When I was Idaho Attorney General in the 1980s, my office kept close track of gasoline prices. A price margin of 10 cents per gallon between the wholesale and retail price was customary. It gave the retailer a reasonable profit, while protecting the interests of the consumer in this basic necessity of present-day life. The price margin was the most valuable tool in evaluating the fairness of retail gas prices. When the margin remained substantially in excess of 10 cents for a sustained period of time in a specific market, we took a closer look at that market to see if there were other signs of profiteering.
On March 13 of last year, Governor Little declared the pandemic emergency. When an emergency is declared, Idaho’s price gouging law comes into effect to prevent “excessive or exorbitant” pricing by retailers of fuel, food, drugs and drinking water.
After the emergency declaration, Idahoans noticed a modest decline in the price of gas at the pump. What they did not see is that the wholesale price took a dramatic nosedive. The retailers were buying gas for much less, but were not passing their savings on to their customers. Attorney General Wasden calculated that the gas price margin steadily increased from about 15 cents per gallon on March 13 to 63 cents per gallon on April 7. This appeared to be a clear-cut violation of Idaho’s price gouging law.
AG Wasden conducted an investigation in accordance with the law, taking into consideration the fact that retailers had suffered a loss of sales in the emergency, and determined that three retailers had taken advantage of their customers during the initial stages of the emergency. In essence, they had engaged in price gouging. He reached a settlement with the three retailers–Jackson’s, Maverik and Stinker–in which they agreed to give their customers $1.5 million in price credits this year.
The gasoline retailers are now before the Idaho Legislature, asking that the teeth of the price gouging law be pulled. Under Senate Bill 1041, a retailer would only be gouging customers when it makes an exorbitant “increase” in the price. In other words, a retailer could have a drastic drop in the price it pays the wholesaler, but keep the customer price steady and pocket the gains, just as Jackson’s, Maverik and Stinker did last year. The legislation would prohibit the Attorney General from considering the profit margin, no matter how large.
During my tenure as Attorney General, I learned that profiteering usually happens when the wholesale price of gas drops. When the wholesale price rises, retailers generally raise their prices immediately to compensate. However, when the wholesale price drops, they often maintain the pump price at the higher level for as long as possible. This is the setting where gouging normally happens. Senate Bill 1041 would make it virtually impossible for the Attorney General to protect consumers against profiteering.
I have a great deal of respect for the bill’s sponsor, Senator Jim Guthrie, but I disagree as to the merits of this bill. The three retailers took advantage of their customers in a declared emergency and should not be given a green light to do so again in a future emergency. Consumers should let their legislators know whether or not they support this bill, which would essentially permit price gouging in the setting where it would most likely occur.
