Office of the Attorney General
Attorney General Conway and Governor Beshear Announce Results of Price-Gouging Investigation

Press Release Date:  Thursday, January 22, 2009  
Contact Information:  Allison Gardner Martin
Communications Director
502-696-5651 (office)

Attorney General Jack Conway and Gov. Steve Beshear today announced the results of the gas price-gouging investigation that occurred in the wake of Hurricane Ike and the subsequent windstorm in Kentucky. The investigation resulted in settlements totaling $107,500 with eight retail stations in seven different Kentucky communities.

“Many of us were shocked and outraged by the scope of the price increases, and on Sept. 12 we decided they merited a closer look,” said Governor Beshear.

On September 12, even before Hurricane Ike made landfall, the Office of the Attorney General and the Office of the Governor received dozens of calls from consumers across the Commonwealth reporting that gas prices had spiked up to $4.59 at some retail stations. We later saw prices increase as high as $4.99 in some locations. There were also widespread news reports that stations in the southeastern United States could possibly run out of gasoline if Hurricane Ike damaged refineries along the Gulf Coast. At one point, the Office of the Attorney General received so many consumer calls that phone service was temporality disrupted.

“Working with Gov. Beshear, we were able to act quickly to protect consumers,” General Conway said. “Because of our proactive efforts, retailers were put on notice that price gouging would not be tolerated and would be investigated. In most cases, we saw gas prices stabilize within 24 to 48 hours.”

Gov. Beshear, at the request of General Conway, declared a state of emergency on Sept. 12 and triggered the provision under Kentucky statute that gives the attorney general the authority to investigate claims of price gouging. A gas price complaints hotline and email address were set up to quickly and efficiently process consumer complaints. In the week following the disaster declaration, the Office of the Attorney General received nearly 2,000 phone calls and emails from consumers.

“I encouraged consumers to be our eyes and ears throughout the Commonwealth to help us crack down on any retailers who might be trying to take advantage of Kentucky consumers,” General Conway said. “They responded by providing us with valuable evidence that included digital photos and receipts.”

Investigators reviewed all of the complaints and sent subpoenas to retailers who had multiple complaints. Those subpoenas included requests for wholesale and retail price data. Based on the information obtained from the subpoenas, investigators determined that some retailers had a profit margin during the one-week period after the disaster declaration of up to $1.00 per gallon.

“I fully support the success of Kentucky businesses, but their practices must be fair, particularly when it comes to indispensable products like fuel for our cars,” said Gov. Beshear.

Five of the retail stations were owned by Pilot Travel Centers, LLC. The stores are located in Corbin, Williamsburg, Middlesboro, Franklin and Oak Grove. Pilot has agreed to pay $100,000 as part of the settlement. Krunal, LLC, which owns the T-Mart in Franklin in Simpson County has agreed to pay $5,000 and Mike and David #2, Inc., which owns the T-Mart in Wingo, will pay $2,500. The fines are not an admission of wrongdoing or guilt. All of the stations have denied any wrongdoing.

The Office of the Attorney General will reimburse itself for investigative costs; however, the majority of the settlement money will be deposited into the General Fund with the hope that the General Assembly will appropriate the restitution for a transportation related purpose to benefit the drivers in the affected communities.

Gas Prices in Louisville

The investigation into the wholesale price of gasoline in Louisville is ongoing. In July, 2008 General Conway and Gov. Beshear launched an investigation into the gasoline prices in the Commonwealth’s largest city after receiving complaints that gas prices were 20 to 30 cents higher per gallon there than in other parts of Kentucky.

In August 2008, General Conway, Gov. Beshear, Louisville Mayor Jerry Abramson and Rep. John Yarmuth (Ky.-3) announced the preliminary results of that investigation. The initial data showed that Louisville retailers are paying about 10 cents more per gallon for gas when compared to prices reported in other parts of the state and region. Higher wholesale prices result in higher prices paid by consumers.

The group formally requested federal anti-trust authorities to review the 1997 merger of Marathon and Ashland Oil and its impact on the entire Kentucky petroleum market.

The Office of the Attorney General has turned over evidence that was requested by the Federal Trade Commission (FTC). Two weeks ago, General Conway spoke with a member of President Barack Obama’s transition team and informed him about the FTC request.

“Louisville consumers appear to be paying a higher pre-tax price for gas today than they were ten years ago when you’re looking at other comparable cities in the region, and I believe this merger is past due for a review,” General Conway said.