Wisconsin Regulators: "Hi. I'm from the government and I'm here to help raise your gas prices."

Ronald Bailey | May 9, 2007

Just try lowering gasoline prices in Wisconsin. The Associated Press reports:

A service station that offered discounted gas to senior citizens and people supporting youth sports has been ordered by the state to raise its prices.

Center City BP owner Raj Bhandari has been offering senior citizens a 2 cent per gallon price break and discount cards that let sports boosters pay 3 cents less per gallon.

But the state Department of Agriculture, Trade and Consumer Protection says those deals violate Wisconsin's Unfair Sales Act, which requires stations to sell gas for about 9.2 percent more than the wholesale price.

Bhandari said he received a letter from the state auditor last month saying the state would sue him if he did not raise his prices. The state could penalize him for each discounted gallon he sold, with the fine determined by a judge.

Whole AP story here.  

Kudos to frequent H&R commenter highnumber for the link.

Comments

|5.9.07 @ 12:57PM|#

Note to self: Do not move to Wisconsin.

Chris Monnier|5.9.07 @ 1:01PM|#

> Note to self: Do not move to Wisconsin.

Minnesota has a similar law, as I'm sure do many states...thank God for entrenched corporate interest protectionism consumer protection!

|5.9.07 @ 1:12PM|#

At least they aren't forced to sell ethanol.

highnumber, you should've credited Das Urkobold. Tsk, tsk.

highnumber|5.9.07 @ 1:20PM|#

Hey, that was all me, ProGLib!

Let me have my kudos.

|5.9.07 @ 1:33PM|#

What right does Wisconsin have to tell someone what they can sell their products for?
They don't, via the first amendment and Article V of the US Constitution.
It looks like another case for the Libertarian militia.

|5.9.07 @ 1:47PM|#

highnumber,

You may have one kudo. We must save the others to whack people across the face that point out that kudos is singular.*

* I take that position myself, but, apparently, some dictionary renegades have given "kudo" back-formation status. I don't hold with that.

|5.9.07 @ 1:49PM|#

And that's not the worst thing about Wisconsin. Hard liquor sales are not allowed after 9pm. The fascist police-state luvin governor vetoed concealed carry. It's touching Illinois. 3 day out of state fishing licenses cost about a million dollars - fuck it, just poach. All the cows emitting their greenhouse gas all over the place. The hippies in Madison smell. Mosquitoes. Need I go on?

The Eric Dolphy Memorial Barbe|5.9.07 @ 1:49PM|#

criminally cheap gasoline=institutionalized collusion

highnumber|5.9.07 @ 1:54PM|#

bigbigslacker,

No need to go on on my account. I live in Illinois.

|5.9.07 @ 1:55PM|#

Many (maybe most?) states have this type of law. These laws are meant to prevent price wars of attrition that are intended to drive out competition and they mandate that the retail price not be below some multiplier of the wholesale price.

The situtaion they are trying to prevent is Deep Pockets Quick Stop from putting Lil' Cheddar Gas'n'Such out of business with a price war that Lil' Cheddar can't sustain.

|5.9.07 @ 1:59PM|#

Have we heard anything about this from Ed Thompson (yet another Thompson who ought to run for President -- and from Wisconson, too, like brother Tommy)?

|5.9.07 @ 2:03PM|#

That AP story seems like a rewrite of this one from the Wausau Daily Herald.

This stupid law has been used to prop up gas prices in WI since 1939. When the governor wants to ignore it he can, of course.

Kevin

Robert|5.9.07 @ 2:07PM|#

9.2%?! What kind of markup is that? In what other business is the markup that low? And gasoline has to be meter-pumped and is flammable. What is it, a leader for the service business?

|5.9.07 @ 2:10PM|#

The situtaion they are trying to prevent is Deep Pockets Quick Stop from putting Lil' Cheddar Gas'n'Such out of business with a price war that Lil' Cheddar can't sustain.

They found a solution to that problem here in Maryland, The Free State, just outlaw company owned gas stations! Mom and pops as far as the eye can see.

Oh, but you still can't sell cheap gas. That'll get you 'Da Hammer!

|5.9.07 @ 2:13PM|#

9.2%?! What kind of markup is that? In what other business is the markup that low? And gasoline has to be meter-pumped and is flammable.

Gas stations turn most of their profit on all the other stuff they sell in the conveniece store. Just like new car dealers turn most of their profit on their service centers, not the sale of new cars. And just like movie theaters turn most of their profit at the candy counter.

Many businesses are based on the sale of a loss-leader.

|5.9.07 @ 2:54PM|#

"The situtaion they are trying to prevent is Deep Pockets Quick Stop from putting Lil' Cheddar Gas'n'Such out of business with a price war that Lil' Cheddar can't sustain."

So are there no Wal-Marts in WI? What a bunch of backwood billhillys.

|5.9.07 @ 2:58PM|#

Deep Pockets Quick Stop is Wall-Mart in a pantsuit.

Ted B. (Charging Rhino)|5.9.07 @ 3:01PM|#

Nine-point-two percent? A friend with a station in a competive stretch of road near me says he's barely able to get ten-cents over wholesale...that's about 4%. When a price-war starts, he sometimes has to go to five-cents; thank god for the attached towing business and his service bays.

One of the big convenience store chains here recently added pumps, and sells regular for one-cent over wholesale...they just suck you into the lot...then you buy coffee, a dounut, sandwiches and the usual milk and bread.

|5.9.07 @ 3:28PM|#

...which requires stations to sell gas for about 9.2 percent more than the wholesale price.

I'm more fixated on the "about" than the "9.2 percent." That's the sort of weasel word that allows for too much mischief, to me.

[Ugly math follows]:

Assume $2.75 wholesale. A 9.2% mark-up gives us $3 a gallon. Deduct 2 cents (because even the smaller rebate was a no-no), and we're down to an 8.4% markup.

So, this guy is in trouble for reducing his price by 0.8 percentage points. Of course, I totally guessed at the wholesale price.

|5.9.07 @ 3:29PM|#

Er, "reducing his markup".

|5.9.07 @ 3:30PM|#

"Independent service station owners pressed lawmakers for the measure as a way to protect themselves from big retailers selling gas below cost to drive them out of business and limit competition."

Ah, yes, economic protectionism. One of the last great remaining virtues of this once-glorious nation.

|5.9.07 @ 4:26PM|#

The issue is not the price of the gas. But if it's legal to charge some people less than other's.

|5.9.07 @ 4:27PM|#

Other's? make that others.

LarryA|5.9.07 @ 4:41PM|#

The issue is not the price of the gas. But if it's legal to charge some people less than others.

What? You've never heard of AARP? Of course seniors should have their discounts!

|5.9.07 @ 4:58PM|#

"""But the state Department of Agriculture, Trade and Consumer Protection says those deals violate Wisconsin's Unfair Sales Act, which requires stations to sell gas for about 9.2 percent more than the wholesale price."""

I think the Unfair Sales Act would prevent AARP members from a "seinor" discount. I'm not saying I agree with it or not. But the law is the law. If you don't like it, try to change it, deal with it, or leave.

|5.9.07 @ 5:33PM|#

TrickyVic, you forgot one option for when you don't like a law: Break it.

|5.9.07 @ 6:35PM|#

Geez, I thought NYS was bad. Here the state merely forbids gas stations to sell below wholesale.

The situtaion they are trying to prevent is Deep Pockets Quick Stop from putting Lil' Cheddar Gas'n'Such out of business with a price war that Lil' Cheddar can't sustain.

Ah, the predatory pricing myth. Deep Pockets better have very deep pockets; if they're stealing all of Lil' Cheddar's customers, they're going to do a lot of volume at that low price, losing a ton of money in the process. Then, when Lil' Cheddar finally folds, they're going to have to jack up their prices to make up for all the money they just lost, which will encourage somebody else to re-open the old Lil' Cheddar down the street and sell it for a non-jacked-up price.

And that's assuming there aren't any other deep-pocketed gas stations around, which will make the whole scenario impossible anyway.

|5.9.07 @ 6:39PM|#

As for the contention that gas stations with convenience stores "lure" customers away from plain gas stations, no duh. Obviously those customers want what the convenience stores have to offer, since they're buying stuff there. If the mom-and-pops aren't able or willing to give customers what they want, then they shouldn't be in business. I'm sure they can get a job as greeters at the local Wal-Mart.

|5.9.07 @ 7:11PM|#

"""TrickyVic, you forgot one option for when you don't like a law: Break it.""""

Sure if you want to pay the price. Don't complain when you're going to jail. But, you're right, it is an option.

Robert|5.10.07 @ 1:42PM|#

"Nine-point-two percent? A friend with a station in a competive stretch of road near me says he's barely able to get ten-cents over wholesale...that's about 4%. When a price-war starts, he sometimes has to go to five-cents; thank god for the attached towing business and his service bays."

I could understand if it were a big ticket item, like the diamond business, where the margins are notoriously low. But even at today's prices, gas & oil are like groceries.

"One of the big convenience store chains here recently added pumps, and sells regular for one-cent over wholesale...they just suck you into the lot...then you buy coffee, a dounut, sandwiches and the usual milk and bread."

But there've long been a few stations that sold nothing but gas & oil -- no doughnuts, just a Coke machine -- and had no service bays. Or they had a garage, but couldn't keep it staffed much of the time. How'd they make out? With insurance and the often expensive real estate they took up?

|5.18.07 @ 10:28AM|#

You are not proposing that they deregulate gas prices are you, because we all know that just leads to corruption and harms the consumer.

(Unfortunately, there are several people in Madison, WI that actually believe that.)