covered by the Statute

Items specifically listed in the law are the following:

• Food and drink, including for animals
• Toiletries
• Medical supplies such as antibacterial products, bandages, isopropyl alcohol, gauze, and medications
• Emergency supplies including water, radios, flashlights, blankets, batteries, candles, diapers and soap
• All types of construction materials
• Home heating oil, motor fuels and gasoline

Price gouging statute doesn’t cover cars and motorhomes requiring DMV registration.

In some cases, if the seller can prove the price increase is a direct result of higher costs for materials, labor, or purchasing the goods from a supplier, the increase of more than 10% will be allowed.

Penalties for Violation of California Penal Code Section 369

Violation of Penal Code Section 396 is a misdemeanor with the following penalties:

• A fine of up to $10,000
• Up to one year in a county jail

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