New York Proposes New Price Gouging Legislation

The New York Office of the Attorney General is actively investigating the advertising or offering for sale of necessary consumer goods at unconscionably excessive prices during the period of market disruption caused by the (COVID-19) outbreak. Necessary consumer goods include sanitizing and disinfecting products used to mitigate the spread of COVID-19. They also include necessities such as toilet paper and basic food supplies.

New York’s price gouging statute, section 396-r of the New York General Business Law, prohibits the sale of goods and services necessary for the health, safety and welfare of consumers at unconscionably excessive prices during any abnormal disruption of the market.

The court’s determination of whether a price is unconscionably excessive may be based on any of the following factors:  (i) that the amount of the excess in price is unconscionably extreme;  or (ii) that there was an exercise of unfair leverage or unconscionable means;  or (iii) a combination of both factors in subparagraphs (i) and (ii).

Where a violation is alleged to have occurred, the AG may seek an injunction, civil penalties in an amount not to exceed $25,000 and restitution.

Proof that a violation of has occurred can include, for example, evidence that: (i) the amount charged represents a gross disparity between the price of the goods or services which were the subject of the transaction and their value measured by the price at which such consumer goods or services were sold or offered for sale by the defendant in the usual course of business immediately prior to the onset of the abnormal disruption of the market; or (ii) the amount charged grossly exceeded the price at which the same or similar goods or services were readily obtainable by other consumers in the trade area.  A defendant may be able to rebut such evidence by establishing that additional costs not within its control were imposed on the defendant for the goods or services.

New York has now proposed price gouging legislation relating to medical supplies. The proposed law imposes a presumption that a price exceeding 10% of its price immediately prior to a declared public health emergency is unconscionably excessive. Notably, New York City has issued an emergency consumer protection rule prohibiting price increases above 10% on certain products and supplies necessary to prevent the spread of COVID-19.

The proposed legislation would amend the general business law, in relation to prohibiting price gouging with respect to medical supplies during a public health emergency. It would create a new section of the General Business Law to prohibit manufacturers, suppliers, wholesalers, distributors, and retail sellers of consumer medical supplies from selling or offering for sale consumer medical supplies for unconscionably excessive prices during a declared public health emergency.

Under New York’s current price gouging statute, the determination whether a price charged for a good or service is “unconscionably excessive” during an “abnormal disruption of the market” is a matter for courts to determine. Under the newly-proposed section of the General Business Law, manufacturers, distributors, retailers and the public would be on notice that a price increase of more than 10% during a declared public health emergency carries a presumption of being unconscionably excessive, and therefore illicit price gouging.

Any entity charged with price gouging during a public health emergency would be entitled to rebut an alleged violation of this new law with evidence that the additional costs not within the control of the defendant were imposed on the defendant for the consumer medical supplies.

Several other states use a 10% increase as the threshold for establishing a rebuttable presumption of price gouging, including California, New Jersey, Arkansas, Oklahoma, Utah, and West Virginia, as well as Washington, DC.

Consult with an experience New York (NY) Department of Consumer Affairs (DCA) lawyer if you are interested in learning more about this topic, or if your business has received a cease and desist letter alleging COVID-19-related price gouging from the office of the New York Attorney General, or the NYC Department of Consumer Affairs.

Richard B. Newman is an FTC attorney at Hinch Newman LLP. Follow him on Facebook at @FTC defense attorney.

Informational purposes only. Not legal advice. May be considered attorney advertising.