Rule-Making Notices (Hearing Notices)

Statutes Interpreted:   ss. 93.06 (1) and (9), 93.15, 93.16 and 100.305, Stats.

The Wisconsin department of agriculture, trade and consumer protection (“DATCP") is responsible for administering the price gouging prohibition under s. 100.305, Stats. Section 100.305, Stats., prohibits sellers from selling “consumer goods or services" at wholesale or retail at “unreasonably excessive prices" if the Governor, by executive order, has certified that the state or a part of the state is in a “period of abnormal economic disruption" due to an emergency. An emergency may include, for example, a destructive act of nature, a disruption of energy supplies that poses a serious risk to the public health or welfare, a hostile action, or a strike or civil disorder.

DATCP has broad general authority, under s. 93.07 (1), Stats., to adopt rules to implement laws under its jurisdiction. Under s. 100.305 (3), Stats., DATCP is specifically required to adopt rules defining what constitutes an “unreasonably excessive price" for purposes of the price gouging prohibition under s. 100.305, Stats.

Under ss. 93.06 (1) and (9) and 93.14 to 93.16, Stats., DATCP may investigate possible rule violations, and may require persons to provide documents, testimony and other evidence related to its investigation. Under s. 93.15, Stats., DATCP may by general order (rule) require persons to answer DATCP questions and submit documents for inspection.

Rule Content

Under this rule, a seller may not sell a consumer good or service in a declared emergency area during a declared emergency period at a price that is more than 10% above the highest price at which the seller sold like consumer goods or services to like customers in the relevant trade area during the 60-day period immediately preceding the emergency declaration. A seller may charge a higher price if the seller can prove, based on evidence in the seller's possession at the time of sale, that any of the following apply:

The higher price does not exceed the seller's cost plus normal markup. “Normal markup" means the percentage markup, over the seller's cost, which the seller regularly used in sales of like goods or services to like customers in the relevant trade area during the 60-day period immediately preceding the emergency declaration. This allows sellers to pass on bona fide cost increases.

The higher price is required by law. For example, a seller may prove that the higher price is required to comply with Wisconsin's Unfair Sales Act (“minimum markup law"), s. 100.30, Stats.

The Governor's emergency declaration directly or impliedly exempts the sale from coverage under the emergency declaration.

Under this rule, DATCP may require a seller to submit written, documented answers to DATCP questions related to the seller's compliance with this rule, including information related to any of the following:

The highest price at which the seller sold a consumer good or service to like customers in the relevant trade area during the 60-day period immediately preceding the emergency declaration.

The scope of the relevant trade area.

Any defenses claimed by the seller under this rule.

Other information relevant to DATCP's investigation.

Federal and Surrounding State Regulations

Federal Law

At various times in United States history, the federal government has imposed price controls. There are no federal “price gouging" prohibitions currently in effect. However, there are federal laws that set or limit prices for certain products or services in certain sectors. Some of these laws may preempt state “price gouging" provisions related to the federally-regulated products or services. For example, state law may not regulate interest rates charged by federally chartered banks, or certain prices charged by certain federally regulated common carriers. The scope and effect of federal regulation varies by industry sector, and is highly specific to individual federal programs.

Other States

Many states have prohibited price gouging during declared periods of emergency. Most of those states prohibit prices above pre-emergency prices, except that most states allow sellers to pass on increased costs. Four states prohibit increased markups over cost, and 6 states cap price increases at some percentage such as 10% or 25%.

Nineteen states prohibit prices that are “unconscionably excessive," “exorbitant," “unjustified," or “grossly excessive" without defining those terms or establishing more specific standards. However, the New York attorney general found that New York's broad prohibition against “unconscionably excessive" prices was unworkable without more specific standards.

The states surrounding Wisconsin have the following regulations:

Illinois, on September 2, 2005, adopted an emergency rule (now expired) which prohibited “unconscionably high prices for petroleum products."

Indiana prohibits price gouging in the sale of fuel. Price gouging occurs if a retailer charges a price that grossly exceeds the average price at which the fuel was readily available during the 7 days immediately preceding the declared emergency and the increase is not attributable to cost factors to the retailer.

Iowa regulates prices on “merchandise needed by disaster victims." The Iowa regulation prohibits “unjustified prices" during times of disaster and recovery (60 day maximum) in a declared disaster zone.

Michigan's consumer act prohibits, among other things, a price that is “grossly in excess" of the price at which similar property or services are sold.

Minnesota does not regulate price gouging.

Ohio prohibits, during a state of emergency, prices that are substantially higher than “the price at which the goods or services were readily obtainable during the 30 days immediately preceding the state of emergency" or “the average price of the goods or services during the 30 days immediately preceding the state of emergency."

Business Impact Analysis

Depending on the scope of a declared emergency, this rule could conceivably affect nearly every business that sells consumer goods in the state (whether at wholesale or retail). A declared emergency may be statewide or localized in scope, and may be broad-based or confined to certain economic sectors. The impact of this rule will vary accordingly.

This rule could have a substantial impact on a wide array of businesses. But it is not possible to predict the impact on individual businesses or on business generally.

Whenever it applies in an emergency, this rule will limit the prices that may be charged by affected businesses. This rule prohibits prices that are more than 10% higher than pre-emergency prices, unless sellers can document that their higher prices do not exceed their cost plus normal markup. Sellers are thus free to pass on relevant cost increases, if they can document those increases.

This rule applies only when the Governor, by executive order, issues an emergency declaration. The emergency declaration determines the scope of coverage, and may exempt certain business sectors from coverage. This rule applies only for the period of time that the emergency declaration remains in effect.

This rule provides some latitude for price adjustments in response to supply and demand, and allows sellers to pass on bona fide cost increases. However, this rule does ultimately set limits on the prices that manufacturers, wholesaler distributors and retailers may charge. Some sellers may withhold goods or services from the market rather than sell at those limited prices. Retailers may benefit from wholesale price limitations, but may suffer from wholesaler decisions to withhold goods or services from distribution.

Under 2003 Wis. Act 145, DATCP and other agencies must adopt rules spelling out their rule enforcement policy for small businesses. DATCP has adopted a separate rule outlining its small business enforcement policy (see ATCP 1, subch. VII). DATCP will follow that rule in the administration of this price gouging rule. DATCP will, to the maximum extent feasible, seek voluntary compliance with this price gouging rule.

This rule first applies to small businesses 2 months after it first applies to other businesses, as required by s. 227.22 (2) (e), Stats. This rule will not apply to small businesses during declared emergencies that fall within that 2-month period, but will apply to small businesses during subsequent declared emergencies. If a declared emergency period starts before the small business effective date, but extends beyond the small business effective date, this rule will apply to small businesses for that portion of the emergency period that occurs after the small business effective date.

Notice of Hearing

Agriculture, Trade and Consumer Protection

The Department of Agriculture, Trade and Consumer Protection announces that it will hold a public hearing on an emergency rule relating to Credit Report Security Freezes. This emergency rule would create a definition for what constitutes proper identification for a consumer who asks a credit reporting agency to create, release, or terminate a security freeze.

DATCP will hold one hearing at the time and place shown below. DATCP invites the public to attend the hearing and comment on the emergency rule. Following the public hearing, the hearing record will remain open until Monday, February 26, 2007, for additional written comments. Comments may be sent to the Division of Trade and Consumer Protection at the address below or by e-mail to [e-mail].

You may obtain a free copy of this rule by contacting the Wisconsin Department of Agriculture, Trade and Consumer Protection, Division of Trade and Consumer Protection, 2811 Agriculture Drive, P.O. Box 8911, Madison, WI 53708. You can also obtain a copy by calling [phone] or emailing [e-mail]. Copies will also be available at the hearing. To view the proposed rule online, go to:

https://apps4.dhfs.state.wi.us/admrules/public/Home

To provide comments or concerns relating to small business, please contact DATCP's small business regulatory coordinator Keeley Moll at the address above, by emailing to [e-mail] or by telephone at [phone].

Hearing impaired persons may request an interpreter for the hearing. Please make reservations for a hearing interpreter by February 2, 2007, by writing to Michelle Reinen, Division of Trade and Consumer Protection, P.O. Box 8911, Madison, WI 53708-8911, telephone [phone]. Alternatively, you may contact the Department TDD at [phone]. Handicap access is available at the hearing.

Hearing Date and Location

Monday, February 12, 2007

1:30 p.m. to 3:30 p.m.

Department of Agriculture, Trade and Consumer Protection

2811 Agriculture Drive, Board Room (CR-106)

Madison, Wisconsin, 53718-6777

Handicapped accessible

Analysis Prepared by the Department of Agriculture, Trade and Consumer Protection

This emergency rule implements s. 100.54, Stats. (created by 2005 Wis. Act 140), related to credit report security freezes. This rule clarifies the information that credit reporting agencies may request in order to verify the identity of persons requesting credit report security freezes. Credit reporting agencies must adopt written procedures to comply with s. 100.54, Stats., and this rule.\

Statutory Authority

Statutory Authority:   ss. 93.07 (1) and 100.54 (12), Stats.

Statutes Interpreted:   s. 100.54, Stats.

The Wisconsin Department of Agriculture, Trade and Consumer Protection (“DATCP") has broad general authority, under s. 93.07 (1), Stats., to interpret laws under its jurisdiction. Section 100.54 (12), Stats., specifically requires DATCP to adopt rules related to identification required of consumers requesting credit report security freezes.

Background

Section 100.54, Stats., created by 2005 Wisconsin Act 140, regulates access to consumer credit reports. The law permits a consumer to create a “security freeze" on his or her consumer credit report. A security freeze limits the release and distribution of the consumer credit report. At any time after creating a security freeze, the consumer may ask the credit reporting agency to release the consumer's credit report for a specified period of time, or to terminate the security freeze altogether.

A consumer who asks a credit reporting agency to create or release a security freeze must provide information to verify the consumer's identity. Under s. 100.54 (12), Stats., DATCP must adopt rules to define what constitutes proper identification.

Emergency Rule

The department is adopting this emergency rule pursuant to s. 100.54 (12), Stats. Section 100.54, Stats., becomes effective on January 1, 2006. At that time, the credit reporting agencies must honor a consumer's request for a security freeze. Since a permanent rule will not be in place at the time the law takes effect, credit reporting agencies will not know what information they may use to identify consumers who request the security freeze unless this emergency rule is adopted. Adopting this emergency rule will enable credit reporting agencies to comply with the statute by defining the types of information they may use to identify consumers who request the security freeze.

This emergency rule does all of the following:

• Spells out the information that a credit reporting agency may require of a consumer who asks the agency to create a security freeze, in order to verify the consumer's identity.

• Spells out the information that a credit reporting agency may require of a consumer who asks the agency to release or terminate a security freeze, in order to verify the consumer's identity. The agency may require the same information that it required to create the security freeze and may, in addition, require a password assigned to the consumer when the security freeze was created.

Fiscal Impact

This emergency rule will have no significant fiscal impact on DATCP or local units of government.

Business Impact

This emergency rule only affects credit reporting agencies by regulating how the agency may identify consumers who request security freezes or changes to their security freeze status. The rule has no effect on a business that is not a credit reporting agency. Currently, there are only 3 credit reporting agencies operating in the United States. None of these are small businesses.

Federal Regulations

The federal Fair Credit Reporting Act of 2003 allows consumers who are victims of identity theft to freeze their credit reports. If a consumer is not a victim of identity theft, they have no option under federal law to place a freeze on their credit report. For victims of identity theft, federal rules under 16 CFR § 614.1 spell out the information that a credit reporting agency may use to verify the identity of consumers who ask the agency to create or release a security freeze. Federal standards are consistent with the standards in s. 100.54, Stats., and this rule.

Regulations in Surrounding States

Approximately 17 states have enacted laws that require consumer credit reporting agencies to freeze consumer credit reports upon request. Under all of those laws, credit reporting agencies may require requesting consumers to submit information to verify their identity. Most states allow credit reporting agencies to demand “information generally deemed sufficient to identify a person." If that information is insufficient, some states allow the consumer reporting agency to request “additional information concerning the consumer's employment and personal or family history in order to verify his or her identity."

Of the states surrounding Wisconsin, Illinois and Minnesota have enacted security freeze legislation. Security freeze legislation has been introduced, but not yet enacted, in Iowa and Michigan.

The Minnesota law took effect on August 1, 2006 and the Illinois law took effect on January 1, 2006. The Minnesota and Illinois laws, like most other state laws on the subject, allow credit reporting agencies to demand “information generally deemed sufficient to identify a person." If that information is insufficient, Illinois law allows the consumer reporting agency to request “additional information concerning the consumer's employment and personal or family history in order to verify his or her identity."

DATCP Contact

Questions and comments related to this rule may be directed to:

Michelle Reinen

Department of Agriculture, Trade and Consumer Protection

P.O. Box 8911

Madison, WI 53708-8911

Telephone [phone]

E-Mail: [e-mail]

Notice of Hearings

Agriculture, Trade and Consumer Protection

[CR 07-006]

The state of Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) announces that it will hold public hearings on proposed amendments to chapters ATCP 60, 69, 77, 80 and 82, Wis. Adm. Code, relating to safe production, processing, distribution and sale of milk and dairy products.

DATCP will hold four public hearings at the times and places shown below. DATCP invites the public to attend the hearings and comment on the proposed rule. Following the public hearings, the hearing record will remain open until Monday, March 19, 2007, for additional written comments. Comments may be sent to the Division of Food Safety at the address below, by email to
[e-mail], or online at: https://apps4.dhfs.state.wi.us/admrules/public/Home.

You may obtain a free copy of this rule by contacting the Wisconsin Department of Agriculture, Trade and Consumer Protection, Division of Food Safety, 2811 Agriculture Drive, P.O. Box 8911, Madison, WI 53708. You can also obtain a copy by calling [phone] or emailing [e-mail]. Copies will also be available at the hearings. To view the proposed rule online, go to: https://apps4.dhfs.state.wi.us/admrules/public/Home.

To provide comments or concerns relating to small business, please contact DATCP's small business regulatory coordinator Keeley Moll at the address above, by emailing to [e-mail] or by telephone at [phone].