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California’s Anti-Price Gouging Law Prohibits Contractors from Over Charging Customers for Repair and Emergency Clean Up Services during Declared Emergency

June 11, 2020 5:30 PM
by Eda Suh

California’s Anti-Price Gouging Law Prohibits Contractors from Over Charging Customers for Repair and Emergency Clean Up Services during Declared Emergency

Raul is a Santa Monica business owner who was horrified when he saw looting engulfing the downtown business district. He rushed to his store to try to protect his business, and his worst fears were realized – looters had smashed the windows of his store and destroyed several displays inside. 

Raul secured the windows with plywood and started looking for contractors to replace his smashed glass and fixtures. He was shocked when he was quoted prices that were more than double what he had paid for the same services a couple of years earlier.

Trying to take advantage of an increased need for certain services and products during an emergency is against the law. California’s price gouging law prohibits businesses and individuals from increasing the price of many essential goods and services by more than 10 percent during a state of emergency. The law, California’s Penal Code Section 396, is triggered as soon as a state of emergency is declared by the President of the United States, the Governor of California, or any city or county executive officer. It prohibits anyone from selling, or offering to sell, a wide array of consumer goods and services at excessively increased prices, for a period of 30 days after the emergency is declared.

The price gouging ban is broad, and includes building materials; food and water; home heating oil and fuel; transportation; diapers; toiletries; pet food; and emergency and medical supplies. The law also applies to short- and long-term rental housing as well as hotels and motels.

The law also makes it unlawful for a contractor to sell or offer to sell any “repair or reconstruction” or “emergency cleanup” services for a price of more than 10 percent above the price charged by that person for those services just before the declaration of emergency, for a period of 180 days following the emergency proclamation. This provision is separate from the section that applies to the sale of consumer goods and services for 30 days following the declaration of emergency.  

California Gov. Gavin Newsom declared a statewide emergency on March 4, 2020 in response to the coronavirus pandemic, and Los Angeles County declared a state of emergency on May 30, 2020 in response to looting, arson, and damage to public and private property in numerous cities and locations throughout the Los Angeles County. With the declaration of the current state of emergency, the price gouging law was triggered, and its price increase limitations are currently in effect in Santa Monica, throughout the County of Los Angeles, and beyond.  

On April 3, 2020 Gov. Newsom, through an executive order, extended the 30-day expiration period for the price gouging provision that applies to the sale of consumer goods and services, to September 4, 2020. (See Executive Order N-44-20 [HYPERLINK:  https://www.gov.ca.gov/wp-content/uploads/2020/04/4.3.20-EO-N-44-20.pdf). Previously, on December 23, 2019 Gov. Newsom had issued Executive Order N-22-19 [HYPERLINK:  https://www.gov.ca.gov/2019/12/23/governor-newsom-issues-executive-order-to-support-communities-recovering-from-wildfires-2/] in response to the devastating wildfires that were causing widespread damage in numerous counties; under that Order the price gouging protections of Penal Code 396 were extended to December 31, 2020, in Los Angeles County and other impacted counties. Both Executive Orders apply to contractors doing business in Santa Monica, and the price gouging protections remain in effect until the end of this year.

There are exemptions to the price gouging ban - if the business or person can prove that the price increase was directly related to an increase in their own costs in providing the goods or services, including labor and material costs, they may not be liable under the law.

Price gouging in California is a misdemeanor punishable by up to one year in jail and a $10,000 fine. It can also be enforced civilly; a violation of the price gouging law automatically constitutes an unfair business practice and an act of unfair competition under California’s unfair competition law. 

If you think that someone is taking unfair advantage during or after an emergency, be sure to save screen grabs, emails, photos, fliers, receipts, and any other evidence that the merchant has unscrupulously raised prices. This evidence of both the regular and increased prices is important when it comes to enforcing California’s price gouging law.

If you believe you have been a victim of price gouging in Santa Monica related to the recent looting or to the coronavirus pandemic, contact the City Attorney’s Office’s Public Rights Division at 310-458-8336 or consumer.mailbox@smgov.net.  Elsewhere in Los Angeles County, contact the Department of Consumer and Business Affairs at 800-593-8222 or dcba.lacounty.gov/. Outside of Los Angeles County, contact the California Attorney General’s Office at (800) 952-5225 or oag.ca.gov.

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