BILL ANALYSIS AB 57X Date of Hearing: May 3, 1994 Counsel: Judith M. Garvey ASSEMBLY COMMITTEE ON PUBLIC SAFETY Bob Epple, Chair AB 57X (Archie-Hudson) - As Amended: April 25, 1994 ISSUES: I. SHOULD IT BE A MISDEMEANOR FOR ANY PERSON TO SELL OR ATTEMPT TO SELL IN ANY AREA THAT HAS BEEN DECLARED A STATE OR FEDERAL DISASTER AREA, ANY CONSUMER GOOD, AS DEFINED, AT A PRICE WHICH EXCEEDS THE AVERAGE STATEWIDE PRICE BY MORE THAN 10 PERCENT FOR THAT COMMODITY? II. SHOULD THE HOME SOLICITATION LAW BE AMENDED TO ALLOW FOR CONTRACTS TO BE VOIDED UNDER SPECIFIED CONDITIONS? DIGEST Urgency statute. 2/3 vote required. Under current law: 1) The content and effect of home solicitation contracts, as defined, is regulated. Services includes among other things, services furnished in connection with the repair, alteration, or improvement of residential premises. (Civil Code section 1689.5.) 2) It is a misdemeanor to willfully make or publish any false statement, š spread any false rumor, or employ any other false or fraudulent means or device with intent to affect the market price of any kind of property. (Penal Code section 536.) This bill: 1) Revises the definition of services to also include services furnished in connection with the "restoration" of residential premises. 2) Provides that any home solicitation contract for the repair or restoration of a residence signed by the home owner within seven days after the home is damaged by disaster is void, unless contact is first initiated by the homeowner at the seller's appropriate place of business. 3) Provides that in addition to any other right to revoke an offer, a š buyer has the right, within a seven business days, to cancel a home solicitation contract or offer for the repair or restoration of residential premises damaged by a disaster that was not otherwise void. - continued - AB 57X Page 1 AB 57X 4) Specifies that the above provision shall not apply to a contract that is initiated by the buyer or his or her agent, and that is executed in connection with the making of prescribed emergency repairs or services, šamong other conditions. 5) Provides it is a misdemeanor for any person to sell or attempt to sell in any area that has been declared a state or federal disaster area, any consumer good, as defined, at a price which exceeds the average statewide price by more than 10 percent for that commodity, punishable by up to one year in the county jail and/or a fine up to $10,000. 6) Specifies the above provisions shall be applicable for 30 days following the declaration by the Governor of any disaster area or state of emergency, except for repair or construction services and transportation, freight, and storage services, in which case these provisions shall be applicable for 90 days thereafter. COMMENTS 1) Purpose. According to the author: Following the January 17th earthquake in Los Angeles, there were numerous instances of price gouging documented by the City of Los Angeles. Following the 1992 civil unrest, Los Angeles passed a city ordinance which prohibited price gouging, yet no provisions of this nature exist at the state level. 2) Statewide Price. This bill as amended, makes it a misdemeanor to sell a consumer good at a price which exceeds the average statewide price by more than 10 percent for that commodity. What source or standard will prosecuting attorneys look to to determine the average statewide price? 3) Comparison to AB 36X (Katz). AB 36X (Katz) is scheduled for hearing š the same day that this bill will be heard. Both bills create a misdemeanor provision through the addition of section 396 to the Penal Code. The proposed misdemeanors contain different elements and definitions, yet are similar. AB 57X (Archie-Hudson) AB 36X (Katz) Home Solicitation Law N/A N/A Requires the registrar of contractors to immediately revoke the license of any contractor convicted of violating the above provisions. Misdemeanor to sell in any Misdemeanor upon the proclamation of a area that has been declared state of emergency declared by the a state or federal disaster President of the United States, the - continued - AB 57X Page 2 AB 57X area, any "consumer good" at Governor of California, or the executive a price which exceeds the officer of any county or city and for a average statewide price by period of 30 days following such more than 10 percent for declaration, it is unlawful for any that commodity. period of 30 days following such declaration, to sell any consumer food items, repair or reconstruction services, goods or services used for emergency šcleanup, emergency supplies, medical šsupplies, home heating oil, or gasoline or šother motor fuels for a price that exceeds šby more than 10% the price charged by that šperson for those goods or services šimmediately prior to the proclamation of šemergency, unless the person can prove that šan increase in price was directly šattributable to additional costs imposed on šit by the supplier of the goods, or for šlabor or materials used to provide the šservices, as specified. A violation would šalso be an unfair business practice and act šof unfair competition. Up to one year in the county Up to six months in the county jail jail and/or a fine up to and/or a fine up to $5,000. $10,000. 30 days upon declaration 30 days upon declaration 90 days upon declaration for 180 days upon declaration for a contractor repair or construction to sell or offer to sell any repair or services and transportation, reconstruction services, or any services freight, and storage services. used in emergency cleanup for a price that exceeds by more than 10 percent the price charged by that person for those services immediately prior to the proclamation of emergency, unless that person can prove that an increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, provided that in those situations where the increase in price is attributable to the increased costs imposed by the seller's supplier or additional costs of providing the service during the state of emergency, the price represents no more than 10 percent above the total of the cost to the - continued - AB 57X Page 3 AB 57X seller plus the markup customarily applied by the seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency. Provisions may be extended for additional 30 day periods by a local legislative body or the California Legislature as necessary. 4) Definitional Conflicts. AB 57X and AB 37X have the following conflicts in definitions: Emergency Supplies a) Archie Hudson. Include but are not limited to batteries, flashlights, candles, blankets, tape, toiletries, diapers, plywood, nails, and hammers. b) Katz. Include but are not limited to, water, flashlights, radios, batteries, candles, blankets, soaps, diapers and temporary shelters. Medical Supplies a) Archie Hudson. Include but are not limited to bandages, gauze, and antibacterial products. b) Katz. Include but are not limited to prescription and nonprescription medications, bandages, gauze, and isopropyl alcohol. Consumer Food Item a) Archie Hudson. Include but are not limited to articles used or intended for use for food, drink, confection or condiment by any person or animal. b) Katz. Any article that are used or intended for use for food, drink, confection or condiment by a person or anima. Repair or Construction Services Archie Hudson and Katz. Contain similar provision to mean services performed by a contractor, as the term is defined in Section 7026, 7026.1, or 7026.3 of the Business and Professions Code, to repair residential or commercial property of any type or character whatsoever that is damaged as a result of a disaster. Additional Definitions within Archie Hudson bill: - continued - AB 57X Page 4 AB 57X a) Consumer Good. Includes but are not limited to emergency supplies, medical supplies, consumer food items, gasoline, repair or construction services, transportation, freight and storage services, and housing. b) Gasoline. Any fuel that is used to power any motor vehicle or power tool. c) Transportation, Freight and Storage Services. Any service that is performed by any company that contracts to move, store or transport personal or business property or rents equipment for those purposes. d) Housing. Any rental housing based on a month-to-month lease or agreement. 5) Restoration Contractors. The Restoration Contractors of California (RCC) is the sponsor of that portion of AB 57X which amends the home solicitation law. The RCC is an association of contractors specializing in the restoration of homes damaged by fire and other disasters. AB 57X addresses the problem of contractors who solicit victims of fire and natural disasters immediately after their homes have been damaged or destroyed. In the case of fire, for instance, the solicitation often begins while the fire department is still on the scene, the contractor having been alerted by a service monitoring the fire and police bans. Homeowners having just experienced the trauma of partial or total destruction of their home and life possessions are often in such an emotional state-of-mind that they are vulnerable to being taken advantage of by unscrupulous contractors preying on their vulnerability. AB 57X stops this abuse. RCC believes that AB 57X does not impact the vast majority of reputable and legitimate licensed contractors, nor does it affect the homeowner who makes the initial contract with a contractor for repair of his damaged or destroyed home. AB 57X only addresses the issue of contractors who solicit victims of fire and other natural disasters at their home. The bill contains an exception of for emergency repairs. 6) Opposition. The Roofing Contractors Association of California opposes this bill because it is "concerned that the proposal's arbitrary standards may inadvertently affect both honest contractors and unscrupulous entrepreneurs. ... Disasters have a significant impact on the economy and the manner in which businesses operate. Setting a price ceiling based on a state average is an oversimplified attempt at regulation. After disasters, transportation systems are in disarray, materials are difficult to procure, and labor is scarce. All of these elements have an impact of the cost of providing goods and services. In light of these - continued - AB 57X Page 5 AB 57X factors, an arbitrary standard for price inflation will have a negative impact on honest contractors and could serve as a disincentive for businesses to attempt to service consumers and aid in rebuilding efforts." SOURCE: Author Restoration Contractors of California (Home Solicitation Contracts) SUPPORT: None on File OPPOSITION: Roofing Contractors Association of California - continued - AB 57X Page 6