As growing demand drives oil prices higher, local radio and gas stations sometimes team up to show special appreciation for their regular listeners and customers with popular “free gas” promotions. In what appears to be a comparable effort to show special appreciation for their most dependable campaign contributors, certain members of the House and Senate are now teaming up to provide a special giveaway to trial lawyers and activist state attorneys general.
Sen. Maria Cantwell (D-Wash.) has introduced the Petroleum Consumer Price Gouging Protection Act, S. 1263, which is likely to be considered as an amendment to a larger energy bill. Rep. Bart Stupak (D-Mich.) is driving a similar bill in the House, H.R. 1252, that may be voted on within days.
With some analysts predicting $4.00-a-gallon gas before summer is out, what could be wrong with legislation that purports to crack down on gasoline retailers and wholesalers who might consider taking unfair advantage of consumers? Plenty.
As currently written, the Senate bill is so full of ambiguities and subjective definitions that those in the business of selling gasoline would have no practical idea about what is permissible and impermissible by way of pricing formulas. About the only thing that the legislative language makes clear is this: some lawmakers seem perfectly content to score easy political points and leave the difficult work of actually defining the law to courts and the class action attorneys and headline-seeking attorneys general who would invariably file countless lawsuits.
Specifically, S. 1263 would severely punish petroleum suppliers who charge “unconscionably excessive” prices during emergencies, such as those that might result from a severe hurricane or terrorist attack. This sounds good, but what does it actually mean? The bill’s authors say an unconscionably excessive price is “grossly” higher than a supplier’s pre-emergency price, or a price that “grossly exceeds” the prices charged by other suppliers in the same market, or a price that takes “unfair” or “unconscionable” advantage of the emergency situation.
Such subjective terms have different meanings to different people. For example, is a per-gallon price “grossly” higher than a supplier’s pre-emergency price if it’s 10 cents higher? Is it “unfair” for a supplier to charge five cents more than she did prior to the emergency, regardless of post-emergency supply and demand? The legislation provides no answer to these questions, even though they would certainly arise in an emergency.
The bill does make an exception for price increases that are “attributable to increased operational costs,” but even this provides no meaningful framework for suppliers. What if the replacement cost for fuel is 15 cents higher than what the retailer last paid for it? Would he be permitted to pass that along to consumers as an “increased operational cost”? Again, the legislation doesn’t say.
The House bill is even more abstract. First, it doesn’t focus strictly on times of emergency. It would apply 365 days a year, rain or shine, boom or bust, war or peace. Every gasoline retailer and wholesaler in the country would live in day-to-day fear of criminal investigations, prosecutions and stiff fines and prison terms as specified in the bill. Optimistically presuming that most virtuous gas suppliers would manage to avoid criminal penalties, they’d still have to worry about private sector personal injury lawyers and abusive, potentially bankrupting class action lawsuits. Think I’m exaggerating?
The House bill’s prohibition against price gouging would apply whenever there are “unusual market conditions (whether real or perceived).” Real or perceived? Perceived by whom? It’s hard to imagine language more inviting to those who gin up litigation for a living.
The frighteningly subjective prohibitions contained in both S. 1263 and H.R. 1252 would prompt some politically motivated state attorneys general to respond to gas increases in a manner that, at best, would be unpredictable. The response from private law firms, on the other hand, would be entirely predictable. And in the latter case, many honest businessmen and women would be sued and subsequently crushed by substantial attorneys’ fees and the prospect of gigantic punitive damage awards for having done nothing more sinister than rely on a supply-and-demand pricing formula that has been the industry standard for decades and which routinely applies to bread, milk, housing – even umbrellas in a rain storm.
Since no member of Congress is naïve enough to think those added costs won’t eventually be passed on to consumers in one way or another, it’s fair to ask how any lawmaker could support such a giveaway to politically connected litigators at the expense of the driving public.