Wednesday, May 27, 2020

Attorney General James Sues Wholesaler for Price Gouging During the Coronavirus Pandemic


Quality King Gouged Prices of More Than 46,000 Cans of Lysol Disinfectant Spray,
Charging Retailers More Than Double As Pandemic Raged On

AG Seeking Restitution for All Consumers Forced to Pay
Excessive Prices Due to Quality King’s Unlawful Activity

  New York Attorney General Letitia James today filed a lawsuit against a wholesale grocery distributor for price gouging during the coronavirus pandemic. The lawsuit charges the wholesaler, Quality King Distributors, Inc., and its CEO, Glenn Nussdorf, with illegally increasing the company’s wholesale prices to sell Lysol disinfectant products to neighborhood grocery and discount stores in New York. Between January 2020 and April 2020, Quality King increased the price of Lysol Disinfectant Spray from about $4.25 per 19-ounce can to as high as $9.15 per can, even though the company did not incur increased costs for the product. The stores purchasing Lysol products from Quality King then passed on those increased prices to their customers, forcing them to pay far higher prices for Lysol products than they did before the pandemic. Consumers were charged as much as $16.99 for one can of Lysol that was previously sold at a retail price range of $5 to $8. The lawsuit seeks restitution from Quality King for those consumers who were forced to pay unlawfully high prices for these essential products. The Attorney General’s Office learned of Quality King’s price gouging after receiving complaints from consumers about retail stores’ high prices.

“Quality King’s profiteering during this time of crisis is appalling,” said Attorney General James. “Instead of ensuring New Yorkers could protect themselves from this virus and stop the spread, Quality King chose to prey on a global pandemic to line its own pockets. I won’t hesitate to take action against any company that tries to cheat New Yorkers during this crisis and beyond.”
Prior to the pandemic, Quality King sold Lysol Spray at the median wholesale price of about $4.25 for one 19-ounce can of the product or about $51 for a pack of 12 cans. The Attorney General’s lawsuit alleges that the company then steadily increased its prices as New York and the nation became gripped by the coronavirus pandemic — first to a wholesale price of about $5 per can ($60 per 12-pack) during February 2020, then about $7.95 per can ($95.45 per pack) by early March. By the end of March, Quality King charged as much as $9.15 per can of Lysol Spray (about $110 per pack), or more than double its typical price for the product just two months earlier.
During this time, Quality King’s own median costs to purchase Lysol Spray from its suppliers remained flat at around $3.54 per can or $42.50 per 12-pack. As a result, the company has been able to boost its gross profit margin on the product from about 21 percent before the pandemic crisis to more than 95 percent during the crisis, or almost a five-time increase.
The lawsuit alleges that Quality King’s price increases injured New York consumers, who sought to buy Lysol’s disinfectant products to kill the coronavirus on surfaces in their homes to reduce the risk of infection. Retail stores in New York paid Quality King’s high wholesale prices and then passed the price increases on to their customers.
As a result, consumers paid prices of $12, $13, and even $16.99 for cans of Lysol that were previously sold at a retail price range of $5 to $8, the complaint alleges. Between February 1, 2020 and April 7, 2020, Quality King sold Lysol Spray with gouged prices in at least 432 separate transactions. These sales accounted for at least 3,835 12-packs of Lysol Spray or 46,020 19-ounce cans.
The lawsuit alleges that Quality King has also increased prices on Lysol Disinfectant Wipes.
The Attorney General’s lawsuit against Quality King and its CEO is part of a broader investigation by the Attorney General into price gouging by wholesalers and retail stores during the coronavirus pandemic. Since February 2020, thousands of consumers have submitted reports to the Attorney General’s Office complaining that they have been charged excessive prices for necessary products during the crisis, including disinfectants, sanitizers, household paper products, and food staples. The Attorney General’s Office investigates consumers’ complaints to determine if price gouging occurred and which parties in the distribution chain — retails stores, producers, or wholesale distributors such as Quality King — are responsible for the excessive price increases.
The Attorney General filed its suit against Quality King in New York State Supreme Court for New York County. The Attorney General is suing for a permanent injunction barring the company and its CEO from continuing their illegal conduct, restitution for injured consumers, a civil penalty, and disgorgement of Quality King’s profits from their illegal practices.

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