AGENDA REPORT
Meeting Date: January 28, 2025
Item Number:
To: Honorable Mayor & City Council
From: Laurence S. Wiener, City Attorney
Subject: CITY COUNCIL CONSIDERATION OF WHETHER TO EXTEND THE CITY'S PRICE GOUGING PROHIBITIONS PAST FEBRUARY 6, 2025
AND WHETHER TO UPDATE THE CITY'S PRICE GOUGING
PROHIBITIONS TO MORE CLOSELY MIRROR THE STATE'S
PROHIBITIONS
Attachments: 1. Beverly Hills Price Gouging Prohibitions
2. State’s Price Gouging Prohibitions
RECOMMENDATION
Staff recommends that the City Council consider whether to extend the City’s current price gouging prohibitions beyond the initial 30 days of their effectiveness and also consider whether to update the price gouging prohibition to more closely mirror the State’s prohibition.
INTRODUCTION
Both the State and the City have prohibitions on price gouging. They both have an initial period of effectiveness of 30 days. The Governor has extended the State’s prohibition on price gouging. The City Council is being asked to consider whether to extend the City’s prohibition on price gouging, and also to consider whether to update the City’s price gouging regulations to more closely mirror the State’s price gouging regulations.
DISCUSSION
Both the State and the City have statutes and ordinances which prohibit price gouging upon the declaration of a State of Emergency by the Governor. Price gouging is generally defined as increasing the price of goods or services by more than 10% directly after a declared emergency.
On January 7, 2025, the Governor declared a state of emergency for Los Angeles County. The emergency was based on the wind driven fires that began on January 6, 2025, including the Palisades fire, the Eaton fire and the Hurst fire.
Meeting Date: January 28, 2025
As a consequence, both the State’s price gouging prohibitions and the City’s price gouging prohibitions automatically went into effect for an initial period of thirty days.
On January 12, the Governor extended the State price gouging prohibitions, for “food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels” and for “repair or reconstruction services or any services used in emergency cleanup” until January 7, 2026.
On January 16, the Governor extended the State price gouging prohibitions on rental housing and hotel and motel lodging and also prohibited the eviction of tenants and subsequent rental of the same housing to another tenant for more money. These prohibitions were extended until March 8, 2025.
The Beverly Hills price gouging ordinance contains similar prohibitions, although some regulations are less detailed because the Beverly Hills ordinance was last amended in 2007 and the State law has been amended several times since 2007. Both the Beverly Hills price gouging prohibitions and the State’s price gouging prohibitions are attached.
Both the Beverly Hills ordinance and the State statute are currently in force in Beverly Hills. However, the Beverly Hills City Prosecutor may only enforce the Beverly Hills ordinance. Either the district attorney or the attorney general can enforce the State law. (Generally, a city is preempted from adopting the same or similar laws as the State.
However, the State price gouging law specifically allows a city to adopt the same or similar law.)
There are two questions for the City Council to address. First, would the City Council would like to extend the City’s price gouging regulations beyond February 6? If so, the City Council may extend the regulations for a maximum of 30 days. However, if the City Council sees fit, the Council can instruct the Director of Emergency Services to extend the price gouging prohibitions until a later specific date. The City Manager serves as the Director of Emergency Services and has the ability to indefinitely extend the price gouging prohibitions in thirty-day increments.
Second, would the City Council like to update the City’s price gouging prohibitions to substantially mirror the State’s price gouging prohibitions? If so, such an ordinance could be brought back to the City Council as an urgency ordinance.
FISCAL IMPACT
The extension of the price gouging prohibitions is not anticipated to materially impact the general fund. It is possible that there will be a small number of prosecutions pursuant to the prohibition, however, that cost should be minimal.
Laurence S. Wiener,
City Attorney
Approved By
Attachment 1
Beverly Hills Price Gouging Prohibitions
2-4-201: FINDINGS AND INTENT:
The city council hereby finds that during emergencies and major disasters elsewhere, including, but not limited to, earthquakes, fires, floods, or civil disturbances, some merchants have taken unfair advantage of consumers by greatly increasing prices for essential consumer goods and services. While the pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions, when a declared state of emergency results in abnormal disruptions of the market, the public interest requires that excessive and unjustified increases in the prices of essential consumer goods and services be prohibited. It is the intent of the city council in enacting this article to protect citizens from excessive and unjustified increases in the prices charged during or shortly after an emergency for goods and services that are vital and necessary for the health, safety, and welfare of consumers. Further it is the intent of the city council that this article be liberally construed so that its beneficial purposes may be served.
2-4-202: DEFINITIONS:
For the purposes of this article, the following terms shall have the following meanings:
BUILDING MATERIALS: Lumber, construction tools, windows, and anything else used in the building or rebuilding of property.
CONSUMER FOOD ITEM: Any article that is used or intended for use for food, drink, confection, or condiment by a person or animal.
DECLARED EMERGENCY: A "local emergency" or "state of emergency" as defined in section 2-4-102 of this chapter.
EMERGENCY SUPPLIES: Includes, but is not limited to, water, flashlights, radios, batteries, candles, blankets, soaps, diapers, temporary shelters, tape, toiletries, plywood, nails, and hammers.
GASOLINE: Any fuel used to power any motor vehicle or power tool.
GOODS: Has the same meaning as defined in subdivision (c) of section 1689.5 of the California Civil Code.
HOUSING: Any rental housing leased on a month to month term.
MEDICAL SUPPLIES: Includes, but is not limited to, prescription and nonprescription medications, bandages, gauze, isopropyl alcohol, and antibacterial products.
REPAIR OR RECONSTRUCTION SERVICES: Services performed by any person who is required to be licensed under the California contractors' state license law (chapter 9 (commencing with section 7000) of division 3 of the California Business and Professions Code), for repairs to residential or commercial property of any type that is damaged as a result of an event that led to a declared emergency or state of war emergency.
TRANSPORTATION, FREIGHT, AND STORAGE SERVICES: Any service that is performed by any company that contracts to move, store, or transport personal or business property or rents equipment for those purposes. 2-4-203: PROHIBITION AGAINST EXCESSIVE AND UNJUSTIFIED INCREASES IN CONSUMER PRICES DURING A DECLARED EMERGENCY:
A. Consumer Goods And Services:
1. Upon the proclamation of a declared emergency or an event triggering a state of war emergency, and for a period of thirty (30) days following the proclamation of a declared emergency or the event that triggered a state of war emergency, it is unlawful for a person, contractor, business, or other entity to sell or offer to sell any consumer food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels for a price of more than ten percent (10%) above the price charged by that person for those goods or services immediately prior to the proclamation of a declared emergency or the event that triggered a state of war emergency.
2. A person may increase prices in excess of the amount permitted in subsection A1 of this section if the seller or vendor can demonstrate that the increase in price is directly attributable to additional costs imposed on that person by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, provided that in those situations where the increase in price is attributable to additional costs imposed by the seller's supplier or additional costs of providing the goods or service during the declared emergency or state of war emergency, the price represents no more than ten percent (10%) above the total of the cost to the seller plus the markup customarily applied by the seller for that good or service in the usual course of business immediately prior to the proclamation of a declared emergency or the event that triggered a state of war emergency.
3. A business offering an item for sale at a reduced price immediately prior to the proclamation of a declared emergency or the event triggering a state of war emergency may use the price at which it usually sells the item to calculate the price increase permitted pursuant to this subsection.
B. Construction, Repair, And Cleanup Services:
1. Upon the proclamation of a declared emergency or an event triggering a state of war emergency, and for a period of one hundred eighty (180) days following the proclamation of a declared emergency or the event that triggered a state of war emergency, it is unlawful for a contractor to sell or offer to sell any repair or reconstruction services or any services used in emergency cleanup for a price of more than ten percent (10%) above the price charged by that person for those services immediately prior to the proclamation of a declared emergency or the event that triggered a state of war emergency.
2. A person may increase prices in excess of the amount permitted in subsection B1 of this section if the seller or vendor can demonstrate that the increase in price is directly attributable to additional costs imposed on that person by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, provided that in those situations where the increase in price is attributable to the additional costs imposed by the contractor's supplier or additional costs of providing the service during the declared emergency or state of war emergency, the price represents no more than ten percent (10%) above the total of the cost to the contractor plus the markup customarily applied by the contractor for that good or service in the usual course of business immediately prior to the proclamation of a declared emergency or the event that triggered a state of war emergency.
3. A business offering an item for sale at a reduced price immediately prior to the proclamation of a declared emergency or the event triggering a state of war emergency may use the price at which it usually sells the item to calculate the price increase permitted pursuant to this subsection.
C. Hotel And Motel Rates:
1. Upon the proclamation of a declared emergency or an event triggering a state of war emergency, and for a period of thirty (30) days following the proclamation of a declared emergency or the event that triggered a state of war emergency, it is unlawful for an owner or operator of a hotel or motel to increase the hotel or motel's regular rates, as advertised immediately prior to the proclamation of a declared emergency or the event that triggered a state of war emergency, by more than ten percent (10%).
2. A hotel owner or operator may increase prices in excess of the amount permitted by subsection C1 of this section if the owner or operator can prove that the increase in price is directly attributable to additional costs imposed on it for goods or labor used in its business, to seasonal adjustments in rates that are regularly scheduled, or to previously contracted rates.
2-4-204: EXTENSION OF TIME PERIOD DURING WHICH PROHIBITION IS IN EFFECT:
The provisions of this article may be extended for additional thirty (30) day periods by the director of emergency services or the city council, if deemed appropriate to protect public health, safety, or welfare
Attachment 2
State Price Gouging Prohibition
396. (a) The Legislature hereby finds that during a state of emergency or local emergency, including, but not limited to, an earthquake, flood, fire, riot, storm, drought, plant or animal infestation or disease, pandemic or epidemic disease outbreak, or other natural or manmade disaster, some merchants have taken unfair advantage of consumers by greatly increasing prices for essential consumer goods and services. While the pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions, when a declared state of emergency or local emergency results in abnormal disruptions of the market, the public interest requires that excessive and unjustified increases in the prices of essential consumer goods and services be prohibited. It is the intent of the Legislature in enacting this act to protect citizens from excessive and unjustified increases in the prices charged during or shortly after a declared state of emergency or local emergency for goods and services that are vital and necessary for the health, safety, and welfare of consumers, whether those goods and services are offered or sold in person, in stores, or online. Further, it is the intent of the Legislature that this section be liberally construed so that its beneficial purposes may be served. (b) Upon the proclamation of a state of emergency declared by the President of the United States or the Governor, or upon the declaration of a local emergency by an official, board, or other governing body vested with authority to make that declaration in any county, city, or city and county, and for a period of 30 days following that proclamation or declaration, it is unlawful for a person, contractor, business, or other entity to sell or offer to sell any consumer food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels for a price of more than 10 percent greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency, or prior to a date set in the proclamation or declaration. However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, during the state of emergency or local emergency, and the price is no more than 10 percent greater than the total of the cost to the seller plus the markup customarily applied by that seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency. If the person, contractor, business, or other entity did not charge a price for the goods or services immediately prior to the proclamation or declaration of emergency, it may not charge a price that is more than 50 percent greater than the cost thereof to the vendor as “cost” is defined in Section 17026 of the Business and Professions Code. (c) Upon the proclamation of a state of emergency declared by the President of the United States or the Governor, or upon the declaration of a local emergency by an official, board, or other governing body vested with authority to make that declaration in any county, city, or city and county, and for a period of 180 days following that proclamation or declaration, it is unlawful for a contractor to sell or offer to sell any repair or reconstruction services or any services used in emergency cleanup for a price of more than 10 percent above the price charged by that person for those services immediately prior to the proclamation or declaration of emergency. However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, during the state of emergency or local emergency, and the price represents no more than 10 percent greater than the total of the cost to the contractor plus the markup customarily applied by the contractor for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency. (d) Upon the proclamation of a state of emergency declared by the President of the United States or the Governor, or upon the declaration of a local emergency by an official, board, or other governing body vested with authority to make that declaration in any county, city, or city and county, and for a period of 30 days following that proclamation or declaration, it is unlawful for an owner or operator of a hotel or motel to increase the hotel or motel’s regular rates, as advertised immediately prior to the proclamation or declaration of emergency, by more than 10 percent. However, a greater price increase is not unlawful if the owner or operator can prove that the increase in price is directly attributable to additional costs imposed on it for goods or labor used in its business, to seasonal adjustments in rates that are regularly scheduled, or to previously contracted rates. (e) Upon the proclamation of a state of emergency declared by the President of the United States or the Governor, or upon the declaration of a local emergency by an official, board, or other governing body vested with authority to make that declaration in any city, county, or city and county, and for a period of 30 days following that proclamation or declaration, or any period the proclamation or declaration is extended by the applicable authority, it is unlawful for any person, business, or other entity, to increase the rental price, as defined in paragraph (11) of subdivision (j), advertised, offered, or charged for housing, to an existing or prospective tenant, by more than 10 percent. However, a greater rental price increase is not unlawful if that person can prove that the increase is directly attributable to additional costs for repairs or additions beyond normal maintenance that were amortized over the rental term that caused the rent to be increased greater than 10 percent or that an increase was contractually agreed to by the tenant prior to the proclamation or declaration. It shall not be a defense to a prosecution under this subdivision that an increase in rental price was based on the length of the rental term, the inclusion of additional goods or services, except as provided in paragraph (11) of subdivision (j) with respect to furniture, or that the rent was offered by, or paid by, an insurance company, or other third party, on behalf of a tenant. This subdivision does not authorize a landlord to charge a price greater than the amount authorized by a local rent control ordinance. (f) It is unlawful for a person, business, or other entity to evict any residential tenant of residential housing after the proclamation of a state of emergency declared by the President of the United States or the Governor, or upon the declaration of a local emergency by an official, board, or other governing body vested with authority to make that declaration in any city, county, or city and county, and for a period of 30 days following that proclamation or declaration, or any period that the proclamation or declaration is extended by the applicable authority and rent or offer to rent to another person at a rental price greater than the evicted tenant could be charged under this section. It shall not be a violation of this subdivision for a person, business, or other entity to continue an eviction process that was lawfully begun prior to the proclamation or declaration of emergency.
(g) The prohibitions of this section may be extended for additional periods, as needed, by a local legislative body, local official, the Governor, or the Legislature, if deemed necessary to protect the lives, property, or welfare of the citizens. Each extension by a local legislative body or local official shall not exceed 30 days. An extension may also authorize specified price increases that exceed the amount that would be permissible under this section during the initial 30 or 180 days after a proclamation or declaration of emergency.
(h) A violation of this section is a misdemeanor punishable by imprisonment in a county jail for a period not exceeding one year, by a fine of not more than ten thousand dollars ($10,000), or by both that fine and imprisonment. (i) A violation of this section shall constitute an unlawful business practice and an act of unfair competition within the meaning of Section 17200 of the Business and Professions Code. The remedies and penalties provided by this section are cumulative to each other, the remedies under Section 17200 of the Business and Professions Code, and the remedies or penalties available under all other laws of this state.
(j) For the purposes of this section, the following terms have the following meanings:
(1) “State of emergency” means a natural or manmade emergency resulting from an earthquake, flood, fire, riot, storm, drought, plant or animal infestation or disease, pandemic or epidemic disease outbreak, or other natural or manmade disaster for which a state of emergency has been declared by the President of the United States or the Governor.
(2) “Local emergency” means a natural or manmade emergency resulting from an earthquake, flood, fire, riot, storm, drought, plant or animal infestation or disease, pandemic or epidemic disease outbreak, or other natural or manmade disaster for which a local emergency has been declared by an official, board, or other governing body vested with authority to make that declaration in any county, city, or city and county in California.
(3) “Consumer food item” means any article that is used or intended for use for food, drink, confection, or condiment by a person or animal. (4) “Repair or reconstruction services” means services performed by any person who is required to be licensed under the Contractors’ State License Law (Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code), for repairs to residential or commercial property of any type that is damaged as a result of a disaster.
(5) “Emergency supplies” includes, but is not limited to, water, flashlights, radios, batteries, candles, blankets, soaps, diapers, temporary shelters, tape, toiletries, plywood, nails, and hammers.
(6) “Medical supplies” includes, but is not limited to, prescription and nonprescription medications, bandages, gauze, isopropyl alcohol, and antibacterial products.
(7) “Building materials” means lumber, construction tools, windows, and anything else used in the building or rebuilding of property.
(8) “Gasoline” means any fuel used to power any motor vehicle or power tool. (9) “Transportation, freight, and storage services” means any service that is performed by any company that contracts to move, store, or transport personal or business property or that rents equipment for those purposes, including towing services.
(10) “Housing” means any rental housing with an initial lease term of no longer than one year, including, but not limited to, a space rented in a mobilehome park or campground.
(11) “Rental price” for housing means any of the following:
(A) For housing rented within one year prior to the time of the proclamation or declaration of emergency, the actual rental price paid by the tenant. For housing not rented at the time of the declaration or proclamation, but rented, or offered for rent, within one year prior to the proclamation or declaration of emergency, the most recent rental price offered before the proclamation or declaration of emergency. For housing rented at the time of the proclamation or declaration of emergency but which becomes vacant while the proclamation or declaration of emergency remains in effect and which is subject to any ordinance, rule, regulation, or initiative measure adopted by any local governmental entity that establishes a maximum amount that a landlord may charge a tenant for rent, the actual rental price paid by the previous tenant or the amount specified in subparagraph (B), whichever is greater. This amount may be increased by 5 percent if the housing was previously rented or offered for rent unfurnished, and it is now being offered for rent fully furnished. This amount shall not be adjusted for any other good or service, including, but not limited to, gardening or utilities currently or formerly provided in connection with the lease.
(B) For housing not rented and not offered for rent within one year prior to the proclamation or declaration of emergency, 160 percent of the fair market rent established by the United States Department of Housing and Urban Development. This amount may be increased by 5 percent if the housing is offered for rent fully furnished. This amount shall not be adjusted for any other good or service, including, but not limited to, gardening or utilities currently or formerly provided in connection with the lease. (C) Housing advertised, offered, or charged, at a daily rate at the time of the declaration or proclamation of emergency, shall be subject to the rental price described in subparagraph (A), if the housing continues to be advertised, offered, or charged, at a daily rate. Housing advertised, offered, or charged, on a daily basis at the time of the declaration or proclamation of emergency, shall be subject to the rental price in subparagraph (B), if the housing is advertised, offered, or charged, on a periodic lease agreement after the declaration or proclamation of emergency.
(D) For mobilehome spaces rented to existing tenants at the time of the proclamation or declaration of emergency and subject to a local rent control ordinance, the amount authorized under the local rent control ordinance. For new tenants who enter into a rental agreement for a mobilehome space that is subject to rent control but not rented at the time of the proclamation or declaration of emergency, the amount of rent last charged for a space in the same mobilehome park. For mobilehome spaces not subject to a local rent control ordinance and not rented at the time of the proclamation or declaration of emergency, the amount of rent last charged for the space. (12) “Goods” has the same meaning as defined in subdivision (c) of Section 1689.5 of the Civil Code.
(k) This section does not preempt any local ordinance prohibiting the same or similar conduct or imposing a more severe penalty for the same conduct prohibited by this section.
(l) A business offering an item for sale, or a service, at a reduced price immediately prior to the proclamation or declaration of the emergency may use the price it normally charges for the item or service to calculate the price pursuant to subdivision (b) or (c).
(m) This section does not prohibit an owner from evicting a tenant for any lawful reason, including pursuant to Section 1161 of the Code of Civil Procedure.