American businesses have been profiteering during the coronavirus pandemic
01/04/2021 / By Franz Walker / Comments
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American businesses have been profiteering during the coronavirus pandemic

Businesses in the U.S. now face a torrent of lawsuits and enforcement actions over accusations of profiteering during the Wuhan coronavirus (COVID-19) pandemic. These come as industry data shows that the average prices of a range of household goods have risen sharply during the pandemic.

All over the country, authorities have brought hundreds of actions over alleged breaches of “price gouging” rules on products including toilet paper, face masks and disinfectant. For instance, the New York City Department of Consumer and Worker Protection (DCWP) has reported that it put around 3,000 retailers on notice over price gouging violations.

Companies getting caught violating anti-price gouging rules

Industry data is highlighting how much more shoppers are now paying for a range of hygiene products. Nielsen reports that, in the 34-week period from March, average in-store prices for hand sanitizer have risen by 53 percent, soap by 10 percent, paper towels by 19 percent, laundry detergent by 10 percent and bleach by 21 percent.

The price increases don’t necessarily breach the rules against price gouging. These rules can vary from state to state but typically prohibit companies from raising prices beyond a certain threshold after an emergency has been declared.

Gouging rules in California and New York prohibit increases of more than 10 percent for many goods and services. The threshold is higher in other states, such as Alabama, where it’s set at 25 percent. Meanwhile, some states, such as Texas, only prohibit “excessive” price increases, without specifying a set percentage.

The increase in prices has put a number of companies under authorities’ crosshairs. In North Carolina, Stephen Gould Corporation was made to pay $150,000 following allegations that it had offered millions of N95 masks for sale at a mark-up of more than 100 percent, according to the state’s attorney-general.

Meanwhile, last month, Michigan’s attorney-general said that he had reached a settlement with AM Cleaning & Supplies after consumers complained that the equipment supplier was advertising hand sanitizer bottles for as much as $60 a bottle.

Price gouging has become even more of a problem online. According to Grace Brombach, a consumer watchdog associate at the non-profit U.S. Public Interest Research Group, online sellers were charging ridiculous amounts that people end up accepting “because they’re desperate.”

Back in April, online retail giant Amazon was the subject of a lawsuit alleging that it was engaged in price gouging practices that violated California’s Unfair Competition Law.

As some companies promise not to raise prices, others argue that it’s necessary

In light of all the legal actions, some businesses have taken the initiative to not raise their prices during the crisis. Bleach-maker Clorox, for example, has stated that it will not increase the prices of any of its products during the pandemic.

“We’re committed to ensuring that consumers have our brand during a recessionary time at the right value, not taking [increasing] pricing during a pandemic,” stated Clorox CEO Linda Rendle told investors this month. “It’s to do the right thing.”

Others, however, have questioned the anti-gouging measures, stating that they shouldn’t apply as their costs have also risen during the coronavirus pandemic.

“It may be totally justified based on the difficulty in doing business during this time,” said Brian Mahanna, partner at the law firm WilmerHale.

Critics of the anti-gouging laws also argue that the measures are counter-productive. In a paper, written in 2013, the Harvard Business Review claimed that these laws actually encourage consumers to hoard and conversely discourage businesses from boosting supplies.

Those tasked with enforcing these laws, however, state that they’re not meant to keep companies from making money. Rather, they’re in place to make sure that they don’t do so at the expense of consumers who may already be struggling during these crises.

“We’re not telling businesses not to make a profit,” said DCWP Commissioner Lorelei Salas. “What we’re saying is that you cannot make a quick buck on the backs of people who are already going through financial struggles and during a state of emergency.”

Follow Pandemic.news for more on the shady business practices some companies are practicing to make a quick buck during the coronavirus outbreak.

Sources include:

FT.com

NCDOJ.gov

Michigan.gov

HBR.org

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