Proposed rules on Price Gouging

Proposed Rules: Closed to Comments

Agency:
Comment By: 
Friday, June 12, 2020
Keywords:

 

Statement of Basis and Purpose of Proposed Rule

On March 15, 2020, the Department of Consumer Affairs (“DCA” or “Department”) promulgated an emergency rule pursuant to section 1043(i) of chapter 45 of the New York City Charter (the “Emergency Rule”) declaring as unconscionable the practice of price gouging certain personal and household goods and services.  The Emergency Rule added a new section 5-42 of chapter 5 of title 6 of the Rules of the City of New York and amended the penalty schedule in section 6-47 of chapter 6 of title 6. 

The Department is proposing a new permanent rule declaring as unconscionable the practice of price gouging goods and services that are essential to health, safety and welfare, or are marketed or advertised as being essential to health, safety and welfare during a declared State of Emergency in the City of New York.

New York City Administrative Code § 20-701(b) permits DCA to declare as unconscionable:

Any act or practice in connection with the sale, lease, rental or loan or in connection with the offering for sale, lease, rental or loan of any consumer goods or services, or in the extension of consumer credit, or in the collection of consumer debts which unfairly takes advantage of the lack of knowledge, ability, experience or capacity of a consumer; or results in a gross disparity between the value received by a consumer and the price paid, to the consumer's detriment[.] 

Price gouging occurs when a merchant takes advantage of an abnormal disruption in the marketplace and charges excessive prices, taking advantage of the consumer’s inability to bargain or seek a better price, resulting in a “gross disparity between the value received by a consumer and the price paid.” Such marketplace disruptions often occur during a State of Emergency. This rule assists in protecting consumers when they are at their most vulnerable. 

The permanent rule declares price gouging conduct unconscionable and aligns New York City with many jurisdictions across the country that prohibit price gouging in emergency circumstances, including New York State. The rule includes an illustrative list of goods that are essential to health, safety or welfare, and could therefore be subject to price gouging. The rule also establishes a threshold for prohibited pricing of ten percent above the price at which consumers in New York City could obtain such goods or services 30 to 60 days prior to the declaration of a State of Emergency in the City of New York. This is similar to the standard used by several other jurisdictions, including the states of New Jersey and California, in laws that prohibit price gouging.                                                                                                           

To ensure that no merchant is penalized unfairly, the permanent rule provides a defense if the merchant can show that the price increase was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services. The permanent rule further provides an exemption for merchants who did not exploit the State of Emergency and charged the same price both 30 days prior to the declaration of a State of Emergency and during that State of Emergency. 

The Emergency Rule added an entry for the new price gouging prohibition to the penalty schedule for consumer protection law violations found in section 6-47 of subchapter B of chapter 6 of title 6 of the Rules of the City of New York. This entry is included in the permanent rule.

This permanent rule is necessary so that DCA can prevent this unconscionable trade practice and take action to protect the residents of New York City during a State of Emergency. Pursuant to section 1041(i)(2) of the New York City Charter, the Emergency Rule is hereby extended for 60 days beyond its original expiration date to allow time for issuance of the permanent rule by the normal rulemaking procedure provided for in the Charter.

 

Public Hearing
Subject: 

.Proposed Rule on Price Gouging

Public Hearing Date: 
Friday, June 12, 2020 - 2:00pm
Contact: 

• To participate in the public hearing via phone, please dial 1-855-282-6330 and input access code 477 857 355.

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