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Attorney General Eliot Spitzer on Monday called for the first overhaul of New York’s price gouging statute since 1998 with a proposal that would presume gouging whenever there is a markup of 25 percent or more following a disaster or other catalyst and would permit his office to pursue treble damages. At a press conference in his Albany office, Spitzer announced that a three-month probe of suspected gasoline price gouging in the wake of Hurricane Katrina resulted in settlements with 15 stations which had increased their markup by 25 percent or more after the storm. But while he said the price gouging statute, Article 26 �396-r of the General Business Law, served its purpose in the gas pricing matters, it is “perhaps a bit too elastic for our tastes.” The existing statute permits the state to impose a fine of up to $10,000 when, during a period of “abnormal disruption of the market caused by strikes, power failures, severe shortages or other extraordinary circumstances,” an “unconscionably excessive price” is charged. Under the law, a price is excessive if there is a “gross disparity” between the price charged before and after the disaster, and the increase is not a result of higher costs imposed on the seller. Spitzer’s proposal would impose a $500 fine, permit the state to establish a prima facie case of gouging when the price is increased 25 percent or more and lead to disgorgement of three times the profit. “When price movements are a result of the natural intersection of supply and demand, we say that is what should be happening,” Spitzer said. “It is only when there is abuse, such as price gouging or collusion … that we intervene to make sure the market functions properly.” GAS STATION CASES The agreements announced Monday with 15 gas stations involved penalties based on several factors, including the size of the increase, the number of days in which consumers were allegedly gouged and other elements. Spitzer stressed that the investigation, led by Deputy Attorney General Martin Mack, resulted in penalties only against stations which had increased their prices more than 25 percent after the hurricane and which had exploited the disaster for their own financial gain. “We are hoping that these 15 cases, distributed across the state, will send a message to retailers that you cannot, under New York law or in good conscience, take advantage of an environmental debacle to extract unfair prices from the consuming public,” Spitzer said. “We have come to these conclusions not based on a random assessment that the price was too high, but based on a careful examination from the markup they extracted from consumers subsequent to the disaster.” New York’s price gouging law has been on the books since the 1970s, when then Governor Hugh L. Carey approved a measure enacted in response to complaints that oil companies were taking advantage of the embargo. It was amended in 1998 in the aftermath of an ice storm which wreaked havoc on many North Country communities, according to Thomas Conway, chief of the consumer frauds bureau. Conway said about 30 states now have price gouging laws. John A. Corlett, director of governmental relations for the New York chapter of the American Automobile Association, said he supports the attorney general’s pursuit of retailers taking unfair liberties after the storm. “After the hurricane hit, consumers were paying 50 cents to a $1 more for gas, literally in a matter of days,” Corlett said. “I don’t think there is any question that some retailers were taking advantage of the hurricane. This sends a strong message that that will not be tolerated.” Mark Alesse, state director of the National Federation of Independent Business, said he shares the attorney general’s concern with price gougers. But he cautioned that not every instance of a sudden and dramatic price increase is price gouging. For instance, he said gas retailers may well have been acting defensively after the hurricane, raising their rates out of fear that their own expenses would rise and their supply would diminish. “We can’t condone price gouging by either small, independent gasoline retailers or large publicly traded energy corporations,” Alesse said. “It shouldn’t be done and perpetrators should be punished. But to a certain degree, ‘price gouging’ is in the eye of the beholder.” But Alesse said higher prices, in response to market forces, can have a positive effect if it leads to a decrease in consumption — which, in the case of gasoline, was a desired result. “We want to be sure that what we call ‘price gouging’ is in fact ‘price gouging,’” Alesse said.

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