When Lack of Government Authority is the Emergency, a Kentucky Story

Federal and state governments declare emergencies or disasters for many reasons. Currently in Arizona an estimated 25 emergency or disaster declarations are in effect. Most common reason in Arizona right now are wildfires, major storms and flooding, and a few continuing Covid declarations. Arizona has both a Covid 19 emergency declaration and a Covid 19 major disaster declaration. A FEMA dataset shows 838 emergency and disaster declarations across the U.S., though not all remain active.

Emergency declarations trigger a number of steps to facilitate government actions like disbursing funds and making it easier for state and federal responses to coordinate responses. In most states with laws prohibiting price gouging typically declaration of an emergency triggers application of the law.

Which brings us to Kentucky.

On June 23, 2022, Kentucky Governor Andy Beshear declared a “state of emergency relating to inflation and gas prices” so as to “implement provisions of KRS 367.372, et seq. as to the sale of goods and services, specifically gasoline or other motor fuels…” The declaration makes clear that all the emergency declaration is intended to do is activate the price gouging authority of the state. In other words, the emergency was the inability of the state to retroactively penalize gasoline retailers for price increases.

Average Gasoline Prices (Regular) for Ohio, Kentucky, and Tennessee, June 6-July 5, 2022

We might notice that prices had peaked about two weeks before the Governor declared the emergency and that prices have continued to fall in the nearly two weeks since. The price gouging law remains in effect only for 15 days unless extended. The enacting of state authority appears to have had no effect so far, as prices in Kentucky track the fall in prices in neighboring states.

As the law prohibits prices “grossly in excess of the price prior to the declaration” (Ky. Rev. Stat. § 367.374), permits prices to rise with fluctuations in commodity markets, and allows for other cost increases, it seems wholly unlikely the law will have any economic effect or legal consequences at all. In fact, that may be just fine with the Governor.

The real emergency in Kentucky was political, not economic. Consumers are unhappy about high gasoline prices. Understandably so; even after adjusting for inflation prices have been at record levels. Unhappy consumers are unhappy voters. Unhappy voters want to see elected officials do something. The Governor did something, and next time he is running for office he can remind voters that he did.

Of course he’ll leave out the part his “something” had absolutely zero effect and he expected it to have zero effect. The news release was the point. Governor Beshear wants voters to know he is “on their side.” Empty symbolism is good enough for Kentuckians in the Governor’s eyes.

Comments filed in New York rulemaking process on price gouging enforcement

One comment consisted solely of the email subject line “Let the market be free.” It was not a view shared elsewhere in the comments.

In March of this year the New York Attorney General’s office initiated an effort to improve the state’s price gouging law enforcement practices. The “Advance Notice of Proposed Rulemaking” explained the intentions behind the state’s price gouging law and suggested experiences over the last two years indicate a need to refine the rules. (See an earlier post on the subject here: Anti-price gouging laws get rulemaking process in New York. The NY AG’s press release has more information.)

The rulemaking process is being overseen by the NY AG’s Senior Counsel for Economic Justice Zephyr Teachout, a former candidate for NY AG and a law professor at Fordham before becoming appointed to the AG’s office this past January. In October 2021, Ms. Teachout’s article on antitrust policy, “Why Judges Let Monopolists Off the Hook,” was published in The Atlantic. That article, along with the text of the ANPRM itself, may provide some insight into the direction the NY AG’s office wants to take New York’s price gouging enforcement activity.

Comments on the ANPRM were due in late April. These comments have been posted on the NY AG’s website in a single 252-page document. In all about 65 separate comments were filed. The vast majority of the comments were either specific price gouging complaints–gasoline prices and new cars were common targets, but Chinese restaurants and the Dollar Store also drew remarks–or generic remarks urging the AG onwards in her fight.

A dozen comments were more general and in-depth comments, with half from the political left and another half dozen from industry. For your reading convenience, I have extracted these 12 comments from the AG’s document and posted them here. Just 64 pages!

A formal “Notice of Proposed Rulemaking” is expected to come sometime in the next several months. If you, like the lone commenter quoted above, would like the NY AG’s office to “let the market be free,” you may want to get involved at the next step in the proceeding.

I admit it, I was wrong (about a federal government price gouging investigation)

Recently a handful of politicians called upon the Federal Trade Commission to investigate oil companies for potential price gouging. I was reminded of an episode from a few years back in which politicians called upon the US Department of Transportation to investigate potential price gouging by airlines.

An Amtrak train derailed in Philadelphia in May 2015, interrupting passenger service in the area for several days. Air travel rates jumped along some affected travel routes. In response Senators and Members of the House called upon the DOT to investigate.

I blogged about the calls for investigation in a July 2015 post at Knowledge Problem. There I made the following prediction:

After a month or two the DOT will report finding that airline prices did jump suddenly after the derailment as demand for air travel jumped up. They will observe that initial price spikes resulted from airlines’ computerized pricing mechanisms and did not reflect an intent to “take advantage of stranded passengers in the wake of such a tragic event.” They will note that airlines responded by adding flights and pressing larger aircraft into service. The report will conclude temporary price spikes reflected the ordinary workings of supply and demand under short-lived extraordinary circumstances. No finding of unfair practices will result, and no trade practices will be condemned.

I did not recall whether the investigation led to any particular conclusion, so I Googled it. To my surprise, my prediction was wrong in a key part.

I wrote “after a month or two the DOT will report…” but it was actually 18 months before DOT concluded its investigation. There was no report. Rather, as the Associated Press described it, the “department quietly sent letters to the airlines” stating the investigation had concluded. The DOT said it found “no evidence of unfair manipulation of airfares or capacity, nor evidence of unconscionable increases in fares beyond normal pricing levels.”

I was wrong on the timing of DOT action, but right about what it would find.

One wildcard this time around. The new chair of the FTC is a strong critic of existing competition policy practice. Last September the FTC announced several efforts to boost scrutiny of gasoline markets. Perhaps under new management FTC lawyers and economists will come up with some new theory of price gouging to justify doing something.

More likely, sometime after the November 2022 elections, the FTC will conclude they found no widespread market manipulation or price gouging. It won’t make much news when they conclude the report.