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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Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters…

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters for clients in a number of industries, including advertising, aerospace, alcoholic beverages, appliances, building materials, consumer products, defense, franchise, medical devices, metals, mining, natural resources, oil and gas, packaging, pharmaceuticals, software and telecommunications. He also has developed substantial experience advising clients regarding the application of the antitrust laws to the pharmaceutical industry, the agriculture industry, trade associations and the energy industry.

Photo of John R. Ingrassia John R. Ingrassia

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years has counselled businesses facing the most challenging antitrust issues and…

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years 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 or joint ventures.

John is a senior counsel at the Firm, advising on the full range of antitrust matters in diverse industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services and health care, among others.  His practice focuses on the analysis and resolution of antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger notification requirements. John has extensive experience with the legal, practical, and technical requirements of merger clearance and is regularly invited to participate in Federal Trade Commission and bar association meetings regarding Hart-Scott-Rodino practice issues.

Photo of Kelly Landers Hawthorne Kelly Landers Hawthorne

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as…

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as a judicial intern for the Honorable Sandra Townes of the United States District Court for the Eastern District of New York.

Kelly is a Teach For America alumnus and taught middle school special education and math in Washington, D.C. prior to law school.