On March 18, 2021, retailer Union Square Supply, Inc. filed a civil rights class action lawsuit in the Southern District of New York challenging New York City’s price gouging enforcement practices.  The complaint alleges that defendants are responsible for “the creation and maintenance of an illegal and unconstitutional penalty enforcement scheme, abuse of emergency powers, and other misconduct that improperly assesses penalties and fines on businesses without any notice or due process.”

Rather than challenging the validity of the price gouging law itself, plaintiff’s arguments largely focus on the whether the process violates constitutionally protected rights.  Still, the relief sought functionally asks for the price gouging law to be abandoned.  The complaint is seeking more than $150 million in damages on behalf of class members, a declaratory judgment that defendants willfully violated their rights, and certain temporary, preliminary, and permanent injunctions.  Part of the injunctive relief sought includes an injunction against “all enforcement, hearings, and determinations of price gouging entirely.

On March 15, 2020, New York City issued an emergency price gouging rule (6 RCNY § 5-42).  That emergency rule was later made permanent, and applies during a declared state of emergency in the city.  The “covered goods and services” under the law include those “goods or services that are essential to health, safety or welfare, or are marketed or advertised as such,” with a non-exhaustive list of examples including: “staple consumer food items,” “goods or services used for emergency cleanup,” “gasoline or other motor fuels,” “emergency supplies,” which includes “candles, blankets, soaps, diapers, [and] toiletries,” as well as “medical supplies.”

The pandemic-related state of emergency order remains in effect through at least April 20, 2021.  For more than a year, the rule has therefore allowed the city to fine retailers who charged excessive prices on covered goods and services.

Lead plaintiff Union Square Supply Inc. and other retailers now allege that the fines that New York City has imposed on business for price gouging during this ongoing state of emergency have been assessed unfairly.  The complaint alleges that the city’s enforcement has intensified over the course of the pandemic, leaving business without fair warning of what constitutes “price gouging.”  Plaintiff accuses the Office of Administrative Trails and Hearings of basing decisions upon “voluminous ‘packets’ where computer printouts of online products are taken as evidence, even if all of the products shown are clearly shown to be ‘unavailable’ or ‘out of stock’,” or comparing local prices to those offered by “out of state or national vendors.”  The complaint also alleges that it “impossible” for businesses to comply with the administrative appeals process.

As a result, plaintiff alleges that the City has violated, among other things, its 14th Amendment Due Process rights and its Eighth Amendment right to be free from excessive fines.

Given the pushback on pandemic restrictions and emergency orders in other areas, it is perhaps not surprising to see a suit challenging New York City’s price gouging enforcement practices.  It remains to be seen how defendants will respond to the argument that the law is “being applied in an arbitrary manner.”  On March 23, Judge Denise Cote denied plaintiff’s motion for a temporary restraining order, which sought to enjoin the enforcement of a penalty imposed on Union Square Supply Inc. and to enjoin future enforcement under the statute.  At least for now, the law remains in full effect.  We will be watching to see how the court responds to the legal theories raised in the case, and what impact it could have on business and other enforcement actions.

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Visit Proskauer on Price Gouging for antitrust insights on COVID-19.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

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Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s Antitrust Group and co-head of the Washington DC office. He represents clients in complex antitrust and consumer protection litigation, defends mergers and acquisitions before the U.S. antitrust agencies, represents companies involved in government investigations, and counsels…

Chris Ondeck is co-chair of the Firm’s Antitrust Group and co-head of the Washington DC office. He represents clients in complex antitrust and consumer protection litigation, defends mergers and acquisitions before the U.S. antitrust agencies, represents companies involved in government investigations, and counsels on antitrust compliance. Chris is also the founder and leader of the firm’s Price Gouging Practice, and is one of the key thought leaders in this space.

Chris handles antitrust matters for clients in a number of industries, including food and agriculture, financial services, media, telecom, technology, e-commerce, consumer products, natural resources, oil and gas, chemicals, and pharmaceuticals.  He also serves as outside counsel to a large number of industry groups, including trade associations and cooperatives.

Chris has been recognized as a leading antitrust practitioner by Chambers, noting that clients describe him as “our primary thought partner – he’s very good at explaining the complex issues and making them easy to understand” and praising “his strong advocacy skills”; by The National Law Review as a “Go To Thought Leader 2020”; by Acritas as a “Star” in multiple years; by Benchmark Litigation as a National Litigation Star 2021; and by The Legal 500 United States for Antitrust: Civil Litigation/Class Actions.

Photo of John R. Ingrassia John R. Ingrassia

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating…

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating to competition and antitrust, CFIUS or foreign investment issues.

For more than 25 years, John has counselled businesses facing the most challenging antitrust issues and helped them stay out of the crosshairs — whether its distribution, pricing, channel management, mergers, acquisitions, joint ventures, or price gouging compliance.

John’s practice focuses on the analysis and resolution of CFIUS and antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger CFIUS and HSR notification requirements. He advises clients on issues related to CFIUS national security reviews, and on CFIUS submissions when non-U.S. buyers seek to acquire U.S. businesses that have national security sensitivities.  He also regularly advises clients on international antitrust issues arising in proposed acquisitions and joint ventures, including reportability under the EC Merger Regulation and numerous other foreign merger control regimes.

His knowledge, reputation and extensive experience with the legal, practical, and technical requirements of merger clearance make him a recognized authority on Hart-Scott-Rodino antitrust merger review. John is regularly invited to participate in Federal Trade Commission and bar association meetings and takes on the issues of the day.

Photo of Kelly Landers Hawthorne Kelly Landers Hawthorne

Kelly Landers Hawthorne is an associate in the Litigation Department and a member of the Antitrust and Product Liability groups. She represents clients in litigations and due diligence across a range of industries, including consumer products, life sciences, healthcare, education, hospitality, sports and…

Kelly Landers Hawthorne is an associate in the Litigation Department and a member of the Antitrust and Product Liability groups. She represents clients in litigations and due diligence across a range of industries, including consumer products, life sciences, healthcare, education, hospitality, sports and entertainment.

Kelly also maintains a diverse pro bono practice. She received Proskauer’s Golden Gavel Award for excellence in pro bono work in 2019.

She is a frequent contributor to Proskauer’s Minding Your Business blog, where she authors articles related to price gouging issues.

Kelly is also a member of the Proskauer Women’s Alliance Steering Committee, where she serves on subcommittees focused on highlighting and providing professional development opportunities for women at the firm.

Prior to her legal career, Kelly was a Teach For America corps member and taught middle school in Washington, DC.

While at Columbia Law School, Kelly served as an articles editor of the Columbia Journal of Law & the Arts and interned for the Honorable Sandra Townes of the U.S. District Court for the Eastern District of New York.