When a disaster hits, a surge of price-gouging complaints and investigations usually follow. After Hurricane Harvey, the Texas attorney general received more than 5,000 consumer complaints about gas stations charging exorbitant prices for gas. The attorney general investigated more than 120 gas stations for suspected price gouging and entered 61 settlements totaling $307,801 with gas stations across Texas. In the first few months of the COVID-19 crisis, more than 10,000 consumers across Texas complained of price gouging to the attorney general. Attorney General Ken Paxton has vowed to “work aggressively to prevent . . . scams” related to the pandemic and “stands ready to prosecute any price-gouger,” so far filing suit against an auction website and an egg supplier for alleged price gouging.
The Consumer Protection Division of the Office of the Attorney General has power to investigate and prosecute violations of Texas’ Deceptive Trade Practices-Consumer Protection Act (“DTPA”), which aims to protect consumers from price gouging, among other false, misleading, or deceptive business practices. Tex. Bus. & Com. Code § 17.44; 17.46. District and county attorneys can also prosecute price gouging on their own and can request the assistance of the Consumer Protection Division. Tex. Bus. & Com. Code § 17.48.
If the attorney general suspects that a business or individual may be engaging in price-gouging or other acts or practices that violate the DTPA, it might issue a Civil Investigative Demand (“CID”) to gather “any documentary material relevant to the subject matter of an investigation.” Tex. Bus. & Com. Code § 17.61.
The DTPA prohibits price gouging during a “designated disaster period.” Tex. Bus. & Com. Code § 17.4625. A “designated disaster period” begins on the earliest of: (1) the date the disaster occurs; (2) the date the governor declares the disaster; or (3) the date the president declares the disaster, if any part of Texas is named in the federally-declared disaster area. On March 13, 2020, the same day that President Trump declared a nationwide emergency due to the coronavirus pandemic, Texas Governor Greg Abbott declared a state of disaster in Texas, triggering DTPA’s price-gouging prohibition. The price-gouging prohibition will remain in effect until the end of the “designated disaster period,” which will be the 30th day after the disaster declarations expires or are terminated.
Section 17.46(27) of the DTPA states that it is a false, misleading, or deceptive act or practice to take “advantage” of a disaster by:
(i) selling or leasing fuel, food, medicine, lodging, building materials, construction tools, or another necessity at an exorbitant or excessive price; or
(ii) demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine, lodging, building materials, construction tools, or another necessity.
The term “another necessity” is not defined in the DTPA. The attorney general recently filed suit against Auctions Unlimited, an auction website, over price gouging and interpreted other necessities to include “medical necessities,” including “face masks, N95 particulate respirators, hand soap, all-purpose cleaner, and disinfectant wipes[.]”
Texas’ DTPA also does not define what constitutes an “exorbitant or excessive price.” Many states that have a price-gouging statute set a certain percentage increase—generally 10%—as an excessive price. A few states allow 15%, 20%, or 25% price increases.And nearly all states that have a price-gouging statute and use a percentage increase provide exceptions for increases directly attributable to reasonable increases in the cost of labor or materials. Texas’ DTPA, however, does not use a bright-line percentage rule or contain an exception for increased costs in determining what constitutes an “exorbitant or excessive price.”
Because an “exorbitant or excessive price” is not defined under the DTPA, and no Texas court has interpreted the provision, some subjective interpretation is required.
- Hotels. After Hurricane Ike in 2008, the Texas attorney general sued a Fredericksburg hotel owner for price gouging, alleging that he took advantage of the situation by charging evacuees $129/night for a room normally priced at $69/night and $114/night for a room normally priced at $64/night. The attorney general and the hotel owner entered into an agreed judgment that the hotel owner charged “exorbitant or excessive prices” by “charging rates in excess of ten percent (10%) of the average price” for the hotel rooms. The parties agreed that “average price” meant the “average price charged for a good or service over a two-month period prior to the” disaster declaration. See State v. Demirov, 2012 WL 911262 (Travis County 2012). After Hurricane Harvey in 2017, the attorney general sued (i) a hotel in Corpus Christi that increased room rates by more than 100% as compared to the average room rate over the prior 3-month period and (ii) a hotel in Portland that increased room rates by more than 50% as compared to the average room rate over the prior 3-month period.
- Fuel. After Hurricane Harvey in 2017, the attorney general entered into settlements with 61 gas stations across Texas. The gas stations agreed to pay restitution by issuing partial refunds to customers that paid by credit/debit card and, if any customers paid with cash and/or the gas station could not segregate credit/debit card payments, payment of a fine to the State of Texas ranging from $170 to $27,004. The attorney general presumed that the price for fuel was exorbitant or excessive when the price per gallon during the state of disaster was greater than 125% of the gas station’s 30-day average price per gallon prior to the state of disaster, unless the gas station could demonstrate through its written records that the price increase was attributable to additional fuel supply costs.
- Personal Protective Equipment. In a lawsuit filed by the attorney general in March 2020 against Auctions Unlimited, the attorney general alleges that the defendant violated the DTPA where the listing price for N95 respirator masks was hiked from a typical price of $10-20 a box to as high as $180 for a box and the defendant allegedly earned as much as $40,000 on sales of $154,400.
- Food. The attorney general filed suit in April 2020 against a Texas egg supplier that it claims raised prices by around 300% without any supply issues or significant disruptions that would drive it to charge more for eggs. In the attorney general’s words, the egg supplier “is simply charging more because it can, or, more specifically, because the pandemic caused market demand to jump.”
The Texas attorney general or a district or county attorney can impose civil penalties for price-gouging violations. Price-gougers may be required to reimburse consumers and could be responsible for penalties of up to $10,000 per violation. The charges could have an additional penalty of up to $250,000 if the victims are elderly. Tex. Bus. & Com. Code § 17.47(c). The DTPA also provides a private right of action by which injured consumers can sue to recover actual damages. Tex. Bus. & Com. Code § 17.50. If the price-gouger acted knowingly, the injured consumer may recover treble damages for mental anguish, and if the price-gouger acted intentionally, the injured consumer may recover treble damages for mental anguish and economic damages.
If your company becomes the subject of a price-gouging investigation or lawsuit in Texas, contact Cobb & Counsel to discuss your options.
 Dan Solomon, Hurricane Harvey Price Gouging Cases are Still Being Settled, Texas Monthly (Dec. 6, 2018).
 Id.; AG Paxton: 6 Gas Stations Agree to Refund Customers for Hurricane Harvey Price Gouging, Office of the Attorney General (May 21, 2019).
 Scott Friedman & Eva Parks, Price Gouging Complaints to Texas Attorney General Top 10,000, NBC 5 Investigates (May 15, 2020).
 AG Paxton Warns of Price Gouging as Texans Prepare to Prevent the Spread of Coronavirus, Office of the Attorney General (Mar. 13, 2020).
 Governor Abbott Declares State of Disaster In Texas Due To COVID-19, Office of the Texas Governor (Mar.13, 2020); COVID-19 Disaster Declarations, FEMA (last visited May 20, 2020).
 Arkansas—Ark. Code Ann. § 4-88-303; California—Cal.Penal Code § 396; District of Columbia—DC ST § 28-4101; Maryland—2020 Maryland Laws Ch. 14 (H.B. 1663); New Jersey—N.J. Stat. Ann. § 56:8-108; Oklahoma—Okla. Stat. Ann. tit. 15, § 777.4; Utah—U.C.A. 1953 § 13-41-201; West Virginia—W. Va. Code, § 46A-6J-1.
 Alabama—Ala.Code 1975 § 8-31-4 (25%); Kansas—K.S.A. 50-6,106 (25%); Oregon—Or. Rev. Stat. Ann. § 401.965 (15%); Pennsylvania—73 Pa. Stat. Ann. § 232.4 (20%).
 Alabama—Ala.Code 1975 § 8-31-4; Arkansas—Ark. Code Ann. § 4-88-303; California—Cal.Penal Code § 396; Kansas—K.S.A. 50-6,106; New Jersey—N.J. Stat. Ann. § 56:8-108; Oklahoma—Okla. Stat. Ann. tit. 15, § 777.4; Oregon—Or. Rev. Stat. Ann. § 401.965; Pennsylvania—73 Pa. Stat. Ann. § 232.4; Utah—U.C.A. 1953 § 13-41-201; West Virginia—W. Va. Code, § 46A-6J-1.