HB25-1010 (Prohibiting Price Gouging in Sales of Necessities) as introduced limits the amount of potential price increases that can occur over a 90 day period. Below are comments to the sponsors of the bill and the AG's office on behalf of CWPMA/RMFIA
We were pretty involved and supported the most recent revision to the section relative to declared emergencies and the context at the time, relative to what happened in florida and the airline hotel and goods prices, very clearly demonstrated that in times of extreme community duress that it is incumbent upon all businesses to recognize that extra care needs to be taken to protect our neighbors that are suffering hardship. We worked hard to clearly define what the essential sector categories were and the limits of the increased responsibility. You will note that fuels, food etc. are all defined.
I have the following concerns with the proposed bill.
1. There is clear language that allows the wholesale cost of the price or good to be considered as a factor.
(3) A price shall not be considered unreasonably excessive if the seller can prove that due to the events that gave rise to the disaster declaration, the price charged by the seller is directly attributable to additional costs imposed by the seller's supplier or suppliers or other direct costs of providing the good or service sold or offered for sale by the seller
I think that there is no reason to remove the section above. In the transportation sector there are legitimate costs that in response to an emergency such as trying to provide services to fight a forest fire for example companies have to pay for overtime, hotel rooms etc that are not normal. Any service provider would have to clearly be able to delineate the excess costs in the course of investigations by the AG's office especially during an emergency but by removing the language around disaster you are not even allowing the ability to justify the cost recovery.
2. Costs increases can occur for a business that have nothing at all to do with the the wholesale price from the supplier or distributors
Here are examples: The Denver City Council recently enacted an ordinance that would ban the sale of all flavored nicotine in the City and the county. Effectively taking 300 million dollars in gross sales from primarily gas stations - So station owners who were depending and budgeting the revenue either have to cut payroll and benefits to save the money or replace it with increasing the cost of fuel. So on March 18th it's more than reasonable that gas prices in Denver will increase by 10-20% to compensate. This will have had nothing to do with the wholesale price of fuel, but is simply a business decision.
Increased insurance premiums in our industry are skyrocketing with 30% average increases which force companies to either increase their personal exposure with high deductibles or incorporate the increase into a recoverable model. Does this count and how, even if it was part of a price increase recovery decision that led to more than a 10% total jump, would a business owner be able to prove that to the AG's investigator?
I have a small grocery in rural Colorado, they own 2 small stores (no fuel) and he called and his family got hit with surgery bills in the 10's of thousands. He asked me if there was any law that kept him from raising prices in the business he uses to support his family to cover it. I said no and if your community is willing to continue to be customers at your store then it's your decision how to run your business. (After he paid off the bills he then lowered the price and did something to make up for it)
Imagine if you are a liquor store or small c -store and a large chain entity enters the market and starts competing on a primary product...(does the small liquor store raise the price in hard liquor for example to help compensate for a grocery store selling beer? Even though the wholesale price of liquor stayed the same? Does a small gas station have to charge 15 percent more per water bottle because a company just took 25% of their fuel volume. Or does this law stop them from doing that?)
3. On a Technical basis I have a fairly significant problem with trying to come up with an average price for fuels. After almost 20 years in fuels I have no idea what that means... INCREASING THE PRICE OF A NECESSITY BY TEN PERCENT OR MORE ABOVE THE AVERAGE PRICE THAT THE NECESSITY COST DURING THE NINETY DAYS PRECEDING THE PRICE INCREASE IS PRESUMED TO BE ENGAGING IN THE 21 UNFAIR AND UNCONSCIONABLE ACT OR PRACTICE OF PRICE GOUGING (from the bill)
Are you talking about the average price at that location? Within a circumference of 10 miles? Fuel marketers at retail at times change the price multiple times during a day and as Director I'm not aware of any law or regulation that requires anyone in any industry (outside of maybe health care) to keep track of what they charged for a loaf of bread 2 months ago? Are you envisioning a record keeping requirement on the people that this would impact? Gas prices vary widely across Colorado, it costs way more in the mountains because of property values, volume, labor etc. Are my mountain guys going to be accused of unconscionable pricing because they are 25 cents higher than Denver?
4. Gasoline products specifications vary between regions. The DMNFR has a requirement that RFG is sold only in that part of the state from June 1st to September 15th. In August there was a 60 cent difference between fuel you could buy in Ft. Morgan for example and what you buy in Ft. Collins. Now factor in that the grocery discount programs take more market share when the fuel price is higher, so that people that spend $200 on groceries get a .20 discount of gasoline at certain stations...so if i'm not a grocery gas station how would average price be determined?
5. I was hoping for clarity on if the 10% increase also applies on wholesale to retail...on my fuel distributor side as well as for our suppliers in the tobacco nicotine space and for our beer stuff this is really important, and not something we really worried about when the statute was limited to emergency declarations.
6. Say I was using products with a 20% discount "loss leader"... in order to introduce myself to a market, earn business etc. If I then increase the price to the normal market rate what happens, am I accused of unconscionable price increases because I increase my price to market levels?
Lastly, as I have thought through this, I think it is more of a pricing cap regulation in effect, even though I think the intent is consumer protection. In certain industries (regulated utilities etc) there is a place for price control in the market, but this affects the entire supply chain including trucking and logistics, construction, food, Ag etc. As Colorado is a nation leader in regulations that candidly serve to consolidate the market in multiple industries so that only larger players can thrive I think this could be better .... but I recognize the intent.
I have always been an innocent until proven guilty guy and I guess my summary point is that there are so many reasons "outside simply wholesale supply cost" that a business owner might choose to raise (or lower) a price by 10% that i think this puts people in a place where they have to prove they didn't do anything wrong.
Senator Weismann is on this and I have always respected the deep dive he takes on anything he signs onto, so I decided to reach out and lay out my concerns in this way.
Happy to provide further context or answer any questions.
6-1-730. Price gouging during declared disaster prohibited - deceptive trade practice - legislative declaration - definitions.
(1) The general assembly hereby:(a) Finds and determines that:
(I) Under ordinary conditions, the pricing of consumer goods and services generally is best left to the marketplace; except that, when a declared disaster results in abnormal disruptions of the market, the public interest requires that any unfair and unconscionable increase in the price of consumer goods or services be discouraged; and
(II) Protecting consumers from price gouging is a vital function of the state’s interest in providing for the health, safety, and welfare of the public; and
(b) Declares that existing prohibitions on deceptive or unfair and unconscionable trade practices under this article 1 should be clarified to ensure that price gouging has been and remains a violation of this article 1.
(2) A person engages in an unfair and unconscionable act or practice when, during a disaster period and within the designated area, the person charges a price so excessive as to amount to price gouging in:(a) The sale or offer for sale of:
(I) Building materials;
(II) Consumer food items;
(III) Emergency supplies;
(IV) Fuel;
(V) Medical supplies; or
(VI) Other necessities; or
(b) The provision of or offer to provide:
(I) Repair or reconstruction services;
(II) Transportation, freight, or storage services; or
(III) Services used in an emergency cleanup.
(3) A price shall not be considered unreasonably excessive if the seller can prove that, due to the events that gave rise to the disaster declaration, the price charged by the seller is directly attributable to additional costs imposed by the seller’s supplier or suppliers or other direct costs of providing the good or service sold or offered for sale by the seller.
(4) This section is enforceable solely by, and at the discretion of, the attorney general or the district attorney with jurisdiction over the conduct at issue.
(5) As used in this section:
(a) “Building materials” means lumber, construction tools, windows, and other materials used in the repair or reconstruction of a structure or other property.
(b) “Consumer food item” means an article used or intended for use as food, beverage, confection, or condiment for human or animal consumption.
(c) “Designated area” means the specific geographic area identified in a disaster declaration.
(d) “Disaster” has the meaning set forth in section 24-33.5-703 (3).
(e) “Disaster declaration” means the declaration of:
(I) A national emergency by the president of the United States pursuant to the “National Emergencies Act”, 50 U.S.C. sec. 1601 et seq., as amended; or
(II) A disaster emergency by the governor pursuant to section 24-33.5-704 (4).
(f) “Disaster period” means the date a disaster declaration begins and continuing for one hundred eighty days after the date that the final disaster declaration concerning the disaster expires.
(g) “Emergency supplies” includes water, ice, flashlights, radios, batteries, candles, blankets, soap, diapers, temporary shelters, tape, toilet paper, tissues, paper towels, and toiletries.
(h)
(I) “Fuel” means any liquid or gas used to power a vehicle or power tool or used to heat and power a building.
(II) “Fuel” includes gasoline, diesel fuel, and methyl alcohol.
(i) “Medical device” has the same meaning as “device” as set forth in section 25-5-402 (8).
(j) “Medical supplies” includes prescription and nonprescription medication, medical devices, bandages, gauze, isopropyl alcohol, and antibacterial products.
(k) “Necessities” means goods and services that are necessary for human or animal survival during a disaster period.
(l) “Repair or reconstruction services” means services performed to repair or reconstruct any type of vehicle; residential, commercial, agricultural, or government-owned property; or any property owned by an educational institution, that is damaged as a result of a disaster.
(m)(I) “Transportation, freight, or storage services” means a service that is performed by a person that:
(A) Contracts to move, transport, or store property; or
(B) Rents equipment for the purpose of moving, transporting, or storing property.
(II) “Transportation, freight, or storage services” includes towing services.
