Reed Smith Client Alerts

Last week, as the United States continued its efforts to stabilize during the COVID-19 pandemic, the country’s largest egg producer, Cal-Maine Foods Inc., was accused of violating Texas’s Deceptive Trade Practices Act by increasing the price of generic eggs by more than 300 percent. In addition to non-monetary injunctive relief, Texas Attorney General Ken Paxton requested monetary relief in excess of $100,000, including civil penalties, attorney’s fees, and costs. Even though Cal-Maine claims that prices for egg producers “have moved…to record levels,” Paxton’s petition alleges that the egg producer faced no supply issues, and production and distribution costs have remained stable as well. Therefore, the AG argues there is no justifiable reason for the increase in price.

Autores: John P. Feldman

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Texas’s focus on anti-gouging initiatives is a good reminder that there are limits on the ability of a seller to set prices in accordance with supply-and-demand principles when a disaster strikes. Those restrictions are based on both federal and state law.

Cal-Maine also had plenty of warning that state attorneys general were keeping an eye on market prices. On March 25, 2020, 33 state attorneys general issued a joint letter to Amazon, Facebook, eBay, Walmart, and Craigslist to “more rigorously monitor price gouging practices by online sellers who are using their services.” The letter recommends that online retailers take the following steps, among others, to help curb the deceptive practice:

  • “Set policies and enforce restrictions on unconscionable price gouging during emergencies: Online retail platforms should prevent unconscionable price increases from occurring by creating and enforcing strong policies that prevent sellers from deviating in any significant way from the product’s price before an emergency. Such policies should examine historical seller prices, and the price offered by other sellers of the same or similar products, to identify and eliminate price gouging
  • Trigger price gouging protections prior to an emergency declaration, such as when your systems detect conditions like pending weather events or future possible health risks
  • Implement a complaint portal for consumers to report potential price gouging”

In response to the rise in price gouging activities on their respective platforms, and even prior to the letter by state attorneys general, eBay and Amazon both began warning sellers and removing listings that were not in compliance with the retailers’ pricing policies.