Price Gouging Bill
Extracted from yesterday’s OPIS report:
Congressional Democrats have said that they want to get an anti-price-gouging bill to the White House by Memorial Day and there is no indication of any presidential veto in the works.
There are two bills pending. One, sponsored by Sen. Maria Cantwell, D-Wash., has already passed the Senate Commerce Committee and could come to a floor vote this coming week. Rep. Bart Stupak, D-Mich., is pushing a near-identical measure in the House.
Both bills contain draconian penalties for violations. For example, Stupak’s seeks up to $3 million/day in civil fines. The criminal penalty is $150 million for a company, $2 million and up to 10 years in jail for an individual. Cantwell’s bill is less harsh — a $500,000 fine for a small, independent marketer and $5 million for other suppliers.
Both measures call for enforcement by the Federal Trade Commission and allow state attorneys-general to conduct sweeping investigations of any marketers suspected of “taking unfair advantage of unusual market conditions (whether real or perceived).”
Cantwell’s measure requires a presidential declaration of an energy emergency before it takes effect, but Stupak’s just makes it an offense to price-gouge at any time. Neither does it define gouging.
“There needs to be a threshold for an investigation, say, if a retailer raised prices 30% above competitors,” says Gilligan [Dan Gilligan, exec VP with the Petroleum Marketers Assn. of America]. As currently written, marketers would have three choices during a shortage if Stupak’s bill passes – cut prices, keep prices the same, or turn off their pumps. “Most will opt to turn off their dispensers,” Gilligan predicts.
You will never catch me accusing Congress of reallying thinking through the potential consequences of the policies they enact. What they are doing here is to ensure, in the case of an emergency, that no gas is available to anyone at any price. If I am retailer, and gas suddenly becomes very scarce, I no longer have the ability to quickly raise prices to stem demand. So, I either run out of product, or turn off the pumps. Imagine a situation like that during a hurricane evacuation.