New York Attorney General Letitia James recently proposed the first-ever rules to strengthen enforcement of the state’s price gouging law, which prohibits companies from exploiting market disruptions to increase their profits on essential goods and services. In response to the influx of pandemic-related price gouging complaints, the 2020-amended law gives the AG rulemaking authority, among other changes.

Open to a 60-day public comment period, the proposed rules aim to protect consumers and small businesses from corporate profiteering by establishing “clear guardrails against price increases during emergencies,” making it easier for the AG to investigate and combat price gouging. Two significant elements of the proposed rules include:

1. They create a presumption that any price increase over 10% during an abnormal market disruption would represent a “gross disparity” and may constitute price gouging. Companies falling in this category must then demonstrate a record of their costs to justify the increase. The AG chose a 10% threshold since it is the “most commonly employed measurement around the country” and is used in New York City’s price gouging rule, indicating a “societal convergence around the illegitimacy of more than 10% price increases.” The rules also provide examples of which justifications count or do not count as affirmative defenses. For example, a new vital product or service introduced after a market disruption does not constitute a defense, meaning companies cannot justify their price increases by pointing to the cost of producing the new product or service.
2. The rules prohibit corporations with more than a 30% market share or in concentrated markets from increasing profit margins during abnormal market disruptions. For companies that rely on or favor dynamic pricing, the AG would use the median price of the same good or service one week before the market disruption as a benchmark to determine whether illegal price gouging occurred.

The rules provide penalties for violations, with fines ranging from $500 to $25,000. Violators may also be required to pay restitution to consumers affected by the price gouging.

Why It Matters

The proposed rules enhance the New York AG’s power to scrutinize and enforce pricing claims against businesses. They also serve as another regulatory initiative to strengthen price gouging laws in the shadow of lessons learned from the COVID-19 pandemic.

Troutman Pepper State Attorneys General Team

	Ashley Taylor – Co-leader and Firm Vice Chair Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. He focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). Drawing upon his experience as a deputy attorney general, Ashley has developed an extensive consumer practice with regard to the consumer financial services industry.
	Clay Friedman – Co-leader Clay is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. Informed by nearly a decade in a state attorneys general office, and more than 25 years in private practice, Clay spends much of his time representing clients in singular or multistate regulatory actions. Clay has repeatedly led teams before all 50 state attorneys general and also handles matters with the Federal Trade Commission, the Consumer Financial Protection Bureau, and other local, state and federal agencies.
	Stephen Piepgrass Stephen represents clients interacting with, and being investigated by, state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in heavily regulated industries.
	Michael Yaghi Michael handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
	Ketan Bhirud As a former government official at the state and federal level, Ketan leverages extensive experience in the public and private sectors to skillfully represent client interests.
	Avi Schick A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
	Chris Carlson Chris represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
	Natalia Jacobo Natalia is an associate in the firm’s business litigation practice. She recently received her J.D from the University of California, Davis School of Law.
	Namrata Kang Namrata is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. Her work includes advising clients in regulatory investigations and compliance matters, in addition to representing clients in civil litigation matters.
	Susan Nikdel Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes. Susan also represents banks, fintechs, and financial services companies in connection with regulatory examinations and investigations brought by the CFPB, state attorneys general, and the California Department of Financial Protection and Innovation.
	Whitney Shephard Whitney is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
	Trey Smith Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement practice. His experience includes serving as a summer associate at the firm in 2021.
	Daniel Waltz An experienced litigator, Daniel advises and represents regional, national and international companies, financial institutions and insurers in all facets of business, complex commercial and insurance coverage litigation. He is committed to working with his clients to find creative solutions to meet their needs.
	Stephanie Kozol Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.