New York Attorney General Letitia James announced that she has launched a rulemaking process in order to look into whether major corporations are unfairly raising the prices of basic goods. Noting that there is evidence that "some of the recent price hikes by big corporations were driven by profit not increased costs," James asserted that she plans to implement new price gouging rules that will "crack down on pandemic profiteering and corporate greed."
In a statement, James said, "The rising costs of essentials and basic household items has had a real impact on working families . . . . My office is prepared to use every tool in our toolbox to crack down on price gouging and pandemic profiteering."
New York's Price Gouging Law
New York's price gouging law prohibits the sale of "goods and services vital and necessary for the health, safety and welfare of consumers or the general public" at an "unconscionably excessive price" during any "abnormal disruption of the market."
An "abnormal disruption of the market" is defined as an actual or threatened change in the market resulting from "stress of weather, convulsion of nature, failure or shortage of electric power or other source of energy, strike, civil disorder, war, military action, national or local emergency" or a disruption "which results in the declaration of a state of emergency by the governor."
The goods and services that are covered by the rule include vital and necessary consumer goods and services, vital and necessary medical supplies and services, and other vital and necessary goods "used to promote the health or welfare of the public."
Whether a price is "unconscionably excessive" depends on whether the amount charged for a product is "unconscionably extreme" or whether the price was set through either "an exercise of unfair leverage" or "unconscionable means." A prima facie case for a violation of the law can be established by showing "a gross disparity" between the allegedly excessive price and "the price at which such 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 by showing that the allegedly excessive price "grossly exceeded the price at which the same or similar goods or services were readily obtainable in the trade area."
Advance Notice of Proposed Rulemaking
In the NYAG's Advance Notice of Proposed Rulemaking, the NYAG said that New York is experiencing an "abnormal disruption of the market" because of the fact that the State is in an ongoing health crisis and has faced disruptions to supply chains, large shifts in demand, and reductions in manufacturing output. The NYAG explained, "COVID-19 has led to the worst economic crisis in New York since the Great Depression, and massive unemployment."
According to the ANPR, New Yorkers have experienced "significant price increases across the board, including in essential services." For example, gas prices increased by 39.6%, the cost of used vehicles increased by 41.6%, the cost of new vehicles increased by 18.4%, and the cost of meat, poultry, fish, and eggs increased by 16%. The NYAG explained, "Many of these price hikes were legal, but when steep price hikes during an abnormal disruption are accompanied by increases in profitability, it raises questions about whether price gouging occurred."
The NYAG is seeking public comment in order to inform its rulemaking process. The NYAG asked for responses to a variety of questions, including the following:
- Is there any reason that, in the presence of abnormal disruptions, it would not be feasible to limit price increases for covered goods and services to the amount of cost increases?
- What role does profit play in determining whether price gouging has occured?
- Sometimes new products develop in response to the reasons for the market disruption. How should price gouging be measured for a product that did not exist prior to the disruption?
- Is it appropriate to set thresholds at which price increases could give rise to a presumption of "unconscionably extreme" excesses in price?
- Should "unconscionability" be treated differently for goods and services that have a high absolte cost and are unquestionably essential?
- In light of large price increases in shipping, meat packing, homebuilding products, rental housing, grocery stores, online platform, and basic household goods, what information could help shed light on whether price gouging is occurring in those industries?
Public comments must be received by April 15, 2022.
"My office is prepared to use every tool in our toolbox to crack down on price gouging and pandemic profiteering" -- New York Attorney General Letitia James