PRICE FIXING: Release from Kentucky Attorney General's Office
FRANKFORT, KY (May 10, 2007) – Attorney General Greg Stumbo announced groundbreaking litigation filed today in Franklin Circuit Court against Marathon Oil Corporation, Marathon Petroleum Company, LLC and Speedway SuperAmerica, LLC, charging the corporations with profiteering during the time of emergency following Hurricanes Katrina and Rita. The companies are alleged to have overcharged Kentucky consumers more than $89 million in grossly excessive motor fuel pricing.
“Today Kentucky becomes the first state in the nation to file suit protecting its citizens against price gouging by a major oil refiner,” said Attorney General Stumbo. “Following an 18-month investigation, my Consumer Protection and Rate Intervention divisions have uncovered evidence of massive overcharging for gasoline, affecting nearly every family and business in the state.”
The defendants are charged with violating Kentucky’s price gouging law (KRS 367.374) and Consumer Protection Act (KRS 367.170) during the declared State of Emergency following the hurricanes in August and September of 2005. Marathon Petroleum Company, LLC is alleged to have overcharged Kentuckians by $86 million in wholesale transactions, while Speedway SuperAmerica, Marathon’s wholly owned retail distributor, overcharged an additional $3 million, resulting in at least $89 million in consumer overcharges during the declared emergency.
The price gouging law specifically provides that during a declared emergency, “No person shall sell… a good or service…for a price which is grossly in excess of the price prior to the declaration and unrelated to any increased cost to the seller.” The price of gasoline and other motor fuels are included among the goods and services covered by the law.
“The worst thing about the massive overcharging for gasoline is that it took place during a grave national emergency,” Stumbo added. “Our nation was rocked by Hurricanes Katrina and Rita. It was a time for Americans to pull together but the lure of easy money made Big Oil hold consumers hostage to high prices. We all must buy gasoline in order to work, travel, buy food for our families and tend to the needs of our loved ones. Based on an exhaustive review of the evidence we are confident that Marathon’s price increases during the emergency period were not justifiable.”
Marathon is Kentucky’s biggest wholesale supplier of gasoline. In the months following the hurricanes, Marathon produced record amounts of product; and, after months of investigating, the Attorney General has found no significant cost increases for the companies during the State of Emergency that would justify the major spike in gas prices. The Attorney General has not ruled out pursuing other companies.
Hurricane Katrina made landfall on August 29, 2005. On August 31, at the request of the Attorney General, the Governor implemented the price gouging statute pursuant to Kentucky’s declared State of Emergency. Immediately, Stumbo began to review the petroleum industry’s pricing and established a hotline for gas price gouging complaints. Nearly 700 consumer calls were received and allegations of price gouging reviewed and/or investigated. On September 24, 2005, Hurricane Rita made landfall. One month later, on October 27, Marathon released its earnings and claimed an increase in profits directly resulting from the hurricanes.
In February, 2006, Attorney General Stumbo issued subpoenas to 30 Kentucky retail gasoline stations regarding pricing during the State of Emergency. In April, 2006, he issued subpoenas to 13 petroleum refiners and suppliers requiring the same data. On August 1, Attorney General Stumbo issued subpoenas to Speedway for data on all stations and announced settlements in the price gouging investigation totaling more than $50,000.
Attorney General Stumbo and Representative Tommy Thompson announced the filing of Anti-Price Gouging Legislation in February, 2004 (HB 471). It was signed into law in April, 2004. “When we proposed this law we could not have known the calamity that would befall us, requiring its protections. But today we see that these protections are absolutely essential to safeguard Kentucky consumers from heartless profiteering during times of danger and emergency. With this suit, I am sending a clear message to gas refiners, wholesalers and retailers that they cannot grossly inflate prices during a crisis. It’s just plain wrong and won’t be tolerated in Kentucky.”
