State Agency Opposes Bill to Outlaw Price Gouging : Politics: Katz’s legislation was inspired by abuses after Jan. 17 quake. Wilson Administration points to rights of small business.

Raising the ire of consumer advocates, the Wilson Administration has announced its opposition to a bill that would outlaw the type of widespread price gouging that occurred after the Northridge earthquake.

The bill, already passed by the Assembly, would limit price increases on essential goods and services to 10% in the wake of a natural disaster such as an earthquake or wildfire.

But the state Department of Consumer Affairs says it wants the legislation diluted so businesses can raise prices by 50% immediately following such calamities.

In addition, the department wants the bill’s author, Assemblyman Richard Katz (D-Sylmar), to reduce proposed fines for price gouging from $10,000 to $1,000. It also wants Katz to remove language calling for immediate revocation of a contractor’s license if he or she is convicted of price gouging.

“The issue is not that we support price gouging, because we certainly don’t,” said Traci Stevens, the department’s deputy director for legislation. “But it’s also a small business issue. Placing caps on prices is a sensitive thing. It doesn’t do anyone any good if small businesses are forced to shut down because they can’t raise prices to pay for reconstruction.”

Stevens said Gov. Pete Wilson’s office supports the department’s position on the bill. “In order for us to have an approved position, it has to go through the governor’s office,” she said.

The Administration’s stance on the bill, which sailed through the Assembly in June and is scheduled for a Senate hearing Tuesday, provoked charges that business interests were getting more protection than consumer concerns.

“We think it’s just outrageous,” said Gail Hillebrand of the Consumers Union, publisher of Consumer Reports. “The Wilson Administration’s consumer protection agency has declared that businesses in state-of-emergency areas should be allowed to gouge consumers by up to 50%.”

Strong legislation is needed, Hillebrand said, because “California needs to send a message to businesses that you can’t take advantage of consumers at the very vulnerable time after a disaster.”

Katz introduced the bill amid a flood of complaints after the Jan. 17 quake that some merchants were charging inflated prices for services and such essential goods as gasoline, batteries, water and building supplies.

A liter of water went for $12.15, a foot of pipe for $850 and a $1.59 pack of batteries sold for $10. Contractors reportedly were overcharging for everything from utility hookups to plywood. The Los Angeles County Department of Consumer Affairs recorded about 1,460 complaints.

While Katz says he may compromise on the issue of automatic revocation of contractors’ licenses--allowing the Contractors State Licensing Board to determine discipline on a case-by-case basis--he will not back down on the 10% limit on price hikes or the proposed $10,000 fine.

“It’s hard to believe that a department called Consumer Affairs would come out and say, ‘You ought to be able to raise prices,’ ” Katz said.

“I’ve seen some bizarre positions by state agencies before, but from an election year standpoint, this is not only bad policy, it’s bad politics,” he said. “The governor’s office has come out with a position now that you ought to be able to take advantage of people in the middle of a disaster.”

Stevens, however, denied that the department favored businesses over consumers. “We are trying to achieve a balance here that’s appropriate for adequate consumer protection and maintaining small business, too,” she said.