AG Letitia James proposes new rules to protect against price gouging

March 3, 2023 Rob Abruzzese

New York Attorney General Letitia James. AP Photo/Brittainy Newman, File

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Attorney General Letitia James announced on Thursday that she has proposed new rules to protect consumers and small businesses from corporate profiteering.

The proposed rules will strengthen the enforcement of New York’s price gouging law, which was updated in 2020 to grant the Office of the Attorney General rule-making authority. The rules aim to make it simpler to investigate and combat price gouging by setting clear guidelines against price increases during emergencies. The proposed rules are open to a 60-day public comment period.

“Soaring costs of essentials have pushed hardworking New Yorkers to the brink and forced hard decisions around kitchen tables,” said Attorney General James. “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. When times get tough, New Yorkers can trust that my office will always have their back.”

The rules proposed by the Office of the Attorney General (OAG) will bolster efforts to crack down on price gouging by corporations and ensure that large corporations do not take advantage of New Yorkers during difficult times, said Attorney General James.

The law prohibits companies throughout the supply chain from taking advantage of a market disruption to increase their profits for vital and necessary goods and services. The proposed rules clarify that a price increase over 10% during an abnormal market disruption may constitute price gouging. The proposed rule deters price gouging, provides enforcers with an easily administrable standard for enforcing the price gouging statute, and is widely used by other enforcers.

The proposed rules also prohibit corporations with large market shares from increasing profit margins during abnormal market disruptions. The rule clarifies that dominant companies with 30% market share, and companies in concentrated markets, have unfair leverage and the power to drive market-wide changes, so they cannot increase their profits during abnormal market disruptions at the expense of New Yorkers.

The rules provide guardrails for companies that rely on dynamic pricing, the AG said. This pricing model allows prices to change depending on demand and time of day, and is favored by some companies, including ride-hailing services.

Due to this pricing model, it is currently difficult to determine if a company is price gouging. This rule allows OAG to establish a benchmark by using the median price for the same good or service at the same time one week before the emergency or market disruption.

During the ongoing COVID-19 pandemic, OAG received many complaints about price gouging on goods and services introduced in response to the pandemic, such as COVID-19 at-home tests and medical treatments.

The rules also provide clarification for what companies can claim as costs when setting prices. A company that raises their prices more than 10 percent must show a record of their costs to justify the price increase. This rule details what does and does not count as a cost for purposes of an affirmative defense.