The order, announced Saturday, prohibits sellers from increasing previous prices for the self-test kits by more than 10%.
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A nationwide shortage of those kits has led to price gouging, with some people reselling the kits for five times as much as they paid for them.
Newsom's order also gives additional tools to the state Department of Justice and attorney general's office, district attorneys and other local law enforcement to take action against price gougers.
After the governor's directive was issued, California Attorney General Rob Bonta released a statewide consumer alert.
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"Sellers who have not previously sold at-home COVID-19 test kits may not sell testing kits for a price that is greater than 50% of what the seller paid to acquire the testing kit," according to a news release.
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Any violation of the executive order could result in a misdemeanor charge punishable by a fine of up to $1,000 or imprisonment for up to six months, or both, the state attorney general's office said. Violations would also run afoul of the Unfair Competition Law, which is subject to a penalty of $2,500 per violation.