California’s ‘pink tax’ law prohibits gender-based pricing of consumer products | Morgana Lewis
Dear Retail Customers and Friends:
Effective January 1, 2023, a new California law will prohibit higher prices for products marketed to a particular gender. The law specifically aims to increase the prices of products marketed to women, sometimes known as the “pink tax”. California’s new ban expands the scope of the state’s existing sex-based price discrimination laws and follows a similar New York law that went into effect in September 2020.
Applicable California law prohibits charging a different price because of a known customer’s gender. The new law expands this premise to focus on the product.
Under the new law,[a] a person, firm, partnership, corporation, company or business shall not charge a different price for two substantially similar goods if these goods are priced differently according to the sex of the persons for whom the goods are marketed and intended”. The law applies to any business operating in California, including but not limited to retailers, suppliers, manufacturers, and distributors, that sells “goods,” meaning products consumer goods used, purchased or returned primarily for personal, family or household purposes. purposes.
The law applies to products which are “substantially similar”, i.e. two goods which have everything of the following characteristics:
- There are no substantial differences in the materials used in production
- Intended use is similar
- Functional design and features are similar
- The trademark is the same or both trademarks belong to the same person or entity
Common examples of products that may be “substantially similar” include lotions, shampoos, deodorants, and razors. In some cases, these products may look exactly the same for men and women, except for different packaging and labels.
A court can issue an injunction prohibiting or prohibiting any violation of the pink tax prohibition, without proof that a person was, in fact, damaged or injured as a result. Restitution may also be available under certain circumstances.
Additionally, courts can impose a civil penalty of up to $10,000 for an initial offense and $1,000 for each subsequent offense, with the total penalty not to exceed $100,000. Each instance of charging a different price for two substantially similar goods is considered a single violation.
Courts can impose additional civil penalties beyond the $100,000 maximum if a defendant subsequently violates the pink tax law with respect to the same property for which the maximum penalty was previously imposed in connection with the lawsuit. a separate civil action or for any property for which the Attorney General has not brought a civil action under the Pink Tax Act.
KEY CONSIDERATIONS FOR MERCHANTS IN ANTICIPATION OF THE PINK TAX LAW
Gender-neutral reasons for price differences are not prohibited
The new law does not prohibit price differences in services or goods based specifically on non-gender reasons, including, but not limited to:
- The time it took to manufacture the goods
- The difficulty of making these goods
- The manufacturing costs of these goods
- The labor used in the manufacture of these goods
- The materials used in the manufacture of these goods
In addition, to qualify as “substantially similar”, the “design and functional characteristics” must be similar.
There should be no private right of action or class action
The Pink Tax Act provides an enforcement mechanism through the Attorney General, who may, upon prior notice to the defendant, seek a court order to restrain and prevent further violations. Significantly, the new law does not expressly provide for a private right of action.
Under California law, a “violation of state law does not necessarily give rise to a private cause of action. Instead, whether a party has the right to sue depends on whether the legislature has “expressed an intention to create such a private cause of action” under statute. To determine legislative intent, courts “first look at the wording of the statute, as it is the best indicator of the existence of a private right to sue”. “It is well settled that there is a private right of action to enforce a law ‘only if the wording of the statute or the legislative history affirmatively indicates such an intention.'
Here, the language of the pink tax law expressly states that “whenever the Attorney General has reason to believe that a breach of this section has occurred, the Attorney General may . . . seek a court order prohibiting and restraining the continuation of these violations”. The legislative history of the law further explains that “the imposition of such penalties remains exclusively in the hands of the Attorney General”. The reasoned selection of Attorney General for the executor indicates that the legislature did not intend this law to be enforceable by a private right of action, including a class action.
The statute provides that a court may impose additional civil penalties on a defendant in excess of $100,000 “for any property for which the Attorney General has not commenced a civil action under this section.” But this clause was included to ensure that a violator can be fined more than $100,000 if they have multiple infringing products, not to create a private right of action. Indeed, the legislative history explains that there is a ceiling of $100,000, “except that additional penalties may be imposed if the company continues to practice discriminatory prices with respect to the good for which it has already received the penalty maximum. or is guilty of charging discriminatory prices for a different product.”
Nothing in the new law “affirmatively indicates” an intention to create a private right to sue. Under California law, therefore, such a right should not exist.
CALIFORNIAN LAW LARGELY REFLECTS NEW YORK’S EXISTING PINK TAX LAW, WITH STRONGER PENALTIES
New York has a similar law, with many of the same requirements, which went into effect in September 2020. Like California law, New York does not expressly provide a private right of action, and it is enforced by the Attorney General. Courts can issue injunctions restraining or prohibiting violations of New York’s pink tax law without proof of prejudice, and can also order direct restitution. Courts may impose a civil penalty of $250 for a first violation of New York law, with such penalties for each subsequent violation not to exceed $500.
The New York law has not generated significant interest or publicity. But the stiffer penalties, increased appetite for law enforcement, an expanding California market and other factors could draw more attention to the new California law.