Order Code RS22236
September 2, 2005
CRS Report for Congress
Received through the CRS Web
Price Increases in the Aftermath of Hurricane
Katrina: Authority to Limit Price Gouging
Angie A. Welborn and Aaron M. Flynn
Legislative Attorneys
American Law Division
Summary
This report addresses the authority of state and federal governments to control price
gouging in the aftermath of Hurricane Katrina. Specifically, questions have arisen
regarding increased prices in the areas affected by Hurricane Katrina and the effect that
the damage caused by the hurricane will have on prices, specifically gasoline prices, in
other parts of the country. State laws regarding price gouging in the event of an
emergency are discussed, as well as the role the federal government could play in
addressing rising gas prices in other parts of the country. This report will be updated as
events warrant.
Introduction
There are no federal laws that specifically address price gouging. Price gouging laws
exist at the state level and are generally applicable in situations arising from a declared
emergency.1 An increase in prices alone does not necessarily constitute price gouging,
and technically, price gouging only occurs when the trigger event has been met in a
particular state. If there exists evidence of collusive activity among retailers, suppliers,
or manufacturers, federal antitrust laws could be applicable. The Federal Trade
Commission monitors gas prices and investigates possible antitrust violations in the
petroleum industry.2 Currently, there is no reported evidence of collusive activity leading
to an increase in retail gas prices.
1 At least 13 states — Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Mississippi,
New York, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia — have laws
that specifically address price gouging in the event of a declared emergency. Other states may
exercise authority under general deceptive trade practice laws depending on the nature of the
state law and the specific circumstances under which price increases occur.
2 For more information on the Federal Trade Commission’s activities with respect to gas pricing,
see [http://www.ftc.gov/ftc/oilgas/index.html].
Congressional Research Service ˜ The Library of Congress

---

CRS-2
Price Gouging in Affected Areas
While there is no federal price gouging law, many states have enacted some type of
prohibition or limitation on price increases during declared emergencies.3 All of the
affected states — Louisiana, Mississippi, Alabama, and Florida — have price gouging
laws that are triggered by the declaration of an emergency in the state.4 Generally, the
laws prohibit the sale of goods and services in the designated emergency area at prices
that exceed the prices ordinarily charged for comparable goods or services in the same
market area at or immediately before the declaration of an emergency.5 However, there
exists a general exemption for increased prices that are the result of additional costs
incurred for procuring the goods or services in question, or “national or international
market trends.”6
The Florida statute is the most detailed of the four. It establishes a prima facie case
of unconscionable pricing, if:
1) The amount charged represents a gross disparity between the price of the
commodity or rental or lease of any dwelling unit or self-storage facility that is the
subject of the offer or transaction and the average price at which that commodity or
dwelling unit or self-storage facility was rented, leased, sold, or offered for rent or
sale in the usual course of business during the 30 days immediately prior to a
declaration of a state of emergency, and the increase in the amount charged is not
attributable to additional costs incurred in connection with the rental or sale of the
commodity or rental or lease of any dwelling unit or self-storage facility, or national
or international market trends; or
2) The amount charged grossly exceeds the average price at which the same or similar
commodity was readily obtainable in the trade area during the 30 days immediately
prior to a declaration of a state of emergency, and the increase in the amount charged
is not attributable to additional costs incurred in connection with the rental or sale of
the commodity or rental or lease of any dwelling unit or self-storage facility, or
national or international market trends.7
Commodity is broadly defined to include “any goods, services, materials, merchandise,
supplies, equipment, resources, or other article of commerce,” and specifically includes,
3 The Federal Emergency Management Administration has declared emergencies in all four states
affected by Hurricane Katrina. See [http://www.fema.gov/news/disasters.fema]. States of
emergency have also been declared by the Governors of Alabama, Florida, Louisiana, and
Mississippi.
4 Code of Ala. § 8-31-3; Fla. Stat. § 501.160; La. R.S. 29:732; Miss. Code Ann. § 75-24-25.
5 See Miss. Code Ann. § 75-24-25(2). The Alabama statute prohibits “unconscionable prices”
during the period of a declared state of emergency, but does not define “unconscionable.” Code
of Ala. § 8-31-3.
6 See Fla. Stat. § 501.160.
7 Fla. Stat. § 501.160(1)(b).

---

CRS-3
“without limitation, food, water, ice, chemicals, petroleum products, and lumber
necessary for consumption or use as a direct result of the emergency.”8
In Alabama, prima facie evidence of unconscionable pricing exists “if any person,
during a state of emergency declared pursuant to the powers granted to the Governor,
charges a price that exceeds, by an amount equal to or in excess of 25% the average price
at which the same or similar commodity or rental facility was obtainable in the affected
area during the last 30 days immediately prior to the declared state of emergency,” but,
like Florida, price gouging does not exist where the price increase is attributable to
reasonable costs incurred by the seller in connection with the rental or sale of the
commodity.9
The Mississippi and Louisiana statutes define price gouging more generally and do
not provide any specific activities which could give rise to prima facie evidence of price
gouging. Each of these statutes prohibits the selling of goods and services at prices which
exceed “the prices ordinarily charged for comparable goods and services in the same
market area at, or immediately before, the time of the [declaration of the] state of
emergency.”10 Under each statute, price gouging does not include price increases due to
additional costs or expenses incurred as a result of the emergency.11
General Price Increases in Other Areas
Typically, state price gouging laws are triggered only when there has been a
declaration of emergency in the state. The laws, therefore, are only applicable in areas
affected by the declared emergency. Thus, in other parts of the country, not directly
affected by Hurricane Katrina, state price gouging laws, where they exist, are not likely
to be generally applicable to any price increases occurring subsequent to the hurricane.
While price increases may not fall within the definition of price gouging, if the raising of
prices by retailers, suppliers, or manufacturers is the result of collusive activity, the
federal antitrust laws could be applicable.12
Under special circumstances and depending on the scope of the statute in question,
state price gouging laws could be triggered by the declaration of an emergency not
specifically related to a natural disaster occurring in the state. For example, Georgia’s
price gouging statute can be triggered by the declaration of an “energy emergency,” which
is defined as “a condition of danger to the health, safety, welfare, or economic well-being
of the citizens of this state arising out of a present or threatened shortage of usable energy
8 Id. at § 501.160(1)(a).
9 Code of Ala. § 8-31-4.
10 La. R.S. 29:732; Miss. Code Ann. § 75-24-25(2).
11 Id.
12 For an overview of federal antitrust law, see CRS Report RL31026, General Overview of
United States Antitrust Law.

---

CRS-4
resources.”13 The Governor of Georgia declared such an emergency on August 31, 2005,
triggering the state’s price gouging statute.14
Increases in Gas Prices
There are no federal price controls for petroleum products that would be applicable
nationwide. However, such controls are not unprecedented. A variety of authorities have,
from time to time, authorized executive branch implementation of price controls for crude
oil and refined petroleum. Under the Economic Stabilization Act of 1970,15 for instance,
the President was authorized to control the price of commodities, including crude oil and
refined petroleum.16 President Nixon exercised this authority in 1971; it expired in
1974.17
Similar authority was contained in the Emergency Petroleum Allocation Act of 1973
(EPAA),18 which directed the President to establish temporary measures “to deal with
shortages of crude oil, residual fuel oil, and refined petroleum products or dislocations in
their national distribution system” and to “minimiz[e] the adverse impacts of such
shortages or dislocations on the American people and the domestic economy.”19 To meet
these objectives, the Act granted the President broad authority to allocate oil and to
specify its price.20 A comprehensive program was established in 1974, including standby
regulations for use during emergencies, which included price controls and allocation
measures.21 The President was also empowered to take a variety of other actions to affect
petroleum product prices, such as ordering refineries to modify their output and to control
the accumulation of petroleum by importers, producers, refiners, marketers or
distributers.22 These regulations were slowly phased out over successive Administrations
and eventually terminated by President Reagan in 1981;23 the law itself expired on
September 30, 1981.24
13 O.C.G.A. § 10-1-393.4; O.C.G.A. § 38-3-3.
14 See [http://www.gov.state.ga.us/ExOrders/08_31_05_01.pdf].
15 P.L. 91-379, §§201-06, 84 Stat. 796, 799-800 (1970).
16 12 U.S.C. § 1904, note (1976).
17 Exec. Order No. 11615, 36 Fed. Reg. 15727 (Aug. 17, 1971).
18 P.L. 93-159, 87 Stat. 627, 693-702 (codified at 15 U.S.C. §§ 751-760).
19 15 U.S.C. § 751(b).
20 Id. § 753(a).
21 39 Fed. Reg. 1924 (Jan. 15, 1974); 44 Fed. Reg. 3928 (Jan. 18, 1979); 45 Fed. Reg. 55374
(Aug. 19, 1980).
22 See 15 U.S.C. §§ 760b-760e.
23 See, e.g., 15 Weekly Comp. of Pres. Doc. 609 (Apr. 1979); Exec. Ord. No. 12287, “Decontrol
of Crude Oil and Refined Petroleum Products,” 46 Fed. Reg. 9909 (Jan. 30, 1981). The price
controls in the petroleum markets were generally considered by economists to be inefficient and
the cause of additional problems.
24 15 U.S.C. § 760g.

---

CRS-5
The federal government may be able to affect oil supplies and prices through use of
the Strategic Petroleum Reserve (SPR). The SPR was created by the Energy Policy and
Conservation Act,25 enacted in 1975, which authorizes the stockpiling of petroleum
products and the drawdown and distribution of SPR oil by the Secretary of Energy
pursuant to Department of Energy (DOE) regulations.26 Specifically, the law authorizes
the Secretary to suspend acquisition of petroleum products for the SPR if the Secretary
determines that “a severe energy supply interruption may be imminent” and to sell any
petroleum product “acquired for and in transit to, but not injected into, the Reserve.”27
The law also authorizes drawdown and sale of petroleum products contained within
the SPR; however, before that can occur, the President must find that such actions are
“required by a severe energy supply interruption” or by international obligations.28 The
law requires the Secretary to sell SPR products at “public sale to the highest qualified
bidder ... without regard to Federal, State, or local regulations controlling sales of
petroleum products.”29 DOE regulations indicate that contracts for sale of SPR petroleum
are to be awarded to “responsive, responsible persons offering the highest prices
...[through] sales conducted pursuant to [DOE] rules ....”30 Sale prices are to be certified
by the offeror that they
have been arrived at independently, without, for the purposes of restricting
competition, any consultation, communication, or agreement with any other offeror
or competitor to: (i) those prices; (ii) the intention to submit an offer; or (iii) the
methods or factors used to calculate the prices offered.31
This and other provisions indicate that sales of SPR petroleum should generally
result in a return to the government of market-priced petroleum. Thus, any effect on
gasoline prices resulting from SPR petroleum sales would seem more likely to be caused
by increased supply or the perception of increased supply.
The current plan to release SPR petroleum would not result in the exercise of the
Secretary’s authority to sell SPR petroleum. It would instead adopt a system of “swaps,”
avoiding the SPR sales requirements. Through “swapping,” a company takes SPR oil and
sells it at current market prices. Theoretically, the additional supply will help reduce
prices. As payment for the SPR petroleum, the recipient is required to provide a
somewhat larger amount of oil to the SPR when oil prices have fallen.32 This process
does not appear to be expressly provided for in the applicable statutes and regulations;
however, authority may be inferred from the Secretary’s SPR development and operations
25 P.L. 94-163, 89 Stat. 871 (1975) (codified as amended at 42 U.S.C. §§ 6231-6247).
26 42 U.S.C. §§ 6234, 6241.
27 Id. § 6240(f).
28 Id. § 6241(d)(1), (h).
29 Id. § 6241(e).
30 10 C.F.R.§ 625.2.
31 10 C.F.R. Pt. 625, App. A, § B.3.
32 For a description of this process, see CRS Issue Brief IB87050, Strategic Petroleum Reserve,
by Robert Bamberger.

---

CRS-6
powers, which include authority to “acquire ... by purchase, exchange, or otherwise,
petroleum products for storage in the Strategic Petroleum Reserve ... [and to] execute any
contract necessary to develop, operate, or maintain ... [the SPR].”33
33 42 U.S.C. §§ 6239; 6240.

---