Why did you investigate?
When the state began the investigation in April 2007, the public and policymakers wondered why Washington prices were higher than those in other states. They also asked why prices in Bellingham and, at one point, Spokane, were higher than other communities.Washington consumers frequently wonder why gas prices are consistently higher in some areas of the state than others. Attorney General Rob McKenna, Governor Chris Gregoire and the Department of Community, Trade and Economic Development wanted to be able to answernew data to help answer that question.those questions.
So in April 2007, the Attorney General’s Office, with assistance from CTED, launched state government’s most comprehensive investigation of the state’s petroleum market in 16 years.
Results from the investigation are included in a 67-page report.
Prior to that, the most recent comprehensive study on Washington gas prices was published by the state Energy Office (now CTED’s Energy Policy Division) in July 1991.
What was the extent of this investigation?
The investigation was conducted in two phases. The first phase primarily centered on gathering facts and relevant information about historic and current gasoline prices in Washington. A Phase 1 report was published on August 16, 2007. It describes how gas prices have increased over the years and identifies the different components contributing to that rising price. The report also compares our state’s gas prices to those in other states as well as across regions within Washington. It includes information about the state’s sources of gasoline, Washington refinery capacity and consumer demand.
Phase 2 of the investigation analyzed price data through March 2008. It included additional analysis related to differences in the wholesale cost of gasoline from various supply sources, transportation costs, retailing costs and diesel prices. Phase 2 also addressed anomalies in the data that were identified in Phase 1. Results from both phases are included in the final report.
What did you find?
The investigation found variations across Washington communities are due to the cost of obtaining and transporting fuel to stations and local competition – not illegal price manipulation. Increasing worldwide demand for oil and an inability for regional refineries to meet local supply demands are the primary contributors to erratically climbing prices. Additional findings are summarized at the beginning of the report.
How was the research conducted?
The study relied on publicly available data related to prices and costs. The Attorney General’s Office chose Dr. Keith Leffler, a University of Washington economist with expertise in the petroleum industry, to conduct the analysis of price data. The office also conducted interviews with industry representatives, sought expertise from CTED’s Energy Policy Division and conducted three public forums to gather consumer comments.
Who paid for the study?
The Attorney General’s Consumer Protection Division paid for the data acquisition and expert analysis out of its existing civil law enforcement budget.
Are you aware of any price-fixing or price-gouging?
The Attorney General’s Office asked the public to provide information which might suggest price-fixing or other violations of Washington’s consumer protection or antitrust laws. Public forums were held in Bellingham, Spokane and Bellevue. Although many comments were received during the forums and through other communications, none included facts that would implicate illegal activity.
When can the Attorney General’s Office take enforcement?
Over the years, our office has taken action against the industry when there has been sufficient evidence of illegal activity.
Here are legal violations that our office looks for:
Price-fixing and other forms of collusion. Price-fixing includes an explicit agreement among competitors to raise, fix, or otherwise maintain the price at which their goods or services are sold to the detriment of either the competitive marketplace or consumers. Consumers can help by alerting us if they know of any efforts by competing firms to fix or manipulate prices.
Business mergers and monopolistic practices that would result in reduced competition and harm to consumers. The Attorney General’s Office closely monitors proposed business mergers to ensure competition remains healthy.
Unfair or deceptive acts, as defined under the state Consumer Protection Act.
For an unfair act to be illegal under this law, we must be able to prove:
That the practice offends public policy.
That it is immoral, unethical, oppressive or unscrupulous.
It causes substantial injury to consumers or competition in the marketplace.
Without direct evidence of an antitrust law violation or an unfair or deceptive act, however, we have no authority to intercede in the market.
When can the Attorney General’s Office issue a subpoena?
The Attorney General’s Office can issue a civil investigative demand when the office believes a business or individual has information relevant to an investigation into possible violations of state consumer protection or antitrust laws. A civil investigative demand, or CID, is a request for documents and is similar to a subpoena.
To an issue a CID, the Attorney General’s Office must be able to state which statute we suspect was violated and describe the general subject matter of the investigation.
The state’s Unfair Business Practices and Consumer Protect Act, RCW 19.86.110, requires the office to use "reasonable specificity so as fairly to indicate the material demanded.” In other words, the office must be able to articulate what we believe occurred and documents that we believe would prove our case. In an antitrust case, for example, this could entail telling the recipient that we are investigating price-fixing of a particular product in a particular area.
A 1975 Supreme Court case, FLORENCE J. STEELE et al, Respondents, v. THE STATE OF WASHINGTON, Appellant, requires a three-pronged test to determine the reasonableness of a CID or similar order. According to the court, this test “requires that (1) the inquiry is within the authority of the agency; (2) the demand is not too indefinite; and (3) the information sought is reasonably relevant.”
Issuing a CID without a factual basis for concern that the law is being violated would put our authority at risk and might constitute an abuse of government power.
Where can I find more information about gas prices in Washington?
See our Gas Prices page for the latest information. The Antitrust Division regularly monitors and collects gasoline pricing information to determine whether price increases indicate possible anticompetitive behavior or reflect normal market forces. The division publishes these figures on a quarterly basis in its Quarterly Gasoline Report. The Quarterly Gasoline Report discusses circumstances unique to the West Coast and Washington, in particular that impact the price of gasoline. It also addresses efforts by the Attorney General’s Office to keep the marketplace free of collusive and deceptive practices and outlines the basic market forces that affect price fluctuations.