Attorneys General Meeting Disaster

By Steve Arthur, Vice President

Attorneys General and their staff from many southern states gathered in Tampa, Florida January 26 and 27 to learn about all aspects of disaster preparedness. From enforcing price gouging statutes to managing their offices more effectively in a disaster, the conference provided an opportunity to share best practices and provide guidance to the private sector.

While there were some excellent presentations about what Attorneys General offices can do to better prepare for disasters and how best to respond, I want to focus on the messages most relevant to the private sector.

Price Gouging

Of particular interest to the private sector were the discussions about consumer protection. In a panel addressing price gouging, there was agreement among the Attorneys General that enforcing price gouging statutes can be problematic. For example, Hurricane Ike (2008) did significant damage to refineries in Texas, but did not cause any damage in Tennessee. But the Texas damage did cause gas shortages which resulted in price spikes for gasoline. Since gas stations usually price their gas based on what they expect to pay for the next tanker, how does an Attorney General determine what price rise is excessive under a state’s statute?

The panel also addressed how best to draft a price gouging statute. Attorney General Roy Cooper (D) of North Carolina outlined two generic options. The first, a more prescriptive statute, sets out formulas for how much a price needs to rise before it would be considered gouging and outlines specific types of products covered. The second is drafted more vaguely and uses words like “excessive” and “unconscionable” price increases. It was described as more along the lines of pornography laws: you know it when you see it. This version understandably makes retailers nervous, but it was argued that this gives Attorneys General more flexibility to enforce against only those retailers engaging in the worst of price gouging, making it less likely that retailers who must pass along price increases will have to defend themselves.

In the end, there seemed to be agreement among the Attorneys General that the most effective deterrent to price gouging was high profile enforcement. By taking on one or two egregious offenders, others would be discouraged from trying to price gouge. They talked about enforcement actions against both the big guys and the little guys to make sure the message gets out. The lesson they were trying to convey: it’s okay to pass along legitimate cost increases, but don’t try to make excessive profits off other people’s misery.

On the plus side, some retailers were praised for their disaster response efforts. Wal-Mart, Lowes and The Home Depot were singled out on several occasions during the conference as model companies for their responses. Each of the companies were cited for their ability to quickly get their stores re-opened and re-supplied, as well as being proactive in freezing prices during and after disasters.

Public Private Partnerships

Also of note for the private sector was the support given to public-private partnerships to better prepare for disasters. General Bob Cooper (D) of Tennessee opened the discussion on this topic by noting that one of the best partnerships between business and government is simply for businesses to execute their disaster response plans and for government to remove barriers to those plans. That is the quickest way to begin getting things back to normal.

More proactively, some states are starting to create business emergency operations centers, which are designed to share resources and build trust between government agencies and the private sector. These centers are used to quickly connect businesses to those officials who might be needed to approve permits for things like overweight/oversized trucks or access to restricted areas to allow stores to quickly re-supply and be ready to re-open when residents are allowed back in.

There was also agreement that the more government and the private sector prepare in advance for disasters, the smoother the recovery will be. For example, multiple presenters mentioned that states should make sure that there is a credentialing system in place prior to an emergency to allow for quicker access to closed areas in order for business to quickly re-establish supply chains.

Establish Relationships Now

One of the most important messages that came through for the private sector was the importance of developing relationships with key state officials in advance of any disaster. Because of the focus on price gouging, this conference of Attorneys General highlighted the importance of having a relationship with those offices to quickly clear up any misunderstandings that might pop up in the aftermath of a disaster. This is especially important in those states where the price gouging statute is written broadly.

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