The New York State Office of the Attorney General (“OAG”) issued numerous letters over the past month alleging that pharmacies are price gouging consumers by offering for sale COVID-19 tests, and/or other testing supplies, at unreasonably inflated prices. Violations of New York’s price gouging law can result in penalties of up to $25,000 per test sold, resulting in significant liabilities if not successfully resolved.
New York law prohibits merchants from taking unfair advantage of consumers by selling goods or services for an “unconscionably excessive” price during an “abnormal disruption of the market,” or a declared state of emergency. An excessive price would be represented by a gross disparity between the price of the product immediately before and after such an occurrence. The law prohibits price gouging by all parties in the chain of distribution, including retailers, manufacturers, wholesalers, and distributors.
Undisputedly, with the ongoing COVID-19 crisis, New York is in “a period of market disruption.” Accordingly, because COVID-19 cases are on the rise once again due to the proliferation of the Omicron variant, and because Covid test kits and supplies are scarce, the OAG is making enforcement of the price gouging law its top priority. In fact, the OAG has conducted a campaign to alert consumers to this practice and urged them to report any suspected price gouging. Given the ambiguities around pricing in times of market disruption, the OAG has received numerous complaints and is in the process of investigating the more egregious cases.
OAG’s Enforcement
Once the OAG gets a report that a business, such as a pharmacy, is violating the price gouging statute, not only will it promptly send a cease-and-desist letter, but it also will request an immediate audit of the business’ sales of Covid-related supplies. These audits will focus on the price at which the tests and supplies were sold, in comparison to the prices of those items (1) prior to the market disruption; and/or (2) the prices at which the same or similar goods were readily obtainable by other consumers in the area. In both instances, the OAG will evaluate whether there were “gross” increases in the prices charged.
Next Steps
Pharmacies and other health care businesses should take these enforcement actions very seriously. If you own and/or operate a business where you sell COVID-19 test kits, other testing supplies, and/or Personal Protective Equipment (“PPE”), it is imperative that you ensure your compliance with the price gouging statute, and that your prices are in line with what is considered acceptable and/or fair market value under New York law.
If you have questions regarding the price gouging statute, or if you are unsure if you are in compliance with all the applicable statutory requirements, you should contact an experienced attorney as soon as possible, and ideally before the OAG initiates any enforcement actions. If you already received a cease-and-desist letter from the OAG, you should contact an attorney immediately for a free consultation.
