Price gouging standard proposed
Attorney general’s office offers new set of rules that limit increases during disruptions
ALBANY — State Attorney General Letitia James is proposing to institute a clear standard for what defines price gouging: any increase over 10 percent during an “abnormal” disruption in the market.
The proposal is part of a series of rules the attorney general’s office is offering up for public comment over the next 60 days.
The rules would include not only the 10 percent threshold, but also prohibitions on corporations with large market shares of a product from increasing profits during abnormal market activity. The rules would establish standards for price gouging relative to companies with fluctuating pricing, including ride-hailing services like Uber and Lyft.
“Soaring costs of essentials have pushed hardworking New Yorkers to the brink and forced hard decisions around kitchen tables,” James said in a news release. “The rules proposed by my office will bolster our efforts to crack down on price gouging and ensure that large corporations do not take advantage of New Yorkers during difficult times.”
Standards on what constitutes price gouging, such as the price of gas or eggs during a hurricane or winter storm, range by state. Some states, such as Connecticut, consider any increase in those situations as price gouging.
At least 10 states, including New Jersey and California, use the 10 percent threshold that James’ office is proposing as setting the legal threshold for what qualifies as price gouging in New York. Others use higher thresholds, like Pennsylvania at 20 percent. (New York City has a 10 percent standard already on the books.)
If adopted, the 10 percent threshold is intended to provide clarity both from a legal lens and to business owners. It would in effect define the current standard for price gouging, which is “unconscionably excessive.” Laws against price gouging in New York began in 1979, which followed a drop in production of oil after the Iranian revolution that then contributed to a spike in oil prices.
In 2020, as price gouging emerged during the COVID-19 pandemic, state lawmakers agreed to amend the rules, which included providing rule-making authority to the attorney general’s office. An abnormal disruption could include weather events, but also labor strikes, civil disorder, war, national or local emergencies and disruptions declared by the governor based on a state of emergency.
“The price gouging law protects the most vulnerable people,” states the office’s description of the proposed rules. “Poor and working-class New Yorkers are the most likely to be harmed by price increases in essential items and the least likely to have savings or disposable income to cover crises. The law ensures that market disruptions do not cause vital and necessary services to be rationed based on ability to pay.”
Other instances of price gouging included in James’ proposed rule changes include companies with at least 30 percent of the market share or those with five or fewer significant competitors being subject to the state’s “unfair leverage rule.” In these instances, the companies would be subject to price gouging for any increase in their “non-cost” prices or, in other words, their threshold for price increases would be zero.
And James is seeking to define price gouging for companies that use “dynamic pricing,” including ride-sharing services, based on the median price at the same time one week prior.
The attorney general, in the rule-making documents, said she considered alternative definitions based on the lowest price charged for a product in the period or based on the highest charged prices, similar to a 2014 agreement with Uber, would “lead to far too much condoned profiteering.” The price gouging agreement with Uber expired in 2017.