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F I S C A L I M P A C T R E P O R T

SPONSOR HJC

ORIGINAL DATE

LAST UPDATED

1/31/2006

2/11/06 HB 392/HJCS

SHORT TITLE Prohibit Profiteering During Emergencies

SB

ANALYST McOlash/Lewis

APPROPRIATION (dollars in thousands)

Appropriation

FY06

FY07

Recurring

or Non-Rec

Fund

Affected

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates SB 445.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Office of the Attorney General (AGO)

Regulation and Licensing Department (RLD)

Administrative Office of the Courts (AOC)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of Bill

The House Judiciary Committee substitute for House Bill 392, with emergency clause, provides

that it is an unconscionable trade practice pursuant to the Unfair Practices Act for any person to

profiteer during a state of emergency or disaster as declared by the president of the United States

or the governor; provided that the governor or the district court issues an order declaring that the

emergency or disaster has caused or appears likely to cause an abnormal market disruption

within the state. The bill adds definitions of “abnormal market disruption,” “disaster,” “necessary

property or service,” and “profiteering during a state of emergency or disaster.”

The bill provisions for public notice and exemptions in certain circumstances, and provides that

willful violation of the prohibition against profiteering during a state of emergency or disaster is

punishable by a fine of up to $1,000 per violation, with an aggregate total not to exceed $25,000

for any 24-hour period. A court may also suspend or revoke a business licenses or certificate for

continuous and willful violations.

A severability clause provides that if any part or application of the act is held invalid, the re-

mainder or its application to other situations or persons shall not be affected.

House Bill 392/HJCS - Page 2

SIGNIFICANT ISSUES

According to the Office of the Attorney General (AGO),

when a disaster such as a hurricane or

earthquake strikes, increased demand for emergency goods and services, coupled with con-

strained supplies may lead to higher prices. While some sellers may charge higher prices because

operating costs have increased due to emergency conditions, others may reap large profits selling

scarce necessities to desperate buyers who have no alternatives. When faced with emergency

conditions, citizens demand government action to relieve hardships. One course of action the

government may consider is price controls to stop price gouging and keep goods affordable.

According to the Department of Finance and Administration (DFA), New Mexico does not have

a “price-gouging” law. The DFA suggests that HB 392 presumably will fill this need as a reac-

tion to the perceived price-gouging after Hurricane Katrina.

Current statute (Section 57-12-10 NMSA 1978) includes provisions allowing any person who

suffers any loss of money or property, real or personal, under the Unfair Practices Act to bring an

action to recover damages.

ADMINISTRATIVE IMPLICATIONS

The Administrative Office of the Courts (AOC) predicts a minimal administrative cost for state-

wide update, distribution, and documentation of statutory changes. Any additional fiscal impact

on the judiciary would be proportional to the enforcement of this law and commenced prosecu-

tions. New laws, amendments to existing laws, and new hearings have the potential to increase

caseloads in the courts, thus requiring additional resources to handle the increase.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

The AGO suggests that

consumers may be taken unfair advantage of during a declared state of

emergency, if such state of emergency results in abnormal disruptions of the marketplace, result-

ing in greatly increased prices for essential consumer goods and services.

BMC/ML:nt