FTC Antitrust Highlights
FTC Finds No "Gas-Gouging"; Does Not Recommend Federal Price Gouging Legislation
Authored by:
Christopher Bowen
202-772-5384
cbowen@sheppardmullin.com
- On May 22, the Federal Trade Commission issued the results of its investigation into gasoline prices after Hurricanes Katrina and Rita. Looking into both allegations of price gouging and energy price manipulation, the FTC concluded that there had been no instances of energy price manipulation nor any instances of price gouging. Under § 632 of the Commission’s 2006 appropriations legislation, the Commission was directed to find gouging where "the average price of gasoline . . . in September, 2005 . . . exceeded the average price of such gasoline in that area for the month of August, 2005.'" In examining the financial data for 30 refiners, 23 wholesalers, and 24 single-location retailers, the FTC found 15 instances where the increase in prices met the definition under § 632. The FTC, however, concluded that these increases in prices were attributable to local pricing factors. In addition, the FTC also found no evidence that energy companies had manipulated prices over the past few years, finding that refiners had not artificially lowered production, shipped products overseas, deliberately lowered expansion plans, or lowered inventories to increase the prices of crude and refined petroleum products.
The report emphasized the difficulty of determining what is and is not price gouging under the act, and that attempts to limit the financial impact of disasters could hurt consumers. "[I]f natural price signals are distorted by price controls, consumers ultimately might be worse off, as gasoline shortages could result. . . A temporary price cap may have an especially adverse effect on incentives as producers withhold supply in order to wait out the capped period." The FTC concluded by refusing to recommend that Congress enact a federal price gouging statute, as states have found similar statutes difficult to enforce. "[T]hroughout antitrust jurisprudence, one area into which the courts have refused to tread is the question of what constitutes a 'reasonable price.' Ultimately, the lack of consensus on which conduct should be prohibited could yield a federal statute that would leave businesses with little guidance on how to comply and would run counter to consumers' best interest."
Authored by:
Christopher Bowen
202-772-5384
cbowen@sheppardmullin.com
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