Fiscal Note & Local Impact Statement
127 th General Assembly of Ohio
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BILL: |
DATE: |
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STATUS: |
SPONSOR: |
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LOCAL IMPACT
STATEMENT REQUIRED: |
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CONTENTS: |
Makes charging an unreasonable price for gasoline an unfair
or deceptive consumer sales practice and makes other changes |
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STATE FUND |
FY 2008 |
FY 2009 |
FUTURE YEARS |
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General Revenue Fund –
Attorney General |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
- 0 - |
Potential increase for
additional legal expenses |
Potential increase for
additional legal expenses |
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Consumer Protection
Enforcement Fund (Fund 6310) – Attorney General |
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Revenues |
- 0 - |
Potential gain from civil
penalties |
Potential gain from civil
penalties |
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Expenditures |
- 0 - |
Potential increase for
additional legal expenses |
Potential increase for
additional legal expenses |
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Unspecified State Fund –
Department of Commerce |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
- 0 - |
Potential increase to
handle petroleum industry reports |
Potential increase to
handle petroleum industry reports |
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Division of Administration
Fund (Fund 1630) – Department of Commerce |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
- 0 - |
Potential increase for
additional information technology equipment |
Potential increase for
additional information technology equipment |
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Note: The state
fiscal year is July 1 through June 30.
For example, FY 2008 is July 1, 2007 – June 30, 2008.
Attorney General
·
The
Office of the Attorney General's Consumer Protection Section, funded out of the
GRF and the Consumer Protection Enforcement Fund (Fund 6310), may file a few
additional civil actions as a result of the bill. Whether the bill will create additional ongoing operating
expenses for the Consumer Protection Section is uncertain. Any proceeds from civil penalties that might
be imposed would be deposited in Fund 6310.
·
The
bill requires refiners and wholesalers of petroleum products and retail sellers
of gasoline in this state to prepare and submit certain reports to the
Department of Commerce, which must be posted on the Department's web site. Based on the number of current operators,
the Department may receive around 608 monthly reports. The Department is unsure if additional staff
will be needed to carry out this function.
·
Given
the volume of these reports, it may be that the Department needs to procure
additional information technology equipment, such as data storage, to house the
reports posted online. The Division of
Administration Fund (Fund 1630) would likely be used to purchase such
equipment.
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LOCAL
GOVERNMENT |
FY 2008 |
FY 2009 |
FUTURE YEARS |
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Counties and
Municipalities |
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Revenues |
Potential gain from court
costs and fines |
Potential gain from court
costs and fines |
Potential gain from court
costs and fines |
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Expenditures |
Potential increase in
adjudication expenses |
Potential increase in
adjudication expenses |
Potential increase in
adjudication expenses |
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Note:
For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1
through June 30.
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Additional
civil suits could impose some new costs on county and municipal courts. However, additional lawsuits would also
likely generate some additional filing fee and court cost revenue for the
counties in which the cases take place.
If the number of cases actually filed were few, then the expenses and
court cost revenue related to conducting court proceedings in these cases would
be minimal.
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Overview
This bill makes charging a
price for a grade of gasoline that does not bear a reasonable relationship to
the cost of making the particular grade of gasoline available to consumers an
unfair or deceptive consumer sales practice and requires certain reports to be
sent to the Department of Commerce by retailers of gasoline as well as refiners
and wholesalers of petroleum products.
The bill also creates the Ohio Gasoline Practices Oversight Commission
to examine the petroleum industry and conduct hearings to recommend a state
gasoline policy.
Attorney General
Consumer
Sales Practices Act investigations
As noted above, the bill
makes charging a price for a grade of gasoline that does not bear a reasonable
relationship to the cost of making the particular grade of gasoline available
to consumers an unfair or deceptive consumer sales practice and, thus, a
violation of the Consumer Sales Practices Act (CSPA). CSPA prohibits unfair or deceptive trade practices as well as
unconscionable acts in consumer transactions.
The statute authorizes the Attorney General to investigate alleged
violations and to seek civil penalties and remedies for various consumer
transactions and provides consumers with a private right of action.
By giving the Attorney
General specific authority to investigate complaints regarding gasoline prices,
the bill may result in an increased workload for Office of the Attorney General
(AGO) staff to investigate additional complaints or initiate additional legal
action. While current law does not
specifically identify gas price gouging as a violation of CSPA, the Attorney
General's office has initiated such legal action in the past under existing
sections of that law.[1]
Potential for new AGO civil cases
Under CSPA, AGO may pursue civil remedies and its Consumer Protection Section, funded by both the GRF and the Consumer Protection Enforcement Fund (Fund 6310), would handle the associated legal work. Based on prior experience, it would be reasonable to assume that under the bill's authority there would be a relatively small number of additional civil cases, if any at all, filed for several reasons.
First, while the number of
complaints to be investigated by AGO might be significant (perhaps in the
hundreds or thousands depending on price swings), the actual number of
additional lawsuits may be rather small.
Cases of gas price gouging alone have been difficult to prove due to the
many factors that affect the price of gasoline, such as the cost of crude oil
(the largest component in the price of gasoline), seasonality of demand, and
product supply/demand imbalances.[2] Refiner inventory levels and profit margins
may also play a significant part in the price of gasoline.[3] The Florida Attorney General, for example,
received over 4,000 price-gouging complaints in the days before and following
Hurricane Katrina, yet only two lawsuits were filed against gasoline retailers
based on gas price gouging.[4]
Second, it seems likely that AGO would try to settle cases before initiating any formal legal action. Similar to the procedures taken in existing Consumer Sales Practices Law cases, AGO would seek court action against a person as a last resort only if it perceives that the person is receiving a pattern of consumer complaints. Assuming a less formal negotiating strategy does not work, AGO could request that a court of common pleas issue a declaratory judgment, a temporary restraining order, or an injunction in order to persuade violators to cease their offending behavior.
On the other hand, if AGO
successfully pursues a civil remedy, the court adjudicating the matter can
award AGO all costs and expenses associated with its investigation, in addition
to reasonable attorney's fees. The
court may also order civil penalties of up to $25,000. Three-quarters of this civil penalty as well
as investigation costs and attorney's fees would be credited to the state's
Consumer Protection Enforcement Fund (Fund 6310). The remaining one-quarter of the civil penalty would go to the
treasury of the county where the case took place.
Thus, whether the bill will
create additional ongoing operating expenses to the Consumer Protection
Section, as well as the amount of those potential costs, is uncertain. It is also uncertain how much civil penalty
revenue may be collected annually from persons in violation of the bill's
prohibition and subsequently deposited to the credit of Fund 6310.
Consumer-initiated actions
As noted above, a consumer
injured by a violation of the new sections would also be able to pursue civil
remedies, which means that additional civil suits could be filed. It is uncertain how many consumers will
elect to pursue a civil remedy without the assistance of AGO, but the number is
assumed to be small as injured persons would, most likely, report a complaint
to AGO initially and then allow the Consumer Protection Section to seek a
resolution to the complaint.
Local civil justice
considerations
The filing of civil suits would likely generate some additional filing fee and court cost revenue for the counties and municipalities that the cases take place in. However, these suits would place some additional burdens on the courts that will have to adjudicate these matters. If the number of cases actually filed as a result of the bill were small, then the expenses and court cost revenue related to conducting court proceedings in these cases would be minimal.
Department of Commerce
Petroleum
industry reports
The bill requires each refiner
and wholesaler of petroleum products in this state to submit to the Department
of Commerce (COM) a monthly report specifying the amount of unrefined and
refined petroleum products the refiner or wholesaler brought into, consumed in,
and exported from this state during the previous calendar month.[5] These reports are to be posted on the
Department web site. Retail sellers of
gasoline must also send written if the retail seller has or will increase the
price of gasoline by seven cents or more during a calendar week and the reason
for the price increase. Unlike the
refiner and wholesaler reports, the bill does not require COM to post these
notices online.
COM may receive
608 or so monthly reports from refiners and petroleum wholesalers. This number is based on the number of
Department of Taxation-licensed motor fuel dealers (i.e. wholesalers and
refiners that distribute motor fuel in Ohio) and exporters as of March 5, 2008.[6] Thus, there may be an additional
administrative burden to handle the reports, which would involve posting the
required reports online. As of this
writing, COM is unsure if additional staff will be needed to carry out this
function.
Given the volume
of these reports, it may be that COM needs to procure additional information
technology (IT) equipment, such as data storage, to house the reports posted
online. The Division of Administration
Fund (Fund 1630), which pays for COM's IT infrastructure, would likely be used
to purchase any additional IT equipment needed. LSC is uncertain what the costs may be for the equipment.
Gasoline Practices Oversight Commission
The bill also creates the
Ohio Gasoline Practices Oversight Commission to examine the petroleum industry
and conduct hearings to recommend a state gasoline policy. The Commission would cease to exist December
31, 2009. Presumably, expenses would be
borne by those making appointments to the Commission: the House of Representatives and the Senate (three members each),
the Governor, the Attorney General, the Auditor of State, and the Consumers'
Council.
LSC fiscal
staff: Jason
Phillips, Budget Analyst
[1] The Attorney General's web
site lists eight legal actions concerning "gas gouging" in its Online
Public Inspection File (OPIF) at http://www.opif.ag.state.oh.us, all of them in
the wake of September 11, 2001. Each
action cited sections 1345.03(A), 1345.03(B)(2), and 1345.03(B)(5) of the
Revised Code, which concerns unconscionable acts in consumer transactions when
the supplier knows that the price is substantially in excess of the price
readily obtainable in similar transactions or when the supplier required the
consumer to enter into a transaction on terms the supplier knew were
substantially one sided in the favor of the supplier.
[2] A Primer on Gasoline
Prices, May 1, 2006, U.S. Department of Energy, Energy Information
Administration,
http://www.eia.doe.gov/bookshelf/brochures/gasolinepricesprimer/eia1_2005primerM.
html (last visited March 10, 2008).
[3] Leffler, Keith B and Peter
K. Ashton, Report on Gasoline Pricing in Florida, June 2005, Florida
Attorney General,
http://myfloridalegal.com/webfiles.nsf/WF/KGRG-6DDLDL/$file/GasPriceReport.pdf
(last visited March 10, 2008).
[4] 2005 Year in Review, pg.
31, June 1, 2006, Florida Attorney General, http://myfloridalegal.
com/webfiles.nsf/WF/MRAY-6SNRSU/$file/2005YIR.pdf (last visited March 10,
2008).
[5] Some of this information
may already be submitted to the Department of Taxation on various motor fuel
tax forms.
[6] "Motor fuel" is defined in the Revised Code as gasoline, diesel fuel, K-1 kerosene, or any other liquid motor fuel, including, but not limited to, liquid petroleum gas or liquid natural gas.