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There has been a nationwide shortage of infant formula following the recall and temporary closure of a major infant formula manufacturing facility in February 2022. This facility supplied up to 40% of the country’s infant formula. country. In the wake of these events, state attorneys general are on the lookout for an illegal increase in infant formula prices. Infant formula sellers must ensure that they do not inadvertently violate state restrictions on price gouging.
State price gouging laws prohibit price increases above certain thresholds during a time of emergency. Several state governments have recently issued statements or proclamations that trigger price increase limitations for infant formula, including California (CA Exec. Order N-10-22, 6/7/2022), Oregon (OR Exec. Procl., 5/13/2022), Colorado (CO Exec. Order D-2022-021, 05/25/2022), New Jersey (NJ Exec. Order No. 296, 5/17/2022) and Kentucky (KY Exec. Order 2022-321, 06/09/2022). Each of these states has a different restriction on price gouging. For example, infant formula sold in California cannot exceed the February 17, 2022 price by more than 10%, except in certain limited circumstances. Other states may have a different price increase threshold or a different reference date. Multi-state sellers should be careful to comply with individual state restrictions.
Several states, such as Colorado and Nevada, have enacted new predatory pricing laws in the wake of the COVID-19 pandemic. SeeCollar. Rev. Stat. § 6-1-730; NRS § 598.09235. Enforcement officials don’t have much experience enforcing these laws, which can mean more uncertainty for sellers in these states.
Most, but not all, states have a price gouging law. In states that do not have a predatory pricing law, attorneys general will often seek to enforce their state’s unfair or deceptive trade practices law against predatory pricing reports. For example, the Attorney General of New Mexico, a state with no predatory pricing law, issued a press release on May 31, 2022 announcing that it was investigating complaints about the price gouging of infant formula. Similar to the COVID-19 pandemic, the infant formula shortage is triggering a variety of price gouging restrictions in different states at the same time. Navigating the differences from state to state can be difficult, especially in light of the new laws and amended laws that have recently been enacted. Sellers should review their normal pricing practices and make any necessary changes to avoid inadvertently running into restrictions in a particular state.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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