Views on News • February 13th, 2009

Minimum markup runs out of gas

by Chris Lato

For now, at least, Wisconsin’s archaic minimum markup law is down for the count. The Depression era law, which requires gas stations to markup the wholesale price of gas, was seen as a way to prevent some (read: larger) gas station chains from slashing their prices to drive others out of business, then hiking prices back up.

In reality, the minimum markup is anti-competition and deserves to die, especially at a time when the economy is hurting. Granted, the price savings wouldn’t be huge (estimated at up to 8 cents a gallon) but there will be an impact.

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Branding Politix, Research & Ideas • July 24th, 2008

Minimum markup madness

by Chris Lato

I stopped for gas yesterday and was downright elated to be filling my tank at a paltry $3.93 a gallon. Boy, times change. News that oil prices are dropping a bit causes us to all breathe a sigh of relief. Now, we’re learning the truth about an arcane practice that artificially heightens the cost of gas in Wisconsin (no, not the gas tax). It is intended to keep ‘predatory pricing’ from driving smaller competitors out of business.

Christian Schneider with the Wisconsin Policy Research Institute debunks the myths surrounding the continued need for a minimum markup on gas in Wisconsin. The bottom line: drivers could be saving a lot of dough in this time of sky-high gas prices by doing away with the minimum markup (hereafter referred to as MM) in Wisconsin.

Credit the Petroleum Marketers in Wisconsin for effectively lobbying against repeal of the MM for so long now. Politicians in both parties have been hammering away at the MM for ages, without success. The idea that mega-sized gas stations would drive the little guy out of business has been a truly powerful PR incentive to keep the MM in place. The notion that corporate giants would sweep in and drive ‘mom and pop’ shops out of small-town Wisconsin has been the strongest case that could be made. It’s a potent hook that still resonates for some.

Trouble is, Schneider points out it’s not necessarily a relevant argument, or even true anymore. Remember, the MM is based on a Depression-era model. The MM is really little more than a form of profit protection for gas stations and interferes with free market forces. That profit goes up as wholesale fuel prices rise, according to Schneider. The MM is so high now that it threatens to eclipse the gas tax.

If government was in the business of protecting the ‘little guy’ then McDonalds, Walgreens, Culver’s and Wal-Mart would be out of business. Like it or not, shoppers choose to go where they can save money, especially in economically challenging times.

As a young(er) reporter, I was covering anti-MM news conferences back in the mid-1990s. That’s how long this issue has been kicking around. Back then, Republican Scott Jensen joined Democrat Shirley Krug (truly an historic and rare pairing) to call for an end to the MM by holding a press briefing outside a Madison gas station. I recall Petroleum Marketers officials on hand as the loyal opposition. To be fair, here’s where they stand on the issue.

But now is the time when repealing the MM could really make a positive difference. For once it could be a bipartisan victory on behalf of Wisconsin consumers to see at least a modification of the minimum markup law, if not an outright repeal - which in the current climate seems to be the better option. Talk about a great issue for politicians to take back to constituents this fall – it hits the sweet spot for struggling families and shows that both sides can work together for the common good.

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