Friday, June 27, 2008

Bill to Give FTC New Authority Over Petroleum Price Gouging Defeated in House

This posting was written by John Scorza, CCH Washington Correspondent.

The House of Representatives rejected a bill on June 24 that would have given the Federal Trade Commission new authority to investigate and punish price gouging in the oil industry. On a motion to suspend the rules and pass the bill, the measure failed to gain the required two-thirds majority by a 276-146 vote.

The bill—the Federal Price Gouging Prevention Act (H.R. 6346)—would make it illegal for any person at the wholesale or retail levels to sell gasoline or other petroleum products at a price that is “unconscionably excessive” in areas that are under a presidentially-declared emergency. The legislation would instruct the FTC to focus its enforcement actions on large energy companies with sales in excess of $500 million.

Supporters of the bill believed it was necessary to give the FTC specific authority to combat the type of price gouging that allegedly occurred after Hurricane Katrina. Detractors countered that the bill would unnecessarily inject the government into the energy marketplace.

In addition to civil penalties of up to $3 million for each violation, the bill would have set criminal penalties of up to $150 million for corporations violating the act. The Justice Department would have been responsible for pursuing criminal charges.

Administration Objections

The Bush administration had threatened to veto the legislation. A June 24 Statement of Administrative Policy asserted that the legislation could result in price controls that would be harmful to consumers.

“By controlling prices, [the bill] would interfere with market mechanisms and distort price signals that encourage suppliers to provide more gasoline,” the statement said.

The administration also objected to the bill’s failure to adequately define the term “unconscionably excessive” prices, which could lead to unnecessary confusion and litigation. The administration contended that the FTC and the Justice Department already have adequate powers to combat price gouging.

“The Administration again urges Congress instead to take actions that address the root causes of high gas prices,” the statement concluded. “To address gasoline prices, we need legislation that will allow environmentally-responsible domestic oil production and encourage refinery expansion.”

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