Citing COVID sticker shock, Michigan Dems push emergency price gouging cap

• House, Senate Democrats revive plan to curb price gouging on essential goods and services during emergencies 
• Proposal would cap price increases on emergency supplies, lodging and energy products at 10% if an emergency declaration is issued
• Critics argue setting arbitrary price controls during crises would “create more problems than it solves”

LANSING — Michiganders seeking toilet paper, cleaning supplies, masks and other essentials early in the COVID-19 pandemic faced serious sticker shock as demand outpaced supply – prompting a surge in price gouging complaints. 

Four years later, Attorney General Dana Nessel and legislative Democrats are renewing efforts to create price caps on consumer goods, lodging, energy products and other necessities during a declared state of emergency, claiming that change is needed to bring Michigan in line with other states and to prevent similar situations from happening in the future. 

Bills pending in the House and Senate lame-duck session “target the narrow situation in which Michigan consumers find themselves in the most vulnerable times in their lives after a natural disaster or emergency,” Sen. Jeremy Moss, D-Southfield, told fellow lawmakers during a Senate panel Wednesday.

The Senate Finance, Insurance and Consumer Protection Committee advanced the proposal to the floor along party lines, while House lawmakers heard testimony this week on their version of the bills. 

In the latest version of the plan, a state emergency designation would prevent businesses providing eligible goods and services from increasing prices more than 10% over the average costs in place prior to the emergency. 

The legislation also outlines stiffer penalties and would empower the attorney general to take action against violators.

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Michigan already has restrictions on price gouging by individual businesses under the state’s consumer protection act, but reform advocates say current law doesn’t go far enough, particularly in emergency situations like a major storm, power outage or the COVID-19 pandemic where a wide swath of businesses could be tempted to hike prices at the same time. 

Sponsoring lawmakers have been working on the concept since 2017, but have pointed to the pandemic as a prime example of why reforms are needed.

During a September press conference, Nessel described price gouging as an inherently "exploitative practice” that targets consumers at their most vulnerable. 

“Our goal … is to keep Michigan an excellent state in which to run your business, and to make Michigan the worst state in the nation to rip off customers,” Nessel said. 

Moss said Wednesday that 30 other states have a law that triggers additional anti-price gouging measures when a state of emergency is declared. 

He said substantial changes have been made since the legislation was first introduced, including exemptions for retailers who were charging lower than average prior to an emergency and language keeping price gouging investigations into individual businesses confidential unless a violation is found.

The attorney general would also have the discretion to lift price gouging restrictions if the state of emergency extends beyond the initial market disruption, Moss said.

Several Republican lawmakers and business groups have raised concerns about the legislation, questioning the possible impact on business owners and a lack of clarity on what constitutes a state of emergency, particularly when the emergency is regionally focused.

Rep. Greg VanWoerkom, R-Norton Shores, said he fears the legislation could give state officials a tool to target individual businesses and potentially cause small business owners accused of price gouging to close their doors if they can’t afford high attorney fees to defend themselves. 

The Mackinac Center for Public Policy, a free market think tank, called the bills “a misguided attempt to control changing prices during emergencies,” arguing in a September blog post that price controls, even if well intentioned, can lead to shortages of needed supplies. 

“Enforcing arbitrary price caps ignores the realities of supply and demand,” Mackinac Center staff wrote. “This legislation will create more problems than it solves.”

The bills would need to clear both the House and Senate to get to Gov. Gretchen Whitmer’s desk, and the current Democratic-majority legislature is running out of time. 

Republicans won back a state House majority in the November election and will control the chamber starting next year, leaving Democrats just a few more weeks to pass remaining priorities.