Gasoline Price Increases: Federal and State Authority to Limit "Price Gouging"
Gasoline Price Increases:
Federal and State Authority
to Limit ‘Price Gouging’
Adam Vann
Legislative Attorney
American Law Division
Summary
During the 2005 hurricane season, gasoline prices rose sharply, both in directly
affected areas and elsewhere in the country, and attention turned to the causes
underlying these sharp increases. Although gasoline prices have fluctuated since then,
Congress continues to consider legislation on fuel pricing, including provisionsth
addressing price gouging. In the 110 Congress, both the House of Representatives
(H.R. 1252) and the Senate (Title VI of H.R. 6) have passed bills that would make price
gouging of gasoline and other fuels a criminal or civil violation. H.R. 1252 passed the
House on May 23, 2007, and H.R. 6 passed the Senate on June 21, 2007. Meanwhile,
a majority of states have already enacted statutes to curtail price gouging, particularly
during emergencies. This report discusses state laws regarding price gouging, the role
of the federal government in addressing rising gas prices, and the new federal legislative
proposals related to price gouging.
Introduction
“Price gouging,” a term commonly used to refer to sellers inflating prices to “unfair”
levels in order to take advantage of certain circumstances causing a decrease in supply,
including emergencies, reached the public consciousness in 2005, when gasoline prices
rose sharply in the wake of several hurricanes in the Gulf Coast area, including Hurricane
Katrina. Currently, no federal law specifically addresses price gouging. However, bills
have been passed in the 110th Congress in both the Senate and the House of
Representatives that would prohibit price gouging of gasoline and other fuels.1 Price-
gouging laws already exist at the state level and are generally applicable in situations
1 H.R. 6, 110th Cong. 1st Sess. passed the Senate on June 21, 2007, and H.R. 1252, 110th Cong. 1st
Sess. H.R. 1252 passed the House on May 23, 2007.
arising from a declared emergency.2 An increase in prices alone does not constitute price
gouging. Generally, provisions in price gouging statutes are triggered only when prices
increase following a statutorily designated event.
Even absent a specific “price gouging” law, federal antitrust laws might apply to
price-gouging behavior.3 The Federal Trade Commission (FTC) monitors gas prices and
investigates possible antitrust violations in the petroleum industry.4 In addition, the
Energy Policy Act of 2005 required the FTC to investigate whether the price of gasoline
is being “artificially manipulated by reducing refinery capacity or by any other form of
market manipulation or price gouging practices.”5
This report begins with a discussion of state price-gouging laws, including their
triggers and applications, and then moves to a discussion of federal legislation aimed at
prohibiting price gouging.
State Price-Gouging Laws
Many states have enacted some type of prohibition or limitation on price increases
during declared emergencies. Generally, these laws prohibit the sale of goods and
services in the designated emergency area at prices that exceed the prices ordinarily
charged for comparable goods or services in the same market area at or immediately
before the declaration of an emergency. However, many statutes include an exemption
if the increased prices are the result of increased costs incurred for procuring the goods
or services in question.
Hurricane-Affected States. Price gouging became a highly publicized concern
in the aftermath of the 2005 hurricane season, which saw sharp price increases in gasoline
and natural gas prices. The potential for price gouging was of particular concern in the
states directly affected by the hurricanes. Of the five affected states on the Gulf of
2 At least 30 states — Alabama, Arkansas, California, Connecticut, Florida, Georgia, Hawaii,
Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan,
Mississippi, Missouri, New Jersey, New York, North Carolina, Oklahoma, South Carolina,
Tennessee, Texas, Utah, Virginia, West Virginia, and Wisconsin — the District of Columbia,
Guam, and the Northern Mariana Islands have laws that prohibit price gouging, excessive price
increases, or unconscionable pricing. Most states have laws that are triggered in the event of a
declared emergency, with a few having laws that may be applicable at other times as well. Other
states may also exercise authority under general deceptive trade practice laws depending on the
nature of the state law and the specific circumstances in which price increases occur.
3 For more information on the applicability of the federal antitrust laws, see CRS Report
RS22262, “Price Gouging,” the Antitrust Laws, and Vertical Integration: How They Are Related,
by Janice E. Rubin.
4 For more information on the Federal Trade Commission’s activities with respect to gas pricing,
see [http://www.ftc.gov/ftc/oilgas/index.html].
5 P.L. 109-58 § 1809, 119 Stat. 594, 1125 (August 8, 2005). The FTC’s report was published in
May of 2006 and can be viewed at [http://www.ftc.gov/opa/2006/05/katrinagasprices.htm].
Mexico, four have specific price-gouging laws premised on the declaration of a state
em ergency. 6
The Florida statute establishes a prima facie case of unconscionable pricing if the
amount being charged represents a “gross disparity” from the average price at which the
product or service was sold in the usual course of business, or available in the “trade
area,” during the 30 days immediately prior to a declaration of a state of emergency.
However, unconscionable pricing does not exist if the increase is attributable to additional
costs incurred by the seller or is the result of national or international market trends.7
In Alabama, prima facie evidence of unconscionable pricing exists “if any person,
during a state of emergency declared pursuant to the powers granted to the Governor,
charges a price that exceeds, by an amount equal to or in excess of 25%, the average price
at which the same or similar commodity or rental facility was obtainable in the affected
area during the last 30 days immediately prior to the declared state of emergency”;
however, as in the Florida statute, there is no unconscionable pricing if the price increase
is attributable to reasonable costs incurred by the seller in connection with the rental or
sale of the commodity.8
The Mississippi and Louisiana statutes do not specify elements of a “prima facie”
case of price gouging, but they are otherwise similar to the Florida and Alabama statutes.
Mississippi and Louisiana prohibit the selling of goods and services at prices which
exceed “the prices ordinarily charged for comparable goods and services in the same
market area at, or immediately before, the time of the [declaration of the] state of
emergency.”9 Under each statute, price gouging does not include price increases due to
additional costs or expenses incurred as a result of the emergency.10
Other States. Many state price-gouging laws are triggered only by a declaration
of emergency in response to localized conditions. Thus, in areas not directly affected by
a particular emergency or natural disaster, state price-gouging laws are not likely to apply
to any price increases subsequent to an emergency or disaster occurring elsewhere.
Some price-gouging laws are less tethered to the occurrence of a local natural
disaster. For example, Georgia’s price gouging statute can be triggered by the declaration
of an “energy emergency,” which is defined as “a condition of danger to the health,
safety, welfare, or economic well-being of the citizens of this state arising out of a present11
or threatened shortage of usable energy resources,” with no geographical restrictions.
6 Texas’s deceptive trade practices law prohibits the exorbitant or excessive pricing of necessities
during a declared disaster, but it does not specifically define those activities as price gouging.
Tex. Bus. & Com. Code Ann. § 17.46(b)(27).
7 Fla. Stat. § 501.160(1)(b).
8 Code of Ala. § 8-31-4.
9 La. R.S. 29:732; Miss. Code Ann. § 75-24-25(2).
10 Id.
11 O.C.G.A. § 10-1-393.4; O.C.G.A. § 38-3-3.
At least two states have laws that do not require the declaration of any type of
emergency as a trigger. Maine law prohibits “unjust or unreasonable” profits in the sale,
exchange or handling of necessities, defined to include fuel.12 Michigan’s consumer
protection act simply prohibits “charging the consumer a price that is grossly in excess
of the price at which similar property or services are sold.”13
Federal Price Gouging Legislation
As mentioned above, currently there is no federal law that deals specifically with
price gouging. However, federal antitrust laws may apply to behavior generally seen in
price gouging.14 The Federal Trade Commission (FTC) monitors gas prices and
investigates possible antitrust violations in the petroleum industry.15 In addition, the
Energy Policy Act of 2005 required the FTC to investigate whether the price of gasoline
is being “artificially manipulated by reducing refinery capacity or by any other form of
market manipulation or price gouging practices.”16 In May 2006, the FTC released its
report, finding generally that sellers behaved competitively and that the price increases
were the result of increased costs, although there were limited instances of price
gouging.17
In the aftermath of Hurricane Katrina and the subsequent rise in gasoline prices, a
number of bills were introduced in the 109th Congress to create a federal price gouging
law. The House passed H.R. 3893, the Gasoline for America’s Security Act of 2005, on
October 7, 2005. Subsequently, H.R. 5253, the Federal Energy Price Protection Act of
2006, was passed by the House on May 3, 2006. Both bills were aimed at prohibiting
price gouging and charged the FTC with enforcement. Neither bill reached a vote in the
Senate.
New price-gouging bills have since been passed in both the Senate and the House
of Representatives in the 110th Congress. The House bill, the Federal Price Gouging
Prevention Act (H.R. 1252), passed the House on May 23, 2007. H.R. 1252 grants the
President the authority to issue an “energy emergency proclamation” for any area within
the jurisdiction of the United States.18 The bill would forbid the sale of crude oil,
gasoline, natural gas, or petroleum distillates in the area and during the period of this
energy emergency at a price that (a) is unconscionably excessive or (b) indicates that the
12 10 M.R.S.A. § 1105.
13 MCL 445.903(1)(z).
14 For more information on the applicability of the federal antitrust laws, see CRS Report
RS22262, “Price Gouging,” the Antitrust Laws, and Vertical Integration: How They Are Related,
by Janice E. Rubin.
15 For more information on the Federal Trade Commission’s activities with respect to gas pricing,
see [http://www.ftc.gov/ftc/oilgas/index.html].
16 P.L. 109-58 at § 1809 (August 8, 2005).
17 The FTC’s report can be viewed at [http://www.ftc.gov/opa/2006/05/katrinagasprices.htm].
18 H.R. 1252 at § 2(a)(2).
seller is taking unfair advantage of the circumstances related to an energy emergency to
increase prices unreasonably.19
H.R. 1252 lists a number of factors to be considered in determining if an
“unconscionably excessive” or “unfair” sale has taken place in violation of the provisions
of the bill.20 These factors include whether the price grossly exceeds the average price
offered for sale by the seller during the 30 days prior to the energy emergency
proclamation, whether the price grossly exceeds the price at which the gasoline or other
petroleum distillate was readily obtainable in the same area from competing sellers during
the same period, and whether the price reasonably reflects additional costs, not within the
seller’s control, that were paid, incurred, or reasonably anticipated, or reflect additional
risks taken by the seller to produce, distribute, obtain, or sell the product.21 In addition,
H.R. 1252 would make it unlawful to report false fuel pricing information to the FTC.22
The FTC would be charged with enforcement of the act through its authority to penalize
unfair or deceptive acts and practices under the Federal Trade Commission Act.23 The
bill also establishes criminal penalties for violations, to be administered by the U.S.
Department of Justice.24 State attorneys general would also be given limited enforcement
authority.25
The price-gouging provisions of the Senate version of H.R. 6, found in Title VI, are
substantially similar to H.R. 1252. Under Title VI of H.R. 6, it would be unlawful to sell
or offer to sell crude oil, gasoline, or petroleum distillate at an “unconscionably excessive
price” during an energy emergency, as declared by the President.26 The bill defines an
“unconscionably excessive price” as one that constitutes a gross disparity from the
average price of the commodity in the supplier’s normal course of business over the
previous 30 days, and also grossly exceeds the price at which the commodity was
available from other suppliers in the same market.27 The bill also states that a price is
unconscionably excessive if it “represents an exercise of unfair leverage or
unconscionable means on the part of the supplier” during a declared emergency period.28
However, it would not be considered unconscionable pricing if the price increase is
attributable to increased wholesale or operational costs.29 These provisions are very
similar to the language found in H.R. 1252. Also, as with H.R. 1252, Title VI of H.R. 6
19 Id. at § 2(a)(1).
20 Id. at § 2(a)(3).
21 Id.
22 Id. at § 2(b).
23 Id. at § 3; 15 U.S.C. § 57a(a)(1)(B).
24 H.R. 1252 at § 4.
25 Id. at § 5.
26 H.R. 6 at § 603.
27 Id. at § 602(4)(A)(i).
28 Id. at § 602(4)(A)(ii).
29 Id. at § 602(4)(B).
would make it unlawful to report false fuel pricing information to the FTC,30 would
charge the FTC with enforcement through its authority to penalize unfair or deceptive
acts and practices defined in a rule promulgated pursuant to 15 U.S.C. § 57a(a)(1)(B),
using the authority granted to it under the Federal Trade Commission Act,31 and would
grant state attorneys general limited enforcement authority.32 The most significant
difference between the two bills is that H.R. 6 contains a prohibition on “market
manipulation” that is not found in H.R. 1252.33
30 Id. at § 605.
31 Id. at § 607.
32 Id. at § 608.
33 Id. at § 604.