Price Gouging Investigation Leads To Refunds And Penalty

Attorney General Spitzer today announced an agreement with the operator of a Broome County hotel to refund hundreds of dollars in overcharges paid by consumers during flooding last month.

Best Western of Johnson City, operated by Oakdale L.R.M., Inc., agreed to settle Spitzer’s investigation into price gouging by paying a $7,500 civil penalty and refunding to seven individuals a total of $510.20 in overcharges.

"State law requires that increased prices in a time of market disruption be linked directly to increased costs. Anything other than that is price gouging," Spitzer said.

On June 27, 2006, there was massive flooding throughout several Upstate New York counties, including Broome County. As a result of the natural disaster, travelers were stranded as roads became impassable and, in some instances, were closed. Consequently, many travelers sought to rent rooms at local hotels and motels.

After receiving two complaints from consumers, Spitzer’s investigation revealed that during this period, Best Western increased its room rates by at least 87 percent. Customarily, Best Western charged approximately $79.95 for any room, and often charged less. In fact, Best Western’s maximum room rates - something that state law requires the hotel to post - were $99.85 for a double and $110.95 for a king room.

Spitzer’s investigation revealed, however, that on June 27, Best Western hiked its room rates to $150 per room, far above its customary charges, and even greatly in excess of its own posted maximum rates.

Current law prohibits the sale of vital consumer goods at an "unconscionably excessive price" during a market disruption caused by natural disasters. The law specifically provides that a price may be considered excessive if there is a gross disparity between the price charged before and after a market disruption, and the price increase is not attributable to higher costs imposed upon the seller.

The settlement agreement also requires that Best Western provide refunds to any additional consumers who file bona fide complaints within the next 90 days about price gouging related to the June flooding. To file a complaint, consumers are encouraged to call the Attorney General’s consumer help line at (800) 771-7755 or visit his web site at www.ag.ny.gov.

This matter was handled by Assistant Attorney General Michael Danaher of the Binghamton Regional Office.

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