Investor's Business Daily, May 10th, 2007
Price-Fixing: A Wisconsin station owner sells gasoline at a discount to senior citizens. And what does he get in return? A commendation from the city council? No, he's told that he's in violation of the law.
Raj Bhandari has been allowing senior citizens a 2-cent discount on each gallon of gasoline they buy from him, and customers who support a local youth hockey program have been getting a 3-cent-a-gallon cut. About 10% of his clientele were taking advantage of the cost-saving promotion. But no more.
Bhandari has been told by state authorities to raise prices at his Merrill, Wis., BP station. The state auditor told Bhandari in a letter that if he didn't cease offering the discounts, the state would sue. He could even be fined for each gallon he sold at a discount.
We can only imagine how severe the punishment would be if he had given the gas away.
Bhandari unwittingly ran afoul of something called Wisconsin's "Unfair Sales Act," which requires retailers to sell gas at prices roughly 9.2% higher than the wholesale price.
What business does the state have in fixing prices? If a retailer can't determine prices without government interference, then freedom is a fantasy. Lawmakers have no authority to capriciously restrict a tested and thriving system in which all actors voluntarily participate and prices are set by freely conducted commerce.
Of course, if any businesses were found to be setting prices, the government would come down hard. Look at how Congress keeps probing prices charged at the pump, hoping to find any shred of collusion that would justify action against oil companies.
By setting a floor and ceiling on retail gasoline prices, Wisconsin doesn't merely distort competition, the mechanism that drives prices lower for consumers, it kills it.
The state's absurd law also skews supply and demand. Retailers in high-traffic areas who can't raise prices beyond an arbitrary point 15uld see their supply drained; retailers in a low-traffic areas are likely to be stuck with a surplus if they can't lower prices to meet the market.
A local newspaper reported that one customer who figured he would save $100 a year because he supported the hockey program has asked a state lawmaker to consider seeking a change in the law. He wants locally owned stations to be free to offer discounts when it benefits schools.
Nice thought, but it fails to address the core issue. Better to change the law so any station can sell gas at market prices. It's the only way we have of knowing the right price of anything.
