When asked when raising prices crosses the line into illegal price gouging, NYS Attorney General Letitia James opined, invoking Justice Potter Stewart’s (in)famous Jacobellis v. Ohio opinion, “there’s no definitive answer to that question, but you know it when you see it.”

Most states have price gouging laws on the books in one form or another. They are often invoked in the wake of a natural disaster such as a flood, earthquake, or hurricane to prevent businesses from reaping excessive profits from the sudden dire need for things like bottled water or power generators. This pandemic is the first instance in the U.S. of these laws being invoked to prevent price gouging on hand sanitizer, toilet paper, and household cleaning products on such a wide scale.

Way back on January 31st, the U.S. Secretary for Health and Human Services declared a national public health emergency for the 2019 Novel Coronavirus (COVID-19). This declaration of a national emergency triggered New York State price gouging laws.

The price gouging prohibition to prevents those within the supply chain from taking unfair advantage of consumers by charging “an unconscionably excessive price” for essential consumer goods and services during abnormal market disruptions. (NY General Business Law § 396-r).

What constitutes “an unconscionably excessive price” is left up to the judge. There are a series of factors set forth in the statute, but they have been criticized as being unhelpfully vague.

Essential goods are currently defined as “consumer goods and services vital and necessary for the health, safety and welfare of consumers.” And abnormal market disruptions include “any change in the market, whether actual or imminently threatened, 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 other cause of an abnormal disruption.” There is no question COVID-19 is an abnormal market disruption.

Violations and Penalties

Both the Division of Consumer Protection (DCP) and the Attorney General (AG) are encouraging New Yorkers who observe or are a victim of price gouging to report these occasions online or at (800) 697-1220. When reporting, consumers should be prepared to provide details of the alleged price gouging, including the location of the merchant and any available proof, such as receipts or pictures. Because the CDC does not currently recommend wearing face masks (they are recommending, and NYS is requiring “cloth face coverings”) the AG is not pursing instances of price gouging related to surgical or n95 masks.

Violators found to be in violation may receive a court-order restraining or enjoining the unlawful practice. Such order can be accompanied by a fine of up to $25,000 and restitution to any consumers found to have been harmed by the practice. It is a defense to a charge of price gouging that

Changes Coming to the Price Gouging Law in New York State

Bills amending the price gouging law are making their way through the State Senate and Assembly that would amend the current law to attempt to more aggressively thwart potential gougers. The proposed amendments would encompass more goods and services by removing the qualification in the existing law that the subject goods and services be for consumer use. Both versions of the bill add to the illustrative list of essential products “medical supplies and services used for the care, cure, mitigation, treatment or prevention of any illness or disease.” They also remove the $25,000 civil penalty maximum by allowing the alternate fee assessment of “three times the gross receipts for the relevant goods or services.” Under the new laws, the AG would have expanded rulemaking power to effectuate enforcement.

Closing Remarks

If you have questions about price gouging or any of the myriad laws, orders, or regulations that are still changing at a furious pace, one of our attorneys can assist you. Please do not hesitate to contact the Wladis Law Firm. We will do our best to provide you with updates and will be available to answer questions as circumstances change. We may be reached at (315) 445-1700 or by e-mailing your everyday firm contacts.