Friday, July 20, 2007

Unfair sales 

There is a relic of the Depression era in Wisconsin, called the Wisconsin Unfair Sales Act. Passed in 1930 it put a minimum on prices for goods and services in the state; you can't sell below cost. There are specific provisions for gasoline, however, which says you have to sell your gas at a markup over wholesale cost that can be 9.18%. In 2003 the Federal Trade Commission offered an opinion that this law is harming consumers by keeping prices high.
Unlike federal antitrust law, the Act protects individual competitors, not competition, and discourages pro-competitive price cutting. In particular, the Act subjects vendors to civil liability - including treble damages and a substantial fine per violation - for cutting prices even if there is no likelihood of harm to competition, and even if the vendors have no intent to engage in anticompetitive conduct.
If you need much more proof that it's protecting competitors, look at a position paper of the Wisconsin Grocers Association. they argue that minimum prices are good for consumers, without any explanation for why.

The Institute for Justice is now seeking to help Raj Bhandari, who is being fined $2,500 per gallon of gas he sells below cost. IJ is arguing that retailers like Bhandari are being denied their due process rights in two ways, first by singling out a good for disparate treatment (namely, gas) and second by blocking people engaging in a common commercial practice.

Our friend David Strom from the Taxpayers League will have Lee McGrath and Bob McNamara on their show, Taxpayers League Live, at 10am tomorrow to discuss the case. I suggest you tune in. If you are in Wisconsin, write to your legislators and get them to repeal this law. It would be a good example for us in Minnesota to follow, where there is also a minimum gas price law.

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