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Politics and Price Gouging

Commissioner Rosch gets off his second shot in against the Department of Justice in just a few weeks in the pages of the Wall Street Journal — this time in a letter to the editor:

Obama’s Political ‘Price-Gouging’

If any doubts existed about whether the Justice Department is just “an arm of the administration,” they were dispelled by the attorney general’s announcement that he is forming, at the president’s request, a new “working group” to investigate “price gouging” at the gas pump (“White House’s Task Force to Probe Oil, Gas Markets,” U.S. News, April 22).  Oddly enough, this “working group” will come under the auspices of the Financial Fraud Enforcement Task Force, which was constituted to prevent fraud in the financial and lending markets. Not only would the group duplicate the functions of existing agencies—namely, the Federal Trade Commission, which through Congress-enacted legislation and its own market manipulationrule, is already empowered to investigate and prevent “price gouging,” and the Commodity Futures Trading Commission, with which the FTC has a memorandum of understanding to implement the rule—but it is blatantly political. It comes on the heels ofthe president’s April 4 announcement that he is running for re-election. By contrast, members of Congress in March sent a bipartisan letter to the FTC asking for a report on its efforts, under its Congress-mandated authority, to investigate “price-gouging” associated with the recent run-up in gas prices. When the FTC issued its “price-gouging” rule in August 2009, Commissioner William Kovacic warned that the rule could andwould be perverted to serve political ends. Lamentably, those of us who voted for it did not heed his warning.

J. Thomas Rosch


Federal Trade Commission


It was just a few weeks ago when Commissioner Rosch went on the offensive against the DOJ Antitrust Division, describing them as “an arm of the administration” which “can and will enforce the antitrust laws only insofar as that is consistent with administration policy.”  Rosch also took a shot at Assistant Attorney General Christine Varney.  The WSJ reports that Rosch described Varney as  “inclined to take a lenient view because of her prior job as a lawyer representing the American Hospital Association.”

While the shot against Varney’s “apparent conflicts” seems a bit out of line by my lights, Commissioner Rosch is right on point with respect to the politicization of oil prices and price gouging investigations.  One need only read the FTC’s 222 page report on gasoline prices post-Katrina and Rita to appreciate the Commission’s expertise in this area.  But perhaps most importantly, and undoubtedly related to the appointment of a working group outside the Commission, is that the Commission understands the relevant economics.  Indeed, as I noted just recently, then Bureau of Economics Director Michael Salinger gets it right when he observed  “as unpleasant as high-priced gasoline is, running out will be even worse.”  Further, it was the Commission Report that found not only scant evidence of what might be described as “gouging” — but did find examples of gas stations that shut down rather than risk a suit under a state price gouging law.  “Price Gouging Helps Consumers” doesn’t make for much of an election slogan, so perhaps this is all to be expected.  But nobody should be fooled into believing that enforcement of existing state price gouging laws, or a new federal task force devoted investigate “price gouging,” are going to make consumers better off.

Filed under: antitrust, economics, markets, regulation