13 NYCRR 600.9

Section 600.9. Cost and profit rebuttals on showing of gross disparities or excesses in price. (a) Definitions. In addition to the definitions set forth in 13 N.Y.C.R.R. § 600.1, in this rule: (1) The date on which a cost is "accrued or paid" means the first of either (i) the date on which the cost is paid; or, (ii) the date on which (A) all events have occurred that establish the fact of the liability, and (B) the amount of the liability can be determined with reasonable accuracy, and (C) economic performance has occurred; (2) "controller payments" means any transfer of anything of value from the seller or an entity under the seller's control to the seller's direc- tors, officers, partners, members, stockholders, or other persons who own or control the seller (either in whole or in part), other than payments the seller or seller-controlled entity was obliged to make pursuant to a contract made in the usual course of business prior to the onset of the abnormal market disruption; (3) "labor costs" means the cost of compensation, whether in the form of money or benefits, for labor necessary for the provision of the es- sential product, including compensation paid to a natural person or paid to the employer of a natural person but excluding controller payments; (4) "regulatory costs" means any costs necessary for the lawful pro- vision of the essential product, including but not limited to government taxes or fees; and; (5) "unit" means the smallest quantity of the good or service the seller sells in the usual course of business. (b) Statutory Costs. The phrase "additional costs not within the control of the defendant" (hereafter "statutory costs"), whether used in General Business Law § 396-r or any regulation promulgated thereunder, means costs, other than excluded costs, imposed on the seller for the scrutinized sale not imposed on the seller for the benchmark sale. For the purposes of this rule: (1) A cost is "imposed on the seller for the scrutinized sale" when the cost is directly attributable to the production, purchase, storage, transpor- tation, distribution, and sale (collectively, "provision") of the essential product sold in the scrutinized sale, (2) A cost is "directly attributable" to the provision of an essential product if it is necessary for the provision of the essential product and either: (i) exclusively identified with the provision of that essential prod- uct ("exclusive costs"); or, (ii) that essential product's proportionate share of a relevant overhead cost. (3) A "relevant overhead cost" is a cost, including but not limited to a capital cost, that is necessary for the provision of the essential product but is not exclusively identified with the provision of the essential product. (4) A "proportionate share" of a relevant overhead cost is the share of each relevant overhead cost the seller would attribute to the essential product when evaluating that cost in the usual course of business, or, if the seller did not perform such evaluations in the usual course of business, the share of each relevant overhead cost that would be attributed to the es- sential product under whichever of the below attribution methods the seller establishes would be the most fair, accurate, and practical for the seller to apply in the usual course of business (applying, in all cases, the same method of cost allocation for both benchmark and scrutinized sale): (i) the exclusive costs of the essential product as a percentage of the total exclusive costs of all of the seller's goods or services sharing that relevant overhead cost on the date of sale (whether or not such goods or services are sold on the date of the sale); (ii) the price of the essential product as a percentage of combined price of all the seller's goods or services sharing that relevant overhead cost on the date of sale (whether or not such goods or services are sold on the date of sale); or, (iii) some other method of attribution the seller shows is more fair, accurate, and practical than either (i) or (ii). (5) A cost is "necessary" to the provision of an essential product if (i) it is a labor or regulatory cost; or (ii) the provision of the essential product could not have lawfully and prudently occurred but for the cost; or (iii) the seller possessed a reasonable belief at the time the cost was incurred that the provision of the essential product could not have lawfully and prudently occurred but for the cost. (c) Excluded Costs. Statutory costs do not include the following ("excluded costs"): (1) any reported costs that do not reflect the transfer of assets in pos- session of the seller, or an entity the seller owns or controls, to a third party in an arms-length transaction, including: (i) a decline in sales of other goods or services, (ii) internal charges levied from one part of a seller to another part of a seller, or from one person owned or controlled by the seller to another person owned or controlled by the seller, (iii) opportunity costs, or expressions of costs as present replace- ment value not reflected by actual purchases of replacements pursuant to subdivision (d) of this rule; (2) controller payments; (3) projected, planned, or speculative future costs, prior to the mo- ment at which the cost is accrued or paid; or, (4) statutory costs already recovered via price increases, whether from the same essential product or other goods and services. (d) Costs Incurred in Acquiring Replacements for Essential Products in the Scrutinized Sale. Costs for a given unit of a good or service that otherwise qualify as statutory costs may include the additional per-unit 31 [] Rule Making Activities cost accrued or paid by the seller in the provision of a replacement for the essential product in the scrutinized sale. If the additional cost of the replacement of the essential product in the scrutinized sale is used to rebut a prima facie case with respect to another unit or provision of the same es- sential product, that amount of increase must not be applied to rebut the prima facie case for the price of any essential product other than the es- sential product the prima facie case of which was rebutted by the showing of that increased cost. (e) Index Prices. A seller's use of an index price to price their goods sold or value their inventory, or the existence of a customary or industry practice of employing an external index for pricing, shall not establish that an increase in the index price reflects an increase in seller's statutory costs absent sufficient evidence that the seller in fact paid index prices to purchase replacements pursuant to subdivision (d) of this rule. (f) Fungible Commodities. Where essential products are stored prior to sale in such a fashion that it is not feasible to determine the price at which any unit of the good was purchased, a seller may determine the price at which a given unit of the good was purchased for purposes of this rule by assuming that the goods produced or acquired first are the first to be sold ("first in, first out"). (g) Excluded Costs and Profit Margin Maintenance Defense. A seller's "profit" for an essential product for purposes of rebutting the prima facie case pursuant to General Business Law § 396-r(3)(c) shall mean the sell- er's gross income per unit minus statutory costs per unit. A seller's "margin of profit" is the proportion of income per unit that is profit.