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Government of the Virgin Islands of the United States of America Department of Licensing and Consumer Affairs www.dlca.vi.gov H. Nathalie Hodge Commissioner Testimony Before the 36th Legislature of the Virgin Islands Understanding the Cost of Living in the Virgin Islands (Consumer Goods) Hon. Milton E. Potter, Senate President Committee of the Whole March 3, 2025 Serving Businesses & Assisting, Educating and Protecting Consumers” Golden Rock Shopping Center 3000 Estate Golden Rock, Suite 9 St. Croix, VI 00820-4311 Telephone: 340.713.3522 Administrative Complex “The Battery” St. John, VI 00830 Telephone: 340.727.3303 Property & Procurement Building 8201 Subbase, Suite 1 St. Thomas, VI 00802-5826 Telephone: 340.714.3522 Testimony before Committee of the Whole Understanding the Cost of Living in the Virgin Islands (Consumer Goods) March 3, 2025 2 Good Morning, Honorable Senate President Potter, Distinguished Members of the 1 36th Legislature, and the Listening and Viewing Audience. I am Commissioner H. Nathalie 2 Hodge. Today, I am joined by Assistant Commissioner Horace Graham, General Counsel, 3 Geraldine P. Vaval, and Wilbur Francis, Director of Enforcement. Thank you for the 4 opportunity given to provide testimony on behalf of the Department of Licensing and 5 Consumer Affairs (DLCA) regarding consumer goods pricing and the broader economic 6 pressures affecting the cost of living in the Virgin Islands. 7 As the agency responsible for consumer protection and business regulation, DLCA 8 plays a critical role in ensuring market transparency, conveying price trends, and enforcing 9 laws that safeguard residents against unfair pricing and deceptive trade practices. Today, I 10 will present key insights into the pricing of consumer goods, DLCA’s current market 11 efforts, and policy considerations aimed at enhancing affordability and economic stability 12 for Virgin Islanders. 13 14 Enforcement of Consumer Protection Laws 15 The DLCA enforces a variety of laws aimed at safeguarding consumer rights. These 16 include, but are not limited to: 17 1. The Consumer Protection Law. The Consumer Protection Law serves as a 18 safeguard against unfair and deceptive trade practices that could mislead or harm 19 consumers. It establishes guidelines to ensure businesses operate with transparency 20 and integrity, preventing fraudulent claims, false advertising, and 21 misrepresentations about products or services. Through enforcement actions, 22 consumer education, and legal interventions, the DLCA actively identifies and 23 addresses violations. By holding businesses accountable for deceptive practices, 24 Testimony before Committee of the Whole Understanding the Cost of Living in the Virgin Islands (Consumer Goods) March 3, 2025 3 this law fosters a fair marketplace where consumers can make informed purchasing 25 decisions with confidence. 26 2. The Price Control Act. The Price Control Act is a critical regulation designed to 27 prevent price gouging, particularly during emergencies such as hurricanes. It grants 28 the DLCA the authority to monitor and regulate the prices of essential goods and 29 services, ensuring that businesses do not exploit consumers by imposing unjustified 30 price increases during times of crisis. This Act covers necessities such as food, fuel, 31 medical supplies, and building materials, and protecting residents from financial 32 exploitation when access to essential products becomes limited. By enforcing price 33 controls and conducting market surveillance, the DLCA upholds economic stability 34 and consumer protection during vulnerable periods. 35 3. Monitoring of Unfair Trade Practices. The Unfair Trade Practices under the 36 Consumer Protection Law of 1973 is designed to protect consumers from fraudulent 37 activities, misrepresentation, and contracts that impose unreasonable burdens. This 38 law prohibits deceptive marketing tactics, hidden fees, and unfair terms that 39 businesses may use to take advantage of customers. The DLCA plays a vital role in 40 enforcing these regulations by investigating consumer complaints, by taking action 41 against violators, and by promoting fair competition. Ensuring that businesses 42 operate with integrity, this Act helps maintain consumer trust and prevents financial 43 harm caused by unethical business practices. Despite the lack of manpower, this is 44 completed through the dedication and tireless efforts of our small, but experienced, 45 consumer protection Team lead by the DLCA’s Chief Consumer Compliance 46 Officer along with and three Consumer Protection Officers. 47 Testimony before Committee of the Whole Understanding the Cost of Living in the Virgin Islands (Consumer Goods) March 3, 2025 4 4. Truth in Pricing Rules and Regulations. The Truth in Pricing Rules and 48 Regulations mandates that businesses provide transparent pricing and uphold their 49 advertised promotions. This regulation ensures that consumers are not misled by 50 hidden costs, unclear labelling, or false advertising. Retailers must display accurate 51 prices on shelves, menus, and promotional materials, allowing consumers to make 52 informed purchasing decisions. The DLCA enforces compliance by conducting 53 inspections, reviewing advertisements, and addressing consumer complaints 54 regarding deceptive pricing practices. This law is essential in promoting honesty in 55 commerce and preventing misleading sales tactics. For instances when businesses 56 may be open after our compliance officer's shifts end, we rely on reporting from the 57 public to receive and investigate these alleged violations. Though it may be 58 challenging, we have always found a way to protect the consumer despite our 59 limited resources. 60 Through routine oversight—including weekly random inspections, three- 61 month follow-ups, annual inspections, and investigations prompted by consumer 62 complaints—along with general compliance audits and targeted operations, the 63 DLCA’s Division of Consumer Affairs actively monitors the marketplace to detect 64 and deter violations of consumer protection laws. These enforcement actions help 65 identify businesses engaged in fraudulent practices, price manipulation, or non- 66 compliance with regulatory standards. Regular oversight ensures that businesses 67 adhere to fair trade principles, fostering a competitive and ethical economic 68 environment. 69 Additionally, the DLCA publishes a monthly Shopping Basket report, 70 which provides real-time price comparisons for common consumer goods at 71 Testimony before Committee of the Whole Understanding the Cost of Living in the Virgin Islands (Consumer Goods) March 3, 2025 5 various retail locations. While this tool enhances market transparency, it is not 72 intended as a formal economic analysis of inflation trends. For long-term price 73 trend data, consumers and policymakers should refer to the Bureau of Economic 74 Research (BER), which conducts in-depth cost-of-living analyses. 75 76 Clarifying DLCA’s Role in Price Monitoring 77 There is often confusion regarding the DLCA’s responsibilities in tracking 78 consumer prices. While the DLCA publishes a monthly "Shopping Basket" report to 79 provide a snapshot of current prices for selected goods, this should not be mistaken for a 80 "Market Basket Survey" used for long-term economic analysis. The Shopping Basket 81 offers real-time pricing insights, but it is not designed for tracking trends over months or 82 years. Consumers looking for comprehensive cost-of-living data should refer to the Bureau 83 of Economic Research (BER), which conducts formal economic assessments. 84 The purpose of the DLCA’s Shopping Basket is to provide transparency in pricing 85 and to inform consumers of the cost of everyday essential goods at various retailers. The 86 items included in the Shopping Basket, however, are rotated and changed regularly, which 87 means that the data collected does not allow for direct price comparison across different 88 time periods. This flexibility in selection is intentional, as it enables the DLCA to highlight 89 a diverse range of consumer goods and ensure that pricing information remains relevant to 90 current market conditions. 91 For those seeking Consumer Price Index (CPI) information or a formal Market 92 Basket Survey that tracks economic trends over time, the BER is the designated agency 93 responsible for compiling such data. The BER conducts structured analyses that account 94 for inflation, cost-of-living changes, and other economic indicators that impact the 95 Testimony before Committee of the Whole Understanding the Cost of Living in the Virgin Islands (Consumer Goods) March 3, 2025 6 financial well-being of consumers in the Virgin Islands. These reports provide an official 96 measurement of economic trends and are the appropriate resource for individuals or 97 organizations interested in understanding long-term pricing fluctuations. 98 It is crucial for consumers and businesses alike to understand the distinction 99 between the DLCA’s Shopping Basket and the BER’s Market Basket Survey. While the 100 DLCA remains committed to consumer advocacy and price transparency, its role does not 101 extend to producing long-term economic data or CPI reports. Misinterpretation of the 102 DLCA’s Shopping Basket as an economic indicator can lead to misunderstandings about 103 price trends and market stability. For precise statistical analysis and comprehensive price 104 comparisons, the BER’s data should be referenced. 105 The DLCA remains committed to its mission of ensuring fair business practices, 106 consumer protection, and pricing transparency. However, its functions are clearly defined, 107 and inquiries or concerns that fall outside its jurisdiction, such as fraud investigations and 108 long-term economic analysis, are redirected to the appropriate agencies. Consumers 109 requiring assistance in these areas are strongly encouraged to contact the relevant 110 authorities for accurate information and proper resolution. 111 While the DLCA may not always have the exact answer, some complaints require 112 detailed analysis and legal guidance to determine the most appropriate agency. In these 113 cases, we leverage our training, experience, and strong working relationships with 114 regulatory partners in the Government of the Virgin Islands (GVI) to provide general 115 guidance or direct consumers to a specific contact within a partner agency for the most 116 effective application of the law. 117 118 119 Testimony before Committee of the Whole Understanding the Cost of Living in the Virgin Islands (Consumer Goods) March 3, 2025 7 Consumer Goods 120 The cost of consumer goods in the Virgin Islands remains a significant economic 121 concern, particularly for food prices, which are among the highest in the region. A 2017 122 study analyzing food prices in the territory identified key cost drivers, including high 123 energy expenses, transportation fees, and reliance on imports. While these factors remain 124 relevant, evolving economic conditions, market shifts, and policy changes continue to 125 influence pricing trends. To gain a more comprehensive and up-to-date understanding, I 126 believe an ongoing Cost of Living Study will provide crucial insights to guide future policy 127 decisions. To this end, the DLCA has been engaged in ongoing discussions with the 128 Analysis Group, the international economics consulting firm that conducted the 2017 129 study, to explore methodologies, data collection strategies, and key economic indicators 130 that will ensure an accurate and meaningful cost-of-living assessment that addresses the 131 challenges faced today. This study will help shape policies aimed at improving 132 affordability and economic stability regarding the cost of consumer goods in the U.S. 133 Virgin Islands. 134 135 Challenges Impacting Consumer Goods Pricing 136 Several economic pressures directly impact the affordability of goods in the 137 territory: 138 1. Freight & Supply Chain Costs 139 The high cost of shipping and import duties significantly affects retail prices. Most 140 goods are imported, and freight surcharges from mainland suppliers continue to drive up 141 costs. The DLCA is collaborating with stakeholders to assess freight cost adjustments and 142 their pass-through impact on consumer pricing. Because this requires buy-in and support 143 Testimony before Committee of the Whole Understanding the Cost of Living in the Virgin Islands (Consumer Goods) March 3, 2025 8 from the industry stakeholders there is no firm timeline for implementation, talks continue, 144 and we are hopeful that our efforts will result in tangible benefits for the consumers in this 145 Territory. 146 2. Retail Markups & Competitive Constraints 147 The high cost of consumer goods in the Virgin Islands is largely due to limited 148 wholesale competition, leading to higher retail markups. With few wholesale suppliers, 149 retailers have limited options, resulting in reduced competition and higher prices. This is 150 further worsened by high import costs, logistical challenges, energy expenses, and 151 regulatory barriers. 152 To address these issues, the DLCA promotes supplier diversification and increased 153 market competition. This includes streamlining business licensing to attract new 154 wholesalers and encouraging support for local agriculture, through expedited licensing 155 services. To ensure the amount of product being sold is accurate, on-site scale compliance 156 checks are facilitated by the DLCA’s Weights and Measures Inspectors for the purposes of 157 protecting both consumers and businesses. Additionally, the DLCA enhances price 158 transparency through retail price comparison reports which are designed to strengthen 159 consumer education efforts. Understanding the impact of high energy and operating costs, 160 the DLCA also supports initiatives that provide energy-efficient solutions and regularly 161 shares information on financial incentives to help businesses lower expenses. 162 3. Inflation & External Market Factors 163 The effects of global inflation, supply chain disruptions, and fuel price volatility 164 have contributed to sustained price increases in key consumer categories. To mitigate these 165 impacts, the DLCA continues consumer education efforts to help residents make informed 166 purchasing decisions. 167 Testimony before Committee of the Whole Understanding the Cost of Living in the Virgin Islands (Consumer Goods) March 3, 2025 9 4. Utilities 168 The high cost of utilities, particularly from the Virgin Islands Water and Power 169 Authority, significantly impacts consumer goods pricing by increasing operating, 170 transportation, and storage costs for businesses. Retailers pass these expenses to 171 consumers, driving up prices on essential goods. Supply chain disruptions and inflationary 172 pressures further strain affordability, while small businesses struggle to stay afloat, 173 sometimes reducing services or raising prices. Additionally, high utility bills reduce 174 consumers’ disposable income, limiting purchasing power and exacerbating economic 175 strain. 176 177 Policy Recommendations & Legislative Considerations 178 To address cost-of-living challenges and ensure consumer protection, the DLCA 179 proposes the following considerations: 180 Expanding Price Monitoring & Reporting by establishing a more comprehensive 181 Consumer Price Monitoring Dashboard in collaboration with the BER, providing 182 consistent long-term tracking of pricing trends. 183 Encouraging Market Competition & Local Production by supporting policies that 184 reduce barriers to entry for new businesses and promote local food production to decrease 185 dependency on costly imports. 186 187 Conclusion and Legislative Considerations 188 I want to thank you for the opportunity to testify on this very important topic. I 189 would like to close with the following: We understand that effective consumer protection 190 is a shared responsibility, not only with the Legislature and the executive branches of 191 Testimony before Committee of the Whole Understanding the Cost of Living in the Virgin Islands (Consumer Goods) March 3, 2025 10 government, but with every individual consumer throughout the Territory. Whether you 192 reside here or are in the Territory for business or leisure, we all share in the responsibility 193 of understanding our rights as consumers and for reporting any activity that you feel may 194 be in violation of the laws of the U.S. Virgin Islands. The DLCA remains committed to 195 working alongside the Legislature to strengthen existing laws and enhance enforcement 196 mechanisms. As we look ahead, we welcome discussions on improving consumer 197 protection policies and increasing funding for enforcement initiatives. To achieve this, we 198 will actively explore federal funding opportunities while leveraging technology to 199 streamline complaint processing and market monitoring. 200 We appreciate the support of Governor Albert Bryan Jr., the Bryan/Roach 201 Administration and the 36th Legislature in these efforts and stand ready to provide any 202 additional information necessary to advance consumer rights in the U.S. Virgin Islands. 203 Thank you for the opportunity to testify before the Committee of the Whole today. We are 204 happy to answer any questions you may have. 205