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The U.S. federal government has arrested someone for price gouging under the Defense Production Act. Amardeep Singh, an owner of a sneaker and apparel store, was arrested in New York for price gouging and hoarding. According to the criminal complaint, since the beginning of the COVID-19 emergency, Mr. Singh has been accumulating and selling PPE (personal protective equipment) to the general public with large markups.
President Trump triggered the Defense Production Act and declared PPE to be scarce. 50 U.S.C. § 4512 provides as follows:
In order to prevent hoarding, no person shall accumulate (1) in excess of the reasonable demands of business, personal, or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which have been designated by the President as scarce materials or materials the supply of which would be threatened by such accumulation.
In perhaps over-simplified terms, the act prevents hoarding and price gouging of scarce materials.
The government argues in its complaint that because Mr. Singh ran a store intended for sneaker and apparel sales, the amount of PPE that he accumulated was in “excess of the reasonable demands” of his particular type of business. The government’s argument seems to imply that if Mr. Singh had owned a medical supply store, then maybe he would be allowed to accumulate these scarce materials.
The government also argued that Mr. Singh sold the products for prices “in excess of prevailing market prices.” I was looking forward to reading how the government determined what “prevailing market prices” for PPE were during this emergency. Unfortunately, there still doesn’t seem to be a clear definition. There isn’t a definitive list of what is an acceptable versus excessive price. Instead, the government cited the markup Mr. Singh gave to all the products.
Mr. Singh sold some face masks he bought at $0.07 each for $1.00 each. That’s a markup of approximately 1,328%. That is the highest markup cited by the government. The rest of the products appear to be marked up at rates between 75% to 225%. The line is still very blurry. What markup is acceptable by the government?
May 6, 2020