An Intolerable Practice in the Marketplace

Price-gouging is an intolerable practice that surfaces from time to time in the marketplace. It usually arises during or in the aftermath of a natural disaster when consumers have no choice but to pay the higher price demanded by some merchants for such critical commodities as food, water, ice or fuel.

The attorney general’s office, however, has made it clear once again that price-gouging won’t be tolerated in Virginia. The office ruled last week that a Pamplin service station must reimburse customers who paid some 38 percent more for gas in September 2008 when Hurricane Ike was approaching the Gulf Coast.

The settlement came against the Pamplin Exxon Service Center following a consumer complaint that alleged the station charged prices that were “unconscionable” as the area faced possible gasoline shortages. The station reportedly sold gasoline at prices of $4.99 per gallon for regular gasoline up to $5.25 for premium.

Those prices on Sept. 12, 2008, were nearly 38 percent higher than prices charged four days earlier.

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Sparked by alarmist warnings on national television news of potential fuel shortages during the approach of the hurricane, other stations across Virginia raised prices prompting thousands of consumer complaints about price-gouging. The Department of Agriculture and Consumer Services looked into the claims, giving potentially valid ones to the attorney general’s office for investigation.

Several oil refineries in Texas shut down to prepare for the storm, which sent hundreds of drivers in the Lynchburg area to fill their gas tanks while they still could. Prices quickly rose above $4 a gallon as stations ran out of fuel.

Virginia’s price-gouging law forbids “unconscionable” price increases on items such as food and gas when the governor declares a state of emergency, which Gov. Timothy M. Kaine had declared at the time.

So what was the Pamplin station’s penalty for price-gouging? The settlement requires the station to set aside $500 to reimburse customers who overpaid for gasoline. It also requires the station to pay $1,250 to reimburse the state for the cost of the investigation and attorney fees. And, in lieu of civil penalties, the station must pay $500 to the Salvation Army for disaster relief purposes.

The Pamplin settlement is the second one related to price-gouging allegations in the Lynchburg area during the same storm. The first was settled in July against Timberlake Citgo, which charged as much as $5.39 per gallon for about 12 hours as the hurricane approach the Gulf Coast.

Attorney General Bill Mims said the state’s law against price-gouging “leaves room for standard market forces to work in times of disaster and prohibits only the charging of unconscionable prices for necessary goods and services during those rare times. I am hopeful,” he added in a news release, “that our seventh price-gouging settlement will send the message that we intend to enforce our statute.”

That’s a clear warning. Any merchants who would be moved to jack up prices during any such natural calamity should take notice.