During COVID-19, you may have found that your trip to the grocery store resembles a scavenger hunt. With everyone stocking up for weeks at a time, essentials are in short supply. Oftentimes, you will need to visit more than one store to get everything that you need. You may have also found that the prices of some staples have gone up far beyond what you can imagine. While some of the increase is due to short supply, there may also be something more sinister at work. Texas and California have filed lawsuits against egg producers and sellers for price gouging as the cost of this critical product has skyrocketed since March.

Eggs and other dairy products are the food groups that are among the most sensitive to supply shocks. These are sometimes prone to increases in price as seasonal and other factors influence whether farmers can meet the country's demand. However, the price hike that has occurred since COVID-19 prompted statewide lockdowns has been far beyond the usual spikes. In some places, the cost of eggs more than tripled at times as stores struggled to keep the product on the shelves. Many consumers were paying more than $3 for a dozen eggs.

States have laws that cap how much the price of food staples are allowed to rise during an emergency. These limits are activated when the governor declares the emergency. In California, the price increase is capped at 10%. However, this did not stop producers from hiking prices.
 

Texas Files Lawsuit Lawsuit Against Cal-Maine

In Texas, the lawsuit names the country's largest egg producer, Cal-Maine Foods, as a defendant. The company is accused of tripling their prices in response to the crisis after consumer stripped store shelves bare of the essentials. In addition, Texas' lawsuit also names a Cal-Maine subsidiary operating inside the state.

The companies will often cite supple issues as the driving force behind their price hikes. However, according to Texas, Cal-Maine was experiencing no supply issues at the time that it raised prices. Instead, the lawsuit alleges that its motives were purely to profit at the expense of consumers who needed to remain stocked with this vital source of protein.

In California, the law is more favorable for the state. Once the attorney general files the lawsuit, the burden of proof shifts to the defendant. This is different than you would need in nearly every other type of lawsuit. Here, the defendant must show that they were not price gouging. The court is able to presume from the amount of the price hike that the defendants were gouging until they disprove the allegations.

The California Attorney General case an even wider net than the Texas lawsuit. The California legal action named 25 defendants in total. This includes egg producers and stores that sell the product such as Costco and Whole Foods. In other words, California has put the onus on most companies associated with the sale of eggs in the state to show that they were not doing something wrong.
 

Shortages Will Cause Legitimate Questions About Price Hikes

The issue of price gouging will only become more pressing as the nation's food supply shows signs of a complete breakdown. Staples such as pork and beef may become incredibly scarce as plants shut down because their workers have been sickened in large numbers. When there is a shortage, there are legitimate reasons for the price of these food items to rise. However, the way that some price gouging laws are written may make it difficult for industry to raise prices to reflect their costs because the emergency has triggered price caps.

Food is not the only area where we may see a surge of price gouging lawsuits. Sellers of personal protective equipment have also dramatically hiked prices as they cannot keep their products in stock. Since price gouging is a matter of state law, life can get difficult for each company that is faced with the prospect of 30 different standards because at least that many states have their own price gouging laws.

Some producers may be able to defend themselves if they are able to substantiate that the rise in price was due to increased input costs as opposed to just profiteering. Nonetheless, they must pay careful attention to their price hikes during this time because the states are watching them closely and ready to take action and make an example out of them.