New York Attorney General Eric T. Schneiderman is investigating post-Hurricane Sandy price gouging after receiving hundreds of complaints from consumers across the state of New York.
Before the storm made land fall, the Attorney General issued an open letter to vendors in areas forecast to be affected by Hurricane Sandy to warn against price gouging, the inflation of the price of necessary goods and services.
New York law prohibits such increases in costs of essential items like food, water, gas, generators, batteries and flashlights, and services like transportation, during natural disasters or other events that disrupt the market.
“Our office has zero tolerance for price gouging,” Schneiderman said. “We are actively investigating hundreds of complaints we’ve received from consumers of businesses preying on victims of Hurricane Sandy, and will do everything we can to stop unscrupulous individuals from taking advantage of New Yorkers trying to rebuild their lives.”
New York State’s Price Gouging Law – General Business Law § 396-r – prohibits merchants from taking unfair advantage of consumers by selling goods or services for an “unconscionably excessive price” during an “abnormal disruption of the market.”
The price gouging law covers New York State vendors, retailers and suppliers, including but not limited to supermarkets, gas stations, hardware stores, bodegas, delis, and taxi and livery cab drivers.
Schneiderman said that his office had received hundreds of complaints from consumers from New York City, the Hudson Valley and Long Island.
While the largest number of complaints related to increased gasoline prices, consumers contacted the Attorney General to report possible gouging for emergency supplies like generators, hotels raising rates due to “high demand,” as well as increased prices for food and water.
The Attorney General noted that these complaints might not meet the threshold for coverage under New York’s gouging statute, but encouraged consumers to contact his office to report anything that appears suspicious.
“Our office is taking every complaint seriously,” Scheiderman said. “Staff from regional offices across the state are triaging and acting on consumer complaints as they come in. We have contacted the targets as part of a preliminary inquiry and vendors are now on notice. While most retailers understand that customers are also neighbors, and would never think of taking advantage of New Yorkers during such disruptive times, emergency circumstances always require an extra sense of vigilance.”
New York’s price gouging law takes effect only upon the occurrence of triggering events that cause an “abnormal disruption of the market.”
An “abnormal disruption of the market” is defined as “any change in the market, whether actual or imminently threatened,” that results from triggering events such as “weather events, power failures, strikes, civil disorder, war, military action, national or local emergency, or other causes.”
During an abnormal disruption of the market like Hurricane Sandy, all parties within the chain of distribution for any essential consumer goods or services are prohibited from charging unconscionably excessive prices.
New York’s price gouging law does not specifically define what constitutes an “unconscionably excessive price.”
However, the statute provides that a price may be “unconscionably excessive” if 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.
A “before-and-after” price analysis can be used as evidence of price gouging.
Evidence that a price is unconscionably excessive may also include proof that “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 merchant may counter with evidence that additional costs not within its control were imposed for the goods or services.
Notably, the price gouging law does not prohibit any disparity between the price charged before and after there is an abnormal disruption of the market.
Rather, the statute prohibits a “gross disparity,” when it is clear that a business is taking unfair advantage of consumers by charging unconscionably excessive prices, and increasing its profits, under severe circumstances that call for shared sacrifices.