Newark – In testimony today before the Assembly Transportation Committee, Division of Consumer Affairs Director Kimberly Ricketts discussed the Division’s efforts on behalf of consumers regarding rapidly rising gas prices and concerns over fair and honest treatment when purchasing gasoline.

"The Division of Consumer Affairs is – by its very definition – an agency dedicated to protecting the rights of consumers," said Director Ricketts. "We have been exercising our statutory enforcement authority to inspect gas stations – both proactively and in response to consumers’ complaints - to ensure that station operators are following the law and that consumers are being treated fairly," said Director Ricketts.

In her testimony, Director Ricketts explained the types of inspections conducted across the state, and discussed what additional tools would be helpful were this type of crisis to occur again in New Jersey. A complete version of Director Ricketts’ testimony is attached.

"Under our authority, we will continue to do everything in our power to help motorists avoid unjustified or prohibited price increases," added Director Ricketts. "We continue to encourage consumers to contact us at 1-800-242-5846 to report any suspicious activity or inflated pricing."

Thank you very much. Chairman Wisniewski and members of the Committee, I have had the opportunity to work with many of you in the past, either in my capacity as Executive Director of the Governor’s Taskforce on Mental Health, or as Chief of Staff at the Department of Community Affairs. It is great to see so many familiar faces. Today I am here to testify in my new capacity as Director of the Division of Consumer Affairs. I have held this position since May, and was officially sworn in by Governor Codey on September 6.

I appreciate this opportunity to talk to you about a subject that has touched each and every New Jersey resident.

Since Hurricane Katrina hit the southern United States at the end of August, consumers in New Jersey – like those in many other parts of the country – have experienced rapidly rising gas prices and concerns over fair and honest treatment when purchasing gasoline.

You have heard from others on this issue today, but I’d like to talk to you from our perspective – to tell you what the Division of Consumer Affairs has done, and is still doing, to protect consumers.

Investigators from the Division of Consumer Affairs, Office of Weights and Measures, as well as investigators from county and municipal offices of Weights and Measures, have been exercising our statutory enforcement authority to address these concerns - by inspecting stations – both proactively and in response to consumers complaints - to ensure that station operators are following the law and that consumers are being treated fairly.

Gas stations are inspected by state, county and some municipal inspectors once a year to ensure that they are operating properly. The pumps are also inspected in response to consumer complaints and, if problems are found, the pumps are condemned and shut down. Over the Labor Day weekend, state, county and municipal inspectors inspected pumps in response to consumer complaints.

Over the Labor Day weekend alone, the state inspectors visited 400 stations and found 100 alleged violations. Some of these alleged violations concerned prices being raised more than once in a 24-hour period, and others concerned the actual pump price for gas differing from the posted price on the roadside sign. I’d like to take this opportunity to thank those county inspectors in Bergen, Camden, Cumberland, Gloucester, Hudson, Monmouth, Middlesex, Morris, Passaic, Salem and Warren counties for their time and assistance.

Our authority to pursue these violations comes from two separate statutes; the Motor Fuels Act and the Consumer Fraud Act. Under the Motor Fuels Act, it is unlawful to change the per gallon price of gasoline more than once in a 24-hour period. The Consumer Fraud Act, which, among other things, prohibits deceptive practices and misrepresentation in the sale of merchandise, requires that the price per gallon at the pump must match the price posted on the roadside sign. Under this authority, we will continue to do everything in our power to help motorists avoid unjustified or prohibited price increases.

I’d like to make one point of clarification: we do not have the authority under New Jersey’s price gouging law to charge a station or an operator with a violation in the current circumstances. Under New Jersey law, there must be a declared state of emergency in New Jersey before price gouging can be charged.

Legislators have requested our assistance with drafting anti-price gouging legislation. We look forward to working with you on this issue; however we think this is a very complex subject that requires careful study and discussion before legislation is created to avoid any unintended consequences.

But there is a change which, if made, would help us do an even better enforcement job should this situation happen again. Penalties need to be increased so that they actually impact a violator’s bottom line. Currently, violations of the Motor Fuels Act carry penalties that range from $50 - $200. This penalty schedule was part of the original Motor Fuels Act enacted in 1938. Clearly, this needs to be updated. The current structure does very little to deter those unscrupulous operators who want to take extra profits at the consumer’s expense. We need your help changing that. We need stronger penalties so that companies do not consider a violation of this law as simply a manageable cost of doing business in New Jersey.

In addition to using the full extent of our enforcement authority under these statutes, we also looked for creative ways to address this situation and protect New Jersey consumers.

You may hear from others testifying today that there are two provisions of the Motor Fuels Act that regulate gasoline pricing that may, as in this recent crisis, appear to conflict.

The first we have already touched on – the prohibition against changing the price of gasoline more than once in a 24-hour period. The second provision prohibits gas station operators from selling gasoline below net cost. The industry contacted us to express their concern that, in a volatile market when the price of oil was changing quickly, the circumstance would arise that they would be forced to either raise the price of gas more than once in a 24-hour period to avoid selling below cost – thereby violating one provision – or sell below cost until they could raise prices legally, thereby violating the other provision.

The Division of Consumer Affairs is – by its very definition – an agency dedicated to protecting the rights of consumers. In this instance, when the industry felt that it was being squeezed between the two provisions, we temporarily suspended enforcement of the prohibition against selling below cost. The prohibition is designed to ensure that one company does not underprice its competitors and drive them out of the industry. In this limited circumstance, it was obvious that this was not a concern. So – to help retailers resolve this predicament, while also protecting consumers – we crafted a creative – and temporary – solution that made sense for all parties involved. We will be closely monitoring prices in the market to determine when enforcement of this provision should resume.

This brings me to another point I want to make here today. I think that, while there are some bad actors out there who tried to take advantage of this crisis to make extra money, most gas station operators tried to do the right thing by consumers, while also trying to stay in business.

We recognize and understand that the operators of the gas stations may not be the ones setting or raising the prices. But our primary jurisdiction is at the pump – and that is where we conduct our inspections to ensure that the rules are being followed. There has been some recent confusion on this point and I want to be sure our role is clear. We have the responsibility to enforce the Motor Fuels Act, but anything beyond enforcement is handled by the Division of Taxation, as it is their statute. We do not have broad authority to set pricing, nor do we have control over the many factors that may have contributed to the recent swing in prices.

We continue to encourage consumers to contact us at 1-800-242-5846 to report any suspicious activity or inflated pricing.

And we stand ready to work with the Legislature to address this issue – both today and into the future.

Thank you again for the opportunity to testify, and I would welcome any questions you may have.

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