By Jennifer Badeau, WPMCA Director of Regulatory Affairs
The Wisconsin Petroleum Marketers & Convenience Store Association (WPMCA) is pleased with its recent legal victory: The 7th Circuit Court of Appeals ruled that Wisconsin’s Unfair Sales Act is constitutional. The decision marks the 10th time an appellate court has ruled in favor of keeping the law in place.
Wisconsin’s Unfair Sales Act covers the sale of all products and is designed to prohibit the use of loss leaders to harm competition. In fact, the preamble of the law states “such practice causes commercial dislocations, misleads the consumer, works back against the farmer, directly burdens and obstructs commerce, and diverts business from dealers who maintain a fair price policy.” For the most commonly used loss leaders – alcohol, tobacco, and motor vehicle fuels – the law also requires a “markup to cover a proportional part of the cost of doing business.” This markup is basically 6% above invoice, and again, is designed simply to ensure that the product is not being sold below true costs.
Unfortunately, the law is commonly mislabeled as the Minimum Markup law, and commonly misunderstood as requiring a built-in profit for retailers. Opponents like Wal-mart and Flying J, claim it artificially inflates the cost of fuel in Wisconsin. The facts prove otherwise. Gas prices in Wisconsin track national trends and a quick look at the AAA fuel gauge report bares this out. Petroleum marketers rarely sell fuel at 6% above invoice. This is due to a crucial (but also misunderstood) component of the law which allows retailers to meet the price of a competitor, be that competitor across the street or across the state border where gas taxes are 5-to-10 cents less.
The value of the law, and fair marketing laws like it in other states, is that it allows retailers of all sizes to fairly compete – keeping them from being eliminated by the unfair use of loss leaders and other predatory pricing tactics. A study in the Journal of Urban Economics entitled, Do State Motor Fuel Sales-Below-Cost Laws Lower Prices?, demonstrates that not only do states with these laws enjoy lower gas prices but they also have a greater total number of gasoline outlets. In other words, the law provides for more competition which of course leads to lower prices.
Wisconsin’s population is a bit more than 5 ½ million people yet we have more than 2500 retail gas stations. None of our stations are owned by the major oil companies. Instead, the vast majority are owned by 1-to-5 store owner/operators who live in Wisconsin. With over 10,000 jobs in the state, our industry is one of the major employers in the economy. That’s the worth of Wisconsin’s Unfair Sales Act and the reason WPMCA has been its champion. The law has a beneficial (if imperceptible) effect on the price of gas – but a dramatic impact on who sells it and where those Wisconsin gas and salary dollars flow.
“The Unfair Sales Act protects all consumers by ensuring a competitive marketplace that leads to more jobs in local communities,” says Matt Hauser, President, WPMCA. “That is its greatest value – and at a time when local economies are struggling, we need to do all we can to keep these good jobs in local communities.”
“Time and time again, those who have opposed the Unfair Sales Act infer that eliminating the law will reduce gas prices,” continues Hauser. “The fact is that the price of gas will continue to rise and fall due to market forces. Wisconsin gas prices track national trends, and in many cases, often fall below national averages due to strong competition. We’ve found through the years that states with fair marketing laws in place often have lower gas prices than states that have repealed those protections.”
WPMCA represents more than 80 percent of the convenience stores in Wisconsin. Members are hopeful that those opposing this law will finally see the merits and move on to other issues that are hurting struggling independent businesses throughout the state.