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Report: Stores overcharging for milk

By David Freedlander | dfreedlander@am-ny.com

7:39 PM EDT, June 5, 2008

New Yorkers are being shaken down for their milk money by their neighborhood bully -- in this case, their local grocery store.

A report released Thursday by the City Council found that 86 percent of city food stores are gouging customers on the price of milk, with some places almost doubling the state-mandated amount.

"While food prices are rising, it's incredibly important we make sure important staples, critical things to families like milk, are as affordable as possible," said Council Speaker Christine Quinn (D- Manhattan.)

The price of milk is regulated by a state law passed in 1991 to prevent retailers from selling at a price deemed "unconscionably excessive."

The prices are adjusted monthly by the state department of agriculture, and are shaped by different factors such as global demand. The price is set to ensure that stores can make a profit, but stores that deem the prices too low can apply for exemptions.

"People need to know there is a law that sets the ceiling for milk prices," said Quinn, adding that consumers who find the price of milk above the price threshold should call the Department of Agriculture.

Stores found not to be in compliance must adjust their prices or apply for an exemption. In very rare cases, law enforcement may get involved.

Councilman Eric Gioia, (D-Sunnyside), whose office lead the investigation, said that the price of milk was mandated by the legislature because customers can't stock up when they find a good price.

"Milk is not a luxury. Milk is a necessity for a healthy diet, especially for children," he said.

Jessica Chittenden, a spokeswoman for the state department of agriculture, said that the milk pricing law was complex, and that the legislature had never given the agency the resources necessary to enforce it.

"Because the price changes so rapidly it can be difficult to enforce."

Industry insiders bristled at the notion that stores were scamming their customers.

"Milk is a commodity no one tries to make money on," said Nelson A. Eusebio, the executive director of the National Supermarket Association. "It's the kind of item that drives people to the store, and you always want to be cheaper than the next guy."

Consumers at the Battery Park City Gristedes, whose prices were found to be among the highest in the city, met the news with a shrug.

"It would take an hour, just to save a dollar, that's why I don't go anywhere else," said Patrick Oliver-Kelley, 55, an investment banker, who was walking out of the store with a half-gallon of milk under his arms. "That's how you make money, you take advantage."

John Catsimatidis, the chief executive of Gristedes, said the council didn't understand the economics of running a grocery store in New York City.

"The supermarket business is a dying breed in the New York area," he said. "Fifty percent of the supermarkets in New York City have gone out of business in the last 6 or 7 years because they didn't charge enough."

He also accused the council of playing politics. Catsimatidis, like Quinn, is likely mayoral candidate in 2009.

"Ms. Quinn should take Economics 101. It's inexcusable that an official of the city of New York would just try to panic people."