Criminal enforcement arms of the government seemed to have “gone cold” since the rise of coronavirus in the United States, but that is not the case. In reality, the U.S. government is on high alert concerning issues of fraud that are likely to occur in connection with the wide-reaching effects of coronavirus.
Who Investigates Allegations of Price Gouging?
Investigations related to the criminal enforcement of price gouging may be carried out by multiple agencies. These criminal investigations may involve the cooperation of federal, state, and local government agencies.
What Should I Do If I’ve Had A Search Warrant Executed on My Business?
If your local police or federal agents have executed a search warrant on your business in relation to a price gouging investigation, contact an attorney from The Blanch Law Firm today at (212) 736-3900.
“Price Gouging” Laws in New York State
#1) General Business Law Section 396-r
“General Business Law Section 396-r” is currently being enforced by the New York State Attorney General’s Office. These agents may initiate investigations based upon anonymous reports from whistleblowers or random inspections while visiting locations.
What Happens During these Investigations?
The issue of a state attorney general’s office inspector visiting your location is that they will most likely have a search warrant to execute on your home or business.
What Happens During the Execution of a Search Warrant?
In the case of a business selling items at inflated prices, what will most likely happen is that investigators will come to your home or business – unannounced – and seize your records and your inventory to determine:
- If you increased the price of certain items after the news of the coronavirus began;
- How much you increased your prices; and
- How many of those items you have sold at the inflated price.
What are Investigators Looking for During a “Price Gouging” Investigation?
The AG’s Office is looking for “unconscionably excessive pricing.” For example, something that generally would sell for $5 – in light of the economic standards for the economy – a 15% to 20% increase may be seen as “unconscionably excessive” or “a gross disparity” and that may lead to a fine.
#2) NYC Administrative Code Section 20-701 (b)
“NYC Administrative Code Section 20-701 (b)” was enacted in New York City during the recent novel Coronavirus (COVID-19) pandemic. Unlike the state law, which uses more general terms, the New York City regulation prohibits a price increase of more than 10%.
For example, if you bought something for $10, you cannot add more than 10% or ($1) to the price when you try to re-sell that product.
What they’re doing is, they’re fining vendors $500 per item. So, for example, if you have 100 cans of Lysol and they’re all priced above 10% then you may be fined for each can of Lysol.
What About Companies that Sell Services?
These Laws Also Apply to the Selling of Services via Website. For example, Uber or a delivery service charges you more than 10% of what they would have generally charged you historically (again, counted per service – meaning per delivery) they will be fined accordingly.
What About Companies the Sell Items Online?
Investigations are also targeting websites, so if your website owner and you are based in New York City, are selling items to customers in New York City, or are shipping items to New York City, you may be charged with price gouging.
What Types of Penalties May a Defendant Face?
Stores primarily have received fines but, in some instances, you find arrests being made in relation to these investigations. Fines can go into the 10’s of thousands of dollars. Many times, the amount of money an individual is ultimately forced to pay far exceeds the profits that they would have made from selling the masks at an increased price point.
What is an Example of a Civil “Price Gouging” Claim?
What makes this even more interesting is you have companies like 3M who have gotten involved in enforcement – to the extent 3M is currently suing a company, Performance Supply Inc., in federal court in the Southern District of New York.
What is 3M Alleging that Performance Supply Inc. Did?
The manufacturing company, 3M, has filed a lawsuit in New York federal court alleging that Performance Supply LLC is price gouging customers of 3M products and engaging in deceptive trade practices. 3M is alleging that this will result in a net loss for 3M in the millions of dollars.
If your business is engaging in similar practices, you may expect to receive cease and desist letters from companies ordering you to stop what you are doing. In some instances, this may lead you into civil litigation.
How Does This Apply to the 4th Amendment?
The 4th Amendment to the United States Constitution deals with search and seizure. A lot of people are heavily relying on 4th Amendment protections under the current circumstances where, for the first time in the history of the country, all states are under a state of emergency.
In these cases, the 4th Amendment protections are extremely weak. It has already been made clear that, under the state of emergency, these types of items will be seized and redistributed and the individual may face either of several penalties and potentially criminal penalties.
What Would Your Advice Be to Prevent These Types of Charges and Accusations?
So, under those circumstances, a lot of people would ask how do you make a living when you know so many businesses are closing and it is a hot item – it’s something that everybody would definitely want to get involved in because they’re basically selling themselves.
What our advice would be to these individuals is for you to look at the current regulations and try to price your items within range.
Most importantly, keep any receipts from the items that you ordered, quantities, vendor names, etc. That’s extremely important because, in defending against these allegations (whether it be civil or criminal), one of the key factors is going to be how much did you pay for the item.
In order to have the potential to exonerate you and make sure that you are treated fairly, these documents are going to be extremely important. Whether you have invoices and receipts stored in your email, on a cloud, or you have physical copies, our best advice to you is to keep the documents, keep them handy and be mindful of the current situation.
What Do You Mean by “This Isn’t Going Away?”
When the courts are back to being fully active there’s going to be a lot of individuals who are going to be prosecuted for this both civilly and criminally and this is not something that’s going to go away.
In the next 30 to 60 days, as the country is looking for money to fill budget gaps, there’s going to continue to be criminal investigations and there’s going to continue to be lawsuits in state and federal courts.
So, we also need individuals to be mindful of the fact that if you, for example, sold thousands of masks and they fit into one of the descriptions that we gave here, generally, don’t be shocked if eight months from now you receive either some type of demand or notice or police officers or some investigative agency knocking on your door.
Don’t think that this is going to be a short-term matter where if we’re not arrested in the next 30 days, then it went away. That’s not the way this is going to work.
This is going to be an ongoing process and we just want everyone to be mindful ahead of time because these types of cases are going to be hard to negotiate out of if you haven’t maintained the proper paperwork.
I also see a lot of people nowadays selling mask on websites, they’re selling hand sanitizer on websites and, it is understandable for people who are looking to help the community, while trying to get an income. In light of the fact that the unemployment level has reached more than a million people, we have to be mindful of that as well.
Call Us Now To Speak to an Attorney
The attorneys at The Blanch Law Firm are here to help individuals facing charges and investigations related to pricing amidst the novel coronavirus (covid-19).
Call us now to speak to schedule your totally free and completely confidential attorney phone consultation at (212) 736-3900.
