Senate Bill S9002A

                                 
BILL NUMBER: S9002A

SPONSOR: HOYLMAN
 
TITLE OF BILL:

An act to amend the general business law, in relation to prohibiting
price gouging with respect to fuel, energy, and transportation goods and
services

 
PURPOSE:

This bill is intended to clarify that the state's price gouging law
reaches fuel, energy, and transportation goods and services, require the
attorney general to obligate public disclosure of prices charged for
fuel to provide transparency and rapid identification of price gougers,
clarify that the attorney general may also require such disclosure of
prices charged in the supply chain for other vital and necessary goods
and services, and clarifies that the statute extends to transactions
made out-of-state for goods and services sold in or into the state.

 
SUMMARY OF SPECIFIC PROVISIONS:

              

Section 1 amends section 396-r of the general business law to make three
changes clarifying the existing statutory text.

First, the definition of "goods and services" is amended to clarify that
the statute reaches the entire chain of distribution for goods and
services sold in or into the state.

Second, the definition of "goods and services" is further amended to
clarify that vital and necessary goods include fuel, energy, and trans-
portation goods and services.

Third, the section clarifies that product recalls leading to supply
shortages can be a cause of an abnormal disruption of the market that
triggers application of the statute.

In addition, the statute is amended to require the attorney general
promulgate regulations providing for periodic public disclosure of the
prices charged throughout the chain of distribution for fuel sold in or
into the state. The amendment clarifies that this mandate does not fore-
close the attorney general promulgating regulations imposing such
disclosure requirements or other disclosure requirements on actors in
the supply chain for other goods and services (as that term is defined
by the statute), or alter in any way the attorney general's preexisting
regulatory authority.

Section 2 provides that this Act shall take effect immediately.

 
JUSTIFICATION:

The Russian invasion of Ukraine has provided an abnormal disruption of
the market for fuel, among other commodities.  Oil and gas companies
have used this disruption to increase fuel prices on consumers, most
notably at the gas pump.

The New York courts have long held that fuel falls within the ambit of
the price gouging statute (see, e.g.  People ex rel. Spitzer v My Serv.
Ctr.  Inc., 14 Misc 3d 1217(A) (Sup Ct, Westchester County 2007) (Lipp-
man, J.) (gas station's prices for gasoline "patently violated GBL §
396-r" and granting injunction); People ex rel. Spitzer v Weyer Petrole-
um, Inc.  14 Misc 3d 491 (Sup Ct, Albany County 2006) (finding gross
disparity in retail gas prices following Hurricane Katrina sufficient to
warrant injunction under GBL § 396- New York State Senate Memorandum in
Support of Legislation People ex rel. Spitzer v Oneida Lake Petroleum
Corp.  Sup Ct, Oswego County, Dec. 18, 2006, Seiter, J., Index No.
2006-1710 (same)). Similarly, New York courts have held that other ener-
gy sources, such as portable generators, fall within the ambit of the
price gouging statute (see, e.g. People ex rel. Abrams v Two Wheel
Corp., 71 NY2d 693, 697 (1988) ("If a power failure or shortage is the
cause of a market disruption, the purchase of a generator is precisely
the kind of transaction that the statute was designed to regulate");
accord People ex rel. Vacco v Beach Boys Equip. Co., Inc.; 273 AD2d 850
(4th Dept 2000); People ex rel. Vacco v Chazy Hardware, Inc., 176 Misc
2d 960 (Sup Ct, Clinton County 1998)).

This legislation aims to codify this judicial finding and permit public
scrutiny of oil and gas price gouging by requiring that the attorney
general promulgate regulations that would obligate periodic price
disclosure by all actors in the supply chain for fuels, whether gas,
diesel, crude oil, or otherwise, that are being sold in or into the
state.

In the specific context of the oil and gas industry, requiring periodic
disclosure the prices charged at each stage of the supply chain for oil
and gas in New York by every actor in that chain, rather than simply the
spot prices charged at the pump or at the terminal, permits rapid
detection of both unconscionably excessive prices and the actors behind
those unconscionably excessive prices after abnormal disruptions of the
market such as the present Ukrainian crisis.

At the same time, the bill clarifies that the fuel disclosure mandate
does not diminish the attorney general's regulatory authority to require
periodic disclosure of prices throughout the supply chain for any other
goods or services covered by the statute. This bill also does not dimin-
ish or alter any other aspect of the attorney general's preexisting
regulatory authority.

At the same time, the State is experiencing other egregious instances of
price gouging, as seen in recent deeply disturbing reports that parents
are being price gouged for infant formula owing to a shortage caused by
an abnormal disruption of the market linked to the COVID-19 pandemic and
bacterial contamination of some portion of the existing supply. This
bill accordingly amends the statute to clarify that a product recall may
be the cause of an abnormal disruption of the market for a vital and
necessary good.

Although the statute already covers such causes, the express clarifica-
tion made in this bill sends a strong message to all actors in this
supply chain: the despicable practice of exploiting product recalls to
force desperate parents to pay staggering sums to feed their babies is
not merely morally repugnant but flatly illegal, and always has been.

Finally, the statute is amended to clarify that any actor in the chain
of distribution for vital and necessary goods and services, wherever
situated, is subject to the price gouging statute if the goods and
services at issue are sold in or into New York state. The legislature
intends for the ambit of the statute to reach the entire supply chain
for goods and services sold in or into New York state, to the maximum
extent permitted by the U.S. Constitution and federal law.

 
PRIOR LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This section shall take effect immediately.