A New York City business claims city authorities have charged excessive fines for alleged price gouging during the COVID-19 pandemic while ignoring companies’ due process rights.
According to a proposed class action lawsuit out of New York, defendants Mayor Bill de Blasio, the city of New York, and the New York City Department of Consumer and Worker Protection (DCWP) and its commissioner have imposed “outrageous, illegal, excessive and unconstitutional fines” on businesses for price gouging while maintaining a “secret list” of maximum allowable prices that remains undisclosed to the public.
Meanwhile, the Office of Administrative Trials & Hearings (OATH) and its commissioner, who are also named as defendants in the suit, have ignored businesses’ 14th Amendment and due process rights by imposing fines “under a bogus hearing process whereby defaults regularly are granted, adjournments are nearly impossible, and ‘appeals’ result in outrageous decisions,” the lawsuit alleges.
The case claims the defendants have applied New York law “in an arbitrary manner” and allowed for an ever-changing definition of price gouging determined by case law instead of public standards such as tenant rent control statutes. Per the suit, the excessive fines “serve no public benefit” when businesses are not informed of the maximum allowable prices for goods sold during an emergency.
“Defendants act under the guise of consumer protection, or a due process hearings [sic], but in reality, they are merely looking to line their pockets at the expense of local businesses,” the complaint scathes.
Per the case, New York City Mayor Bill de Blasio declared a state of emergency on March 12, 2020 in response to the coronavirus pandemic. A few days later, de Blasio and New York City approved an emergency rule that stated the “practice of price gouging with regard to personal and household goods and services” is unconscionable, according to the suit. The complaint says the notice defined price gouging as “when a merchant takes advantage of an abnormal disruption in the marketplace and charges excessive prices, taking advantage of the consumer’s inability to bargain or seek a better price, resulting in a gross disparity between the value received by a consumer and the price paid.”
Under New York City law, the case explains, two exceptions to the price gouging rule include when a merchant increases its price because its supplier has increased costs and when a merchant sold goods at an excessive price 30 days before a state of emergency was declared and has not increased the price of such goods.
The plaintiff business, which operates a store on Fourth Avenue, says it received on July 13, 2020 a summons from the Department of Consumer Affairs regarding alleged price gouging. Per the case, an inspector had taken photographs of items in the storefront “regardless of whether they were offered for sale,” incorrectly listed sale prices, and issued violations for some items based on “some unknown price list” provided by DCWP. According to the suit, the items at issue included face masks, hand sanitizer, wipes, cleaning spray, bleach, paper towels and gloves.
The lawsuit alleges that during the inspection and the following hearings, the defendants failed to assess the pre-pandemic sales price of the items in the summons or consider the cost for the plaintiff business to purchase the items. Moreover, the defendants have based violations on a “secret standard” of maximum prices that has not been disclosed to the plaintiff and have failed to produce this list at hearings or otherwise, according to the complaint.
The case goes on to claim that the defendants failed to provide proper notice to the plaintiff and other businesses that in-person hearings were not being held during the COVID-19 pandemic and that they were required to request live hearings by telephone five days in advance of their hearing date. As a result, many businesses were held in default after “failing to appear” for their hearings, the suit says.
Still further, the lawsuit challenges the defendants’ decision to use the sale prices of online vendors and nationwide chain stores to determine “acceptable” prices, noting that the majority, if not all, of the items on the defendants’ list were out of stock. Moreover, the suit charges, interpreting such online goods as items that “could have been obtained by a buyer in the City of New York” for the purpose of defining whether a business has engaged in price gouging is unfair given brick-and-mortar shops have expenses such as rent, overhead and other costs that online vendors do not.
The plaintiff says it was assessed a $21,000 penalty by OATH after a February 2021 hearing. While the defendants previously imposed a $3,000 fine maximum, the limit “is no longer being honored” and businesses are frequently assessed violations in excess of $15,000 for alleged price gouging.
The case claims an unintended consequence of the defendants’ conduct may be that emergency goods suppliers will choose to “sit out an emergency” for fear of price gouging investigations, an OATH summons and a “sham administrative review.”
“This is precisely what consumers do not need during a state of emergency, namely less storefronts selling these necessary goods,” the complaint states.
The lawsuit looks to represent anyone who was issued a fine through OATH for price gouging during a state of emergency.
ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.