Three Gas Stations Sued In Continuing Katrina Probe

As part of an ongoing probe of high gasoline prices after Hurricane Katrina, Attorney General Spitzer today announced price gouging lawsuits against three service stations.

The lawsuits accuse the three gas stations of charging consumers unconscionably excessive prices in the days immediately following Hurricane Katrina last fall. Previously, the Attorney General's office settled related price gouging charges with 15 gas stations across the state.

"The lawsuits we are filing today continue my office's effort to ensure that during market disruptions gas pricing decisions are proportionate to increased costs," Spitzer said. "As part of that effort, we continue to believe that the state needs a clearer and stronger statute to deter price gouging and I urge the State Legislature to act on the bill we have proposed."

In a related matter, Spitzer called upon the Federal Trade Commission (FTC) to aggressively pursue its ongoing investigation of gasoline pricing, market manipulation, and price gouging. Congress directed the FTC to study oil and gas prices both leading up to and following Katrina and to determine whether those prices can be attributed to the exercise of unlawful market power by the oil companies.

"With regular gasoline selling at $4.14 a gallon at a station in Brooklyn this week, it is essential that the FTC focuses not only on the merit of price gouging statutes that deal with events such as Katrina, but also on the causes behind the dramatic price increases we're experiencing all these months later. While we need federal and state price gouging laws to protect consumers when disaster strikes, we also need to police oil company behavior during periods of unprecedented prices and profits."

The lawsuits, the call for a stronger state statute, and the appeal for more aggressive federal action were applauded by a leading advocate for motorists:

John A. Corlett, Director of Government Relations for American Automobile Association (AAA) New York State said: "The Attorney General's action sends an important reminder that predatory pricing tactics will not be tolerated. Moreover, strengthening the state's price gouging statute will bolster enforcement efforts and, consequently, deter unscrupulous sellers seeking to prey on consumers."

New York lawmakers also expressed support for the actions:

Assemblyman Paul Tonko, Chairman of the Assembly Energy Committee said: "Working families, businesses, farmers, municipalities and school districts are struggling to cope with skyrocketing gasoline and diesel prices at the pumps. This legislation will help the Attorney General effectively prosecute unscrupulous individuals or businesses who take advantage of consumers during supply disruptions, emergencies and natural catastrophes." The bill (A.10722) is also sponsored by Assemblywoman Audrey Pheffer, Chairwoman of the Assembly Consumer Protection Committee.

Senator Charles Fuschillo, Jr., Chairman of the Senate Consumer Protection Committee said: "As gas prices continue to skyrocket, New York Sate must do everything it can to protect consumers from being scammed. An investigation conducted by the Attorney General last year demonstrated that some gas stations are willing to defraud their customers through price gouging. We need to remove any financial incentive for gas stations to engage in price gouging, and raising the level for the maximum fine will do just that. I applaud the Attorney General for championing this measure, and look forward to working with him to get these stronger penalties enacted into law."
The destruction from Hurricane Katrina led to the largest single jump in gasoline prices in state history. Hundreds of complaints received by the Attorney General's office voiced the same alarm, which is that prices were changing at the pump not only overnight, but several times a day.

The three gas stations named in lawsuits today are: Penn-Can Truck Stop Mobil located in Central Square in Oswego County; My Service Station Inc. located in New Rochelle in Westchester County; and Schaghticoke Mobil located in Rensselear County.

The lawsuits allege that:

  • Penn-Can prior to Katrina charged its customers for regular gasoline an average of $.70 per gallon more than it paid its supplier for that gasoline. After the Hurricane, the station raised its retail price to $3.40 per gallon, a mark-up of $.89 per gallon over what it paid its supplier. This is an increase in the mark-up of more than 25 percent.
  • My Service Center prior to Katrina charged its customers for regular gasoline $.67 per gallon more than it paid to its supplier. Following Katrina, the station raised its retail price to $3.45 a gallon, a markup of $.99 a gallon over what it paid its supplier, an increase in the mark-up of over 48 percent; and
  • Schaghticoke Mobil prior to Katrina charged its customers for regular gas $.83 per gallon more than it paid its supplier and that, after the hurricane, the station raised its retail price to $3.60 per gallon, a markup of $1.43 per gallon over what it paid its supplier, an increase in the mark-up of over 72 percent.

Current law prohibits the sale of vital consumer goods at an "unconscionably excessive price" during natural disasters. The law specifically says that a price may be considered excessive if there is a "gross disparity" between the prices charged immediately before and after the emergency, and the disparity is not attributable to higher costs imposed upon the seller.

Under current law, "gross disparity" is not defined. The Attorney General has proposed that the law be amended to specify that a markup of 25 percent or more would constitute price gouging. In addition, Spitzer is recommending that penalties under the law be enhanced to allow recovery of three times the gouger's profits.