Congress is preparing for a long anticipated and lengthy recess, with the House of Representatives scheduled to leave at the end of this week and the Senate pressing on for another five days.
The House’s schedule, however, may extend to Saturday to enable the chamber to vote on several last minute issues. According to NACS sources, there are two issues important to the industry that might come up. The first is a vote on increasing the minimum wage by $2.10 over three years. Republican leaders met with the caucus this morning and appeared to be leaning towards allowing a vote. The Republican minimum wage package is rumored to include authorization for the establishment of associated health plans, also known as small business health plans, and some other “sweeteners” designed to lessen the burden on small businesses. The details of these sweeteners were not fully available by press time.
The other issue that might come up is a vote on a conference agreement regarding pensions. The overall issue itself is not a priority for NACS, but the tax package that is under consideration as part of that legislation includes a permanent reduction in the death tax. By the end of the day Thursday, it was unclear if the tax provisions would survive the conference.
Meanwhile, the Senate undertook debate on legislation to authorize oil and gas production in a portion of the Gulf of Mexico. The compromise earned the support of the senators from Florida who have long opposed any effort to open the region to production. A vote on a motion to proceed to consideration is scheduled for Monday, and with the support of Florida senators, as well as Minority Leader Harry Reid (D-NV), it is likely the legislation will be approved. It must then either be adopted as is by the House, or enter into conference negotiations with a previously passed House version. If negotiations are required, resolving differences could be very difficult.
For some time, the Senate has been trying to bring a reauthorization of the Commodity Futures Trading Commission (CFTC) to the floor. Although the House will recess until after Labor Day this week, the Senate remains in town next week, and the CFTC legislation may be considered. If it is, two price gouging amendments are expected.
The first would be offered by Sen. Maria Cantwell (D-WA). This legislation declares price gouging to occur during periods of emergency declarations when the price charged by any entity for a petroleum product is “unconscionably excessive” or “indicates the seller is taking unfair advantage of the circumstances to increase prices unreasonably.” Neither term is defined. It further stipulates that a violation occurs when the price represents a “gross disparity” from the price charged before the declaration of emergency or “grossly exceeds” the price of the same product available from other sellers. Some mitigating factors include consideration of supply and demand factors and cost of goods sold.
While NACS does not believe any price gouging statute is necessary or advisable--a position shared by Federal Trade Commission (FTC) Chair Deborah Majoras--the political momentum to enact such a provision is strong and blatant opposition to the concept is politically untenable. Therefore, we have focused our attention on the nature of proposed legislation to ensure that retailers are able to conduct their businesses according to reasonable market dynamics. Sen. Cantwell’s amendment does not satisfy this objective and subjects honest business owners to prosecution based upon poorly defined terms without recognition of the fundamental dynamics associated with the petroleum marketplace.
The alternative amendment is expected to be offered by the Republican leadership. This legislation, while it still inappropriately establishes a federal price gouging statute and includes unreasonable penalties for violations, includes several defenses NACS believes necessary to protect responsible businesses from prosecution. Specifically, the legislation has a section on “Justifiable Price Increases,” in which it stipulates that increased prices are not a violation when done in response to increased costs, increased replacement costs, increased operational costs or prevailing market conditions.
The bill further defines “unconscionable amount” as an increase in price that substantially exceeds the price charged by the same entity during the 30 days prior to the declaration of an emergency AND that cannot be explained as “Justifiable Price Increases” AND that substantially exceeds the average price charged by competitors. This section ensures that retailers responding to changing and anticipated costs, while responding to competitive conditions within their market, are protected from prosecution during both increasing and retreating market cycles.
Both amendments place enforcement of the statute under the jurisdiction of the FTC, but the Republican amendment utilizes existing enforcement authority at that commission while Cantwell’s sets up a state-federal dual enforcement situation.
NACS staff and outside counsel have met with several key congressional aids and members of Congress to discuss this issue and believe that the FTC is the appropriate venue for determinations to be made relative to petroleum pricing practices and that it is the role of Congress to articulate what “gouging” is “not.” It is our opinion that the provisions included in the Senate Republican amendment provide honest retailers with protection from wrongful prosecution by acknowledging in statute the myriad factors that influence pricing decisions and enabling retailers to remain consistent with necessary activities in a competitive marketplace.
We will continue to work with both the House and the Senate if or when this issue progresses to ensure that the interests of the convenience and petroleum retailing industry are reflected in any legislation that might make its way to the president’s desk for enactment.
Washington is less than one week away from a period of quiet with all legislators back home until after Labor Day. Here’s to counting down the days!
Have a good weekend!
John Eichberger
Vice President, Government Relations