Proposal to repeal Utah’s price gouging protections stalls in Senate committee

Bill is one of 3 before Legislature that would address price gouging.

(Rick Bowmer | AP file photo) A Utahn wears a mask to protect against COVID-19 as he displays the toilet paper he purchased at a grocery store, March 17, 2020, in Salt Lake City. The Utah Department of Consumer Protection has fielded several complaints about high costs for toilet paper as the pandemic wears on. At least three proposed bills before the Legislature would change Utah's price gouging law.

After the coronavirus pandemic hit the state last spring, nearly 1,000 Utahns filed complaints alleging higher-than-average costs for everything from toilet paper to hand sanitizer and food staples.

Now, state lawmakers are poised to consider two bills that would reduce the strength of those consumer protections — and another that would abolish Utah’s price gouging act altogether.

Sen. Jake Anderegg, R-Lehi, acknowledged during a hearing Monday on his bill that there are disadvantages to a full repeal of the act, which would remove sanctions for anyone who charges high prices for necessities during an emergency.

But Anderegg believes there are more pros than cons to the effort, arguing that the free market will right itself without the “heavy hand” of government and that the current law has been used “like a club” on businesses that saw costs increase during the pandemic and then became the subject of complaints when they raised their prices as a result.

“I truly believe that the economy adjusts and can adjust as fast as people make decisions to adjust,” Anderegg told his colleagues on Monday. “It can go slow. It can go really fast. And to that end, I think it is the better policy. Even though there are pros and cons to the existing statute and there are pros and cons to this repealer, I think the pros to this repealer outweigh the cons by and large.”

The Senate Business and Labor Committee ultimately declined to take action on SB74 on Monday, as several legislators questioned the ramifications of a repeal and two members of the public spoke against it.

Sen. Karen Mayne, D-West Valley City, called the effort to abolish the price gouging act “spooky” and described it as a “knee-jerk” reaction that required more study.

“Things are going to get caught up in this that we don’t want to just because of, ‘Well let’s get rid of this; buyer beware, free market takes care of everything,’” she said. “Well if that takes care of everything, why are we here to make laws and regulations for things?”

Stephen Foxley, who spoke on behalf of the insurance company Regence BlueCross BlueShield, said during public comment that he hoped the state would keep the price gouging statute on the books in order to hold “bad actors” to account — like a provider he said has been charging $1,600 for a single COVID-19 test when the national cost is around $130.

“I am a free market person,” he said. “I understand that argument. But sometimes there are market failures. And in this case, the federal government created a market failure that allowed a certain provider to come out and charge that $1,600.”

Utah’s price gouging act has been on the books since 2005 but was never used before the coronavirus pandemic. During the act’s first test, the state has fielded nearly 1,000 complaints — though not all actually represent an instance of illegal gouging.

For one thing, the law applies only to goods or services that are deemed “necessary for consumption or use as a direct result of events giving rise to a state of emergency.” The statute doesn’t define what is “necessary,” so it’s up to a judge to decide.

The Department of Consumer Protection, which is tasked with considering complaints, also can’t look solely at a listed price when deciding whether a company or individual has violated the statute. Instead, investigators find baseline costs to compare the price to — including whether the seller sold the good or service in the 30 days before the emergency and at what cost and whether there were wholesale price increases in the cost of obtaining the good or providing the service.

Overall, the Division of Consumer Protection has filed 15 total actions for price gouging and has recovered nearly $43,800 that was charged in excess of what statute allows. The state has also issued around $1,900 in fines, according to a spokesman with the division.

Those fines suggest the statute “may be working,” said Sen. Curt Bramble, R-Provo, in relaying those statistics on Monday — though he said that doesn’t mean the act isn’t “open for amendment.”

Anderegg, however, argued that the fact that so few of the complaints were substantiated could show the law is flawed, and noted that there was likely a cost for businesses to defend against false claims.

While the committee didn’t advance his bill Monday, Anderegg said he thinks it deserves further consideration along with two other bills aimed at addressing the state’s price gouging statute.

One of those comes from Rep. Rex Shipp, whose proposal would tweak several provisions in the price gouging act, including the thresholds that constitute violations.

His bill, HB157, would allow someone who hadn’t sold an item in the 30 days preceding an emergency declaration to charge twice their total cost for obtaining the good or providing the service. The state’s price gouging statute currently allows such a seller to charge just 30% above those costs.

The bill also takes into consideration the price of obtaining a good or service in the markup a seller can charge, such as “the cost of shipping that could be included in that acquisition cost,” Shipp, R-Cedar City, said in a recent interview.

Under his proposal, those costs “wouldn’t affect their margin they could get on the product,” he said.

But while Shipp believes there need to be tweaks to the statute, he said he doesn’t support efforts to repeal the price gouging protections altogether.

“I feel like there still needs to probably be some sort of control so people don’t price gouge in those types of situations, so there’s some limits on their margin that they can do there,” he said. “I believe in a free market but sometimes people might take advantage of people in a certain situation.”

Sen. Lincoln Fillmore, R-South Jordan, is also running a bill to tweak the state’s price gouging protections, and his bill has several of the same elements as Shipp’s — including a consideration of all acquisition and distribution costs in determining an acceptable markup.

His bill would increase the threshold for a violation of the act by a person who had not previously sold a good or service prior to the emergency declaration. Under his proposal, that would rise from 30% to 40%.

SB86 would also make it harder for the Division of Consumer Protection to investigate alleged violations, allowing the agency to do so only if it has received three or more “credible reports” about a seller and if the person appears to have profited in an aggregate amount of at least $1,000.