Federal court dismisses challenge to NYC’s price-gouging rule
Department of Consumer and Worker Protection (DCWP) Commissioner Peter A. Hatch announced that the U.S. District Court of the Southern District of New York dismissed Union Square Supply, Inc.’s lawsuit, which alleged that DCWP’s price gouging enforcement during the pandemic was unconstitutional.
To quote the judge’s dismissal, “Union Square Supply’s conduct — charging steep prices for products such as face masks and hand sanitizer during the early months of the COVID-19 pandemic — falls in the heartland of what the rule was intended to prohibit.”
Union Square Supply had challenged the constitutionality of the city’s rule, which prohibits price gouging for any personal or household good or any service that is needed to prevent or limit the spread of or treat COVID-19, and the Office of Administrative Trials and Hearings’ (OATH’s) decision in their case.
OATH had found the business guilty of 60 violations of price gouging for face masks, hand sanitizer, rubber gloves and cleaning supplies and ordered it to pay $21,000, or $350 per violation.
“New Yorkers remember how essential PPE was to health and safety during the peak of the pandemic and DCWP acted quickly to ensure we weren’t overcharged for those life-saving products,” said DCWP Commissioner Peter A. Hatch. “Our price-gouging rule is constitutional and vital to the health of New Yorkers. We applaud the court for their decision.”
“During a pandemic, no consumer should have to go without face masks or hand sanitizer or pay steeply for those products because of price-gouging businesses,” said New York City Corporation Counsel Georgia M. Pestana. “We are pleased the court recognized that this city rule falls squarely within the city’s authority to prohibit businesses from illegally lining their pockets at the expense of the health and safety of New Yorkers.”
Since March 5, 2020, DCWP has received more than 12,000 price gouging complaints and issued more than 15,000 violations for price gouging. The number of complaints received weekly has declined since its peak of 2,108 in mid-March 2020. Some of the most egregious violations include selling 8 oz. bottles of hand sanitizer for $27.99 and selling N95 masks for $20 per mask.
DCWP analyzed the first 10,000 complaints about price gouging and found that the neighborhoods with the most complaints are many of the same neighborhoods that were hardest hit by COVID-19. These neighborhoods, which are majority Black and Hispanic, are already financially vulnerable and, with median household incomes of approximately $30,000, can least afford to be gouged on lifesaving items like face masks, hand sanitizer, and disinfecting wipes.
In March 2020, DCWP promulgated an emergency rule under the City’s Consumer Protection Law that makes price gouging illegal for any personal or household good or service that is needed to prevent or limit the spread of or treat COVID-19.
Two months later, looking ahead to future emergencies, DCWP made the Rule permanent – it now makes price gouging illegal for any products or services essential to health, safety and welfare during a declared state of emergency. The fine for price gouging is up to $500 per item or service.
If businesses are paying more to obtain these items themselves, they must provide proof to DCWP and any increase must be comparable. For example, if a business paid $2 more per item, it cannot charge customers $50 more.
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