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Post date: January 10 2006

Spitzer Authors Bill To Strengthen Price Gouging Law

Attorney General Spitzer today announced that he has submitted legislation to strengthen the price gouging law to better protect consumers against unconscionably excessive prices and to more clearly define violations.

"Spikes in prices for gasoline and home heating fuel following last year's hurricanes
caused public outrage and tested the limits of the very laws enacted to protect the public from price gouging," Spitzer said. "Abuse of the free market system by those who seek to exploit natural disasters and tragedies cannot be tolerated."

Specifically, the bill provides that increases in prices or mark-ups of more than 25 percent following the onset of an abnormal market disruption trigger a presumption of price gouging. Currently, the law requires the Attorney General's office to establish a "gross disparity" in prices charged before and after the market disruption.

"The establishment of a clear threshold for price gouging violations removes the uncertainty that merchants face when prices are changed after a market disruption," Spitzer said. "Moreover, it will make it easier for consumers and courts to identify instances of price gouging and hold violators liable for their conduct."

To deter future price gouging violations, the bill allows the courts to levy a penalty of $500 per violation, plus three times the total profits for such violation. Currently, the maximum penalty a court can impose is a total of $10,000, regardless of the profits that the party realized or the number of consumers it injured.

Also, the current price gouging law applies to all sellers in the chain of distribution, when the product sold was located in New York state prior to the sale. The proposed legislation makes clear that all such sellers are covered, even when the sale occurred outside the state.

The price gouging law, last amended in 1998, was established to prevent any party within the chain of distribution of any vital consumer goods from taking unfair advantage of consumers during market disruptions. It has been successfully enforced in the wake of several types of emergencies, including the sale of generators after a hurricane and an ice storm, home repairs following violent wind and snow storms, and hotel prices after the terrorist attacks on September 11th.

Spitzer's office commenced investigations into allegations of price gouging at gas stations throughout the state immediately following last summer's hurricanes. The investigations resulted in settlements with 15 gas station operators paying a total of $63,500 in penalties. Other retailers, distributors and wholesalers remain under investigation.