Sticker Shock at the Pump: An Evaluation of the Massachusetts Petroleum Price-Gouging Regulation

By Ball, Caitlin E. | Suffolk University Law Review, Fall 2011 | Go to article overview

Sticker Shock at the Pump: An Evaluation of the Massachusetts Petroleum Price-Gouging Regulation


Ball, Caitlin E., Suffolk University Law Review


"[D]uring any abnormal disruption of the market for consumer goods and services vital and necessary for the health, safety, and welfare of consumers resulting from stress of weather, convulsion of nature, failure or shortage of electric power or other source of energy, strike, civil disorder, war, military action, national or local emergency, or other cause of an abnormal disruption of the market which results in the declaration of a state of emergency by the governor, no party within the chain of distribution of such consumer goods or services or both may sell or offer to sell any such goods or services or both for an amount which represents an unconscionably excessive price." (1)

"Apparently, bicycles are the way to go on Martha's Vineyard." (2)

I. INTRODUCTION

On August 29, 2005, Hurricane Katrina struck the Gulf Coast of the United States. (3) The storm became the costliest as well as one of the deadliest natural disasters in American history. (4) By damaging oil drilling platforms, petroleum pipelines, and refineries, Hurricane Katrina disabled roughly 95% of the Gulf Coast's offshore crude oil processing mechanisms, which at the time represented 27% of the total crude oil production in the United States. (5) Following Hurricane Katrina, gasoline prices rapidly increased by more than $.45 per gallon above the average pre-storm retail price, and extreme price fluctuations continued for weeks after. (6) Due to the swift and seemingly excessive rise in gasoline prices, many consumers speculated that the price hikes were a result of price gouging on the part of sellers seeking a windfall in profits, as opposed to a reflection of actual petroleum shortages. (7)

Economists define "price gouging" as the practice of pricing goods above a reasonable market rate resulting in a surplus of revenue for the seller. (8) The federal government has not passed legislation regulating price gouging, leaving the matter for determination by the individual states. (9) Price gouging of petroleum products has emerged as an especially contentious issue. (10) While many argue that gouging is a form of "profiteering" at the expense of vulnerable consumers, and therefore should be prohibited, opponents of anti-price-gouging laws contend that these statutes actually serve to hinder petroleum markets by artificially constraining the price of gasoline, resulting in long-term price escalations. (11)

The Massachusetts anti-price-gouging regulation prohibits unconscionable pricing of petroleum products during a market emergency. (12) In White v. R.M. Packer Co., (13) the United States Court of Appeals for the First Circuit (First Circuit) provided guidance for applying and interpreting the regulation by devising a scheme for analyzing gross disparities in petroleum pricing. (14) In construing the statute, the First Circuit analyzed the plain language of the anti-gouging regulation as well as applicable contract jurisprudence. (15) Going forward, it will also be important for Massachusetts courts to address the views of economists who have evaluated restrictions on price gouging and their economic impact, while refining the existing framework for evaluating violations of the anti-gouging regulation. (16)

This Note will first discuss the origin and meaning of "price gouging" and the impetus for states to enact anti-gouging legislation. (17) This Note will then discuss the existing types of anti-gouging laws implemented by the states as well as review the positions of opponents and proponents of price restrictions. (18) This Note will proceed to consider the history and judicial interpretation of the Massachusetts anti-price-gouging regulation. (19) This Note will go on to analyze the First Circuit's use of contract law and the statute's plain meaning in the White decision, as well as the possible economic effects of statutory price constraints in light of the court's decision. (20) The Note will conclude by proposing recommendations for Massachusetts courts to consider when analyzing a gouging claim in the future. …

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