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NYC Charges Milk Sellers With Price Gouging

Reduced enforcement blamed for high prices

June 9, 2008

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The gas pump isn't the only place consumers sometimes feel gouged. The New York City Council has released a report charging consumers in the city are being overcharged for milk.

The problem, says Council Speaker Christine C. Quinn, Oversight and Investigations Chair Eric Gioia and Council Member Letitia James, is "significantly decreased" oversight of New York State's Milk Price Gouging Law, resulting in citywide milk prices that are above the state-determined legal threshold.

Tracy Shelton, a consumer attorney for the New York Public Interest Research Group, calls the report's findings "disturbing." She says its outrageous that some consumers are paying more than the threshold price for milk.

Lucy Cabrera, president of the New York City Food Bank, said price gouging on necessities like milk should never be tolerated.

The prices that consumers must pay for milk as well as other commonly consumed items are rapidly increasing. The most recent survey from the New York State Department of Agriculture and Markets (AGMKT) found that the cost of a gallon of whole milk in the New York metropolitan area increased nearly 30% between December 2006 and December 2007.

In 1991 New York State enacted the Milk Price Gouging Law, designed to protect consumers from food retailers who sell milk at a price that is "unconscionably excessive."

The law requires the AGMKT to set a monthly threshold for the price of milk for two regions of the state – Upstate New York and the Metropolitan New York area to ensure that retailers are not charging consumers substantially more than what is paid to farmers.

The AGMKT Division of Milk Control and Dairy Services is responsible for enforcing the Milk Price Gouging Law. The Department currently conducts monthly supermarket surveys; however the same supermarkets are analyzed each month, allowing the AGMKT to obtain only a measure of milk prices over time.

"As food prices continue to rise, New Yorkers are finding it harder and harder to feed their families. We must ensure that the safeguards and thresholds for keeping milk affordable are effective and that retailers are following the letter of the law," said Quinn.

"Consumers should have the confidence that a staple such as milk – which is critical for a child's healthy growth and development– is available at reasonable prices," Quinn said.

In November 2007, investigators from the New York City Council's Policy and Investigations Division conducted a survey of milk prices at 50 retailers throughout the city, including ten per borough. Once the surveys were completed, the Council compared the milk prices at stores around the city to the respective thresholds that the AGMKT set for November 2007 to determine whether retailers in New York City were charging prices that might be classified as gouging.

This investigation found:

• Forty-three of the 50 stores surveyed (86%) charged a price that was higher than the threshold for at least one unit of milk.
• The 43 surveyed retailers that charged above the threshold for at least one unit of milk charged an average of $0.40 per unit above the threshold.
• Twelve (63.2%) of the 19 supermarkets surveyed charged above the threshold for at least one unit of milk.
• A total of 458 units of milk were surveyed, with 238 (51.9%) units priced above the threshold.

These findings suggest that reduced enforcement of the Milk Price Gouging Law has resulted in retailers who are essentially unencumbered by the law and able to set milk prices almost as if the law does not exist.

The report issues the following recommendations:

• The New York State Department of Agriculture and Markets should recommence its oversight efforts by conducting more regular price-gouging enforcement.
• The New York City Department of Consumer Affairs and the State Department of Agriculture and Markets should work together to increase public awareness of the Milk Price Gouging Law and the monthly milk threshold.
• The New York State Department of Agriculture and Markets should implement a more comprehensive system of notifying milk retailers of the upcoming month's price threshold.
• Milk retailers should stay abreast of changes to the monthly price threshold and adhere to the Milk Price Gouging Law when setting their prices.

Studies show that nationwide, milk is the second most commonly consumed beverage, and the most heavily consumed beverage among children ages 4-8. However, milk consumption has dropped significantly over the past half century, with consumers opting towards less nutritious and often less expensive soft drinks, fruit juices, coffees and teas.

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