Price Gouging Under California “Unfair Competition Law” During COVID-19
We have previously talked about California’s “Unfair Competition Law” (UCL). During COVID-19, there have been many instances of price gouging where people jack up the price of many essential items. This is unlawful. So, does the California UCL cover price gouging? The answer is yes.
First, we look at California Penal Code Section 396(b) provides it is unlawful for a person, contractor, business or other entity to sell or offer to sell to any consumer food items, emergency products or services, fuel, building materials and other items for a price more than 10 percent greater than the price charged immediately prior to a declaration of emergency by the President of the United States, Governor or other governing body who can make such a declaration.
Penal Code Section 396 has similar provisions for contractors who provide repair or reconstruction services (subpart c), hotel and motel owners or operators (subpart d), and for rental housing (subpart e).
A violation of Penal Code Section 396 constitutes an unlawful business practice and an act of unfair competition within the meaning of Business and Professions Code Section 17200.
California’s Unfair Competition Law Discussion
Business and Professions Code Section 17200, also known as California’s Unfair Competition Law (“UCL”) prohibits any unlawful, unfair or fraudulent business act or practice. It also prohibits unfair, deceptive, untrue or misleading advertising. While the statute is called “unfair competition,” its primary purpose is actually consumer protection. UCL Section 17200 is not limited to anti-competitive business practices but is also directed towards the public’s right to protection from fraud, deceit, and unlawful conduct. This area of the law is separate from issues related to non-compete or non-competition claims.
California courts interpret this statute broadly so it is less restrictive. In order to prevail on a claim under the UCL, a potential Plaintiff must establish that a business practice or act is either unlawful, unfair, or fraudulent.
Unlawful Business Practices
To set the standard for what constitutes an “unlawful” business practice, the UCL borrows substantive law from other laws. Laws that can be used to find an unlawful business practice include statutes that are civil or criminal in nature, and can range from federal and state statutes to municipal regulations. However, where there some law that explicitly legalizes a certain business practice, a violation of that law cannot be used to find a violation of UCL Section 17200. Further, where an alleged unlawful act is based on state law, federal law can be used to defeat that claim if the requirements for federal preemption are met.
Unfair Business Practices
California Courts have states that an “unfair” business practice is one that offends an established public poly or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injuries to consumers. Despite this broad language, no clear test has been established as to what the limitations are for “unfair” business practices.
Fraudulent Business Practices
Establishing that a “fraudulent” business practice has been committed under UCL Section 17200 is not subject to the same requirements as common law fraud. Rather, a Plaintiff need only show that the practice is likely to deceive members of the public. Intent is not a requirement (as it is with fraud), and mere negligence can be sufficient to establish a violation. Further, the fact that a statement is accurate is not a defense if the statement was likely to deceive.
Who Can Bring These Claims (known as “standing”)?
To bring an action under the UCL a potential Plaintiff must have suffered an injury in fact, and have lost money or property as a result of the unfair competition. In other words, there must be some form of economic injury in order to maintain an action. This can be met by showing that a party lost more or acquired less in a transaction than they otherwise might have. Or that a party was deprived of money or property to which they had a cognizable claim. Or, that a future or present property interest was diminished.
Remedies for Violation of UCL Section 17200
The UCL authorizes equitable remedies such as injunctions and restitution. Private individuals may not recover compensatory damages outside of these equitable remedies. Accordingly, restitution under the UCL is limited to the amount received by the Defendant as a result of its unlawful, unfair or fraudulent business practices.
Getting Legal Help
If you are involved in a dispute concerning unlawful, unfair or fraudulent business practices, it is smart to speak with a top-rated Irvine litigation attorney. Our team of experienced business litigation attorneys and trial specialists are here to help. Contact Brown & Charbonneau, LLP today by calling 714-505-3000 to schedule your appointment or email us at firstname.lastname@example.org.
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