In Support of Lower Pump Prices

Millions of Wisconsinites fill their gas tanks each day, blissfully unaware that the cost per gallon they pay is artificially inflated by state law. The Unfair Sales Act, a legislative artifact of the Depression Era, requires state retailers to charge customers 9.18% more for gasoline than the business pays for it. The goal of the “minimum mark-up law,” as it is better known, is to protect smaller retail outlets from being forced out of the market by chain operators that can low ball them on price.

The Wisconsin Institute for Law and Liberty released a study this week that shows the law no longer does that (if it ever did). WILL’s study compares Wisconsin’s retail gasoline market with markets in other states without minimum mark-up. The finding: the markets look about the same, with or without minimum mark-up. All the law really does is mandate a higher than market profit of margin and protects petroleum marketers from competitors undercutting them on prices at the pump. While WILL’s review is thorough, a very compelling case comes from someone in the gas war trenches.

Krist Atanasoff owns 37 gas stations in Wisconsin and 36 stations in Michigan. The price he pays for his product comes from the same wholesaler, so the cost is identical in both states. Michigan has a higher gas tax than Wisconsin yet Krist is charging more for fuel in the Badger State. Why? The minimum mark-up law.

“Trust me, I’d like to offer lower prices to my Wisconsin customer, but a dumb state law forbids it,” Atanasoff said in a recent email. “I’d like to compete with my peers, not only on cleanliness and service, but on price. But I can’t”

Atanasoff is a big supporter of the Assembly Transportation Reform plan, “The Road to a Flat Tax.” It wouldn’t eliminate the minimum mark-up law but would reduce it to three percent. He calls the proposed drop significant. “(This) will absolutely, positively lower the price Wisconsin residents pay for gas.”

The problem is many of Atanasoff’s competitors want the law to stay in place. A mandated profit margin means petroleum marketers don’t have to worry about the station down the street beating them on price. Atanasoff believes the price per gallon should be something he negotiates with his customers. “I don’t want the crony capitalist protections so many in our industry want. I just want to compete, without government favor.” And Atanasoff points out that the extra money you pay for gas buys you nothing.

“None of the money you pay at the pump right now because of minimum mark-up goes to pay for the construction and upkeep of roads. It is merely a government-mandated guaranteed profit margin for one industry. I don’t want any favors in state law; I want to sell gas at a price agreed upon between the customer and me. Unfortunately, your tax money, instead of fixing our roads, or lowering Wisconsin’s high tax burden, is instead being used against me in legal action because I want to sell gas cheaper than what the state allows.”

 

In fact, Atanasoff uses the law as an offensive weapon, filing complaints against his competitors. In 2014, Krist Oil filed 70% of the complaints the state received related to the minimum mark-up law. Why does Atanasoff utilize a law he despises?

The answer is twofold: Filing a complaint against a competitor and a Notice of Meeting Competition form not only allows him to match that retailer’s price, it also protects him against any retaliatory legal action. “At the advice of my attorney, I protect myself from my competitors by filing a complaint and a meeting-competition form, which allows me to match competitors’ prices” even if they’re below the minimum markup, he explains. “If I drop my price to match a competitor and don’t file those forms, competitors can say I’m cutting prices (below the minimum markup level), and they can sue me. I’m very, very careful about conforming to the law.” As an example, Atanasoff cites an instance in which a bigbox retailer was selling gas in Wausau for $3.22 per gallon, while surrounding competitors were selling at $3.28 — even though the minimum markup price that day was $3.30. So he electronically filed a complaint and a meeting-competition form with DATCP, which allowed him to match the $3.22 price while providing immunity against competitors’ claims of violating the law.

And Krist last year sued the state over the law. Now he is challenging Republican lawmakers to back State Representative Dale Kooyenga’s efforts to reduce the minimum mark-up on gasoline to 3%. “Dale Kooyenga should be applauded for standing up to very powerful, deep-pocketed business interests and their army of lobbyists. I hope he is successful. Wisconsin can have a more solvent transportation fund, better roads, free markets and lower gas prices. It will just take politicians siding with taxpayers, over special interests. A lot of Republicans say they are for a free market, better roads and lower taxes. Kooyenga is giving them an opportunity to prove it.”