Elevated retail gasoline prices often result in accusations of retail price gouging and lead to enforcement actions by states attorneys general and legislative proposals in Congress to make “price gouging” a federal offense and to impose civil and criminal penalties on violators.
In the 110th Congress (2007-2008), both the House and Senate passed legislation declaring price gouging to be illegal and establishing civil and criminal penalties for those found in violation of the statute. The legislation was similar, although certain details did vary. The basic provisions, however, defined price gouging as charging an “unconscionably excessive price” for gasoline or petroleum distillates (Senate bill included crude oil) during and within an area declared an energy emergency by the President. Unconscionably excessive prices were defined as those that:
- Are significantly higher than the average price charged by that supplier during the 30-days prior to the emergency;
- Are significantly higher than the competition; and,
- Are not attributable to increased costs, including replacement costs.
In addition, in determining whether a violation has occurred, the regulators are to take into consideration whether the seller sold more product during the emergency (at the elevated prices) than prior to the emergency.
Any legislation to define price gouging and make it a federal offense is potentially dangerous to the market and retailers in particular. It is essential that retailers are able to respond to changing conditions in a competitive market and set prices based upon their own strategies — not according to artificial parameters established by the government.
NACS believes that any federal price-gouging legislation is inappropriate, unnecessary and potentially damaging to the market. However, because political momentum for Congress to “do something” is difficult to stop, NACS has made an effort to ensure that any proposals allow the retail market to function effectively and do not impede a retailer’s normal business operations.
Specifically, NACS advocated for inclusion of a provision in each bill that declares a price is not “unconscionably excessive” if it is not substantially higher than the competition. This protects retailers who are simply responding to overall market conditions — competition will remain the driving factor in pricing decisions. This is critical for retailers, especially when wholesale prices begin to retreat, competition remains steady and margins expand. In addition, the bills specify that retailers may factor legitimate replacement costs into pricing decisions. This is critical when wholesale prices are on the rise and gives protection to retailers who are accused by the press of raising prices before a shipment arrives. NACS is also engaged with the National Association of Attorneys General and has provided information and resources to help members of that organization better understand the retail petroleum marketplace.
Congress did not consider price gouging legislation during the 111th Congress and no legislation has been introduced this Congress.