LANSING, Mich. -- Governor Jennifer M. Granholm said last week that legislation will be introduced in the State House of Representatives that would give the attorney general full authority to investigate price-fixing and gas-gouging at Michigan's gasoline pumps. The governor called for this legislation to protect consumers in her 2008 State of the State address. The legislation (HB 6250) will be introduced by State Representatives Mary Valentine (D) and Robert Dean (D).
"We are working to protect the pocketbooks [image-nocss] of consumers who are feeling pain at the pump," Granholm said. "While the vast majority of service station dealers are reputable business owners who deliver the proper quality and quantity of fuel, this legislation would give the attorney general the authority to make sure that consumers are treated fairly."
The legislation would amend the Michigan Consumer Protection Act by granting the attorney general the ability to issue a civil investigative demand against companies believed to be in violation of the act without having to first obtain a court-ordered subpoena based on probable cause. And the legislation would clearly define what is considered to be a grossly excessive price for goods and services. With these amendments, the attorney general would be able to more efficiently and readily investigate a potential violation of the act, including consumer complaints against the gasoline industry for price-gouging.
The legislation would also amend the Michigan Antitrust Reform Act to expand the ability of the attorney general and local prosecutors to investigate anti-competitive conduct by the state's retail gasoline industry by authorizing them to investigate and file actions based on possible violations of both state and federal antitrust laws.
"At a time when global markets and international speculation are causing gas prices to rise, we are going to continue to do everything we can to ensure citizens are getting every penny's worth at the pump," Granholm said.
"While many Michiganders may feel cheated at the pump, [HB] 6250 is neither fair nor desirable," said Hannah K. Mead of the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. "If passed, the legislation may actually increase gas prices and exacerbate the broader economic woes of the state."
She added, "The proposed legislation makes gasoline retailers sitting ducks. True, the bill appears to permit retailers to raise prices if they can prove their own costs went up, but they can face such fluctuations daily. Gas stations are squeezed between the input costs of refined gasoline and price competition from other stations. Threatening to investigate these businesspeople for price-gouging whenever consumers complain about spiking prices would not only be misguided but could drive up gas stations ' legal bills and force them to either raise prices or close up shop. Fewer gas stations would mean less competition and fewer jobs—that is, costlier gas and, for some, less money to afford it.
"HB 6250 still has troubling legal implications. Though the search-and-seizure protections in the U.S. and Michigan constitutions do not appear to affect noncriminal investigations such as these, the legislation 's encroachments on privacy should concern any state resident. The bill eliminates the current requirement for a court-ordered subpoena in consumer-protection probes and replaces the need for probable cause with 'reasonable cause,' thereby creating a nominal standard that an attorney general could hardly fail to meet….
"A genuine solution to rising gasoline prices does not require such drastic measures; instead, it would involve deregulating oil and gasoline markets to allow greater competition. Contrary to the theory of price-gouging, gas stations cannot simply charge whatever they please for gasoline; if they could, they would have been charging $5 per gallon for years. In a competitive market, if one station raises its price, others will undercut it as much as they profitably can to lure away the station 's customers. Competition, not undue power for the attorney general, will make sure that consumers are treated fairly."
Mead concluded, "Hair-trigger investigations can only reduce competition, hurt consumers and make the state 's business climate even more unfriendly. Stripping businesspeople of safeguards of their civil liberties is a high price to pay for the dubious effects of this legislation—a brutal form of price-gouging indeed."
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