Curmudgeon's Corner

cur-mud-geon: anyone who hates hypocrisy and pretense and has the temerity to say so; anyone with the habit of pointing out unpleasant facts in an engaging and humorous manner

Minimum Mark-Up? That Helps Us How?

Economy, Germantown, Political, Wisconsin

You have probably heard all about the 'minimum mark-up law' that prevails in Wisconsin.  You' ve learned that Wal-Mart publishes a different 'Black Friday' flyer with higher prices for use in Wisconsin than in neighboring states.  And on and on and on.

What you and I refer to as the 'minimum mark-up law' is actually known as the 'Unfair Sales Act'.  It is, in fact, unfair to you and me; but it is more than fair to those whom it 'protects'!  Two very brave lawmakers are trying to get this unfair law changed once and for all.  Why do I call them brave? Because the people who want to keep this unfair law in place make lots more money with the law than without the law.  That means they are going to do everything in their power to keep this from happening.  That means things will get downright nasty for those who support the change.  Among the groups wanting to maintain the status quo will be the liquor and malt beverage wholesalers, and the major gas station chains and operators along with the fuel wholesalers.  It isn't often that profits are guaranteed by law.

Who are the legislators who've decided to take another shot at this modern version of 'Christians vs. lions'?  Rep. Leah Vukmir (R-Wauwatosa) and Rep. Bill Kramer (R-Waukesha).  (I am a huge Leah Vukmir fan, in case I've not mentioned that before!)  They are now out trolling for more co-sponsors to sign on for this challenge.  Typically, the more co-sponsors from both parties that sign on, the better the chances of passage become.  When there are big money groups trying to prevent some change, those special interests are able to bring tremendous pressures to bear. 

A case in point is Tom Reynolds, a FORMER Assemblyman, who took on the road builders over the state's then automatic annual gas tax increase.  He won the uphill battle...and then he lost his seat in the Assembly.  The road builders get a lot of money through highway projects year-in and year-out.  Those projects are funded by gas taxes.  The road builders have long memories.  The old tune tells us not to "spit into the wind or tug on Superman's cape".  Tom Reynolds did both and paid the price. 

Just what is involved with this whole situation?  First, the law as currently in place forbids general merchandise from being sold below cost by either wholesalers or retailers.  Alcohol and tobacco products must include at least a 3% mark-up by wholesalers and at least a 6% mark-up by retailers.  If the wholesaler is also the retailer, then the minimum required mark-up is 9.18%.  Motor vehicle fuel (gas and diesel) cannot be sold at less than cost, and retail seller's cost is defined as including a 9.18% mark-up over the posted "terminal price".

Exceptions to this law are made to allow for matching a competitor's price, clearance and final liquidation sales, sales of damaged goods and perishable merchandise and for merchandise sold to charitable or relief agencies.

The Federal Trade Commission (FTC) in its response to a member of the Assembly in October, 2003 made these statements about our current law...

  • Does the law harm consumers by significantly raising prices to consumers?  "Most likely yes."
  • Does the current Wisconsin law duplicate existing protections against 'predatory pricing' found in federal anti-trust law?  "The act does more than duplicate these protections; it exceeds them in ways that do not benefit consumers."
  • Does the current Wisconsin law discourage or encourage competitive pricing?  "Current Wisconsin law discourages competitive pricing."  "The Act focuses on harm to competitors rather than harm to competition."
  • Are there any scholarly studies or court decisions in recent years that address the effect of "below-cost" pricing in relation to the creation of monopolies?  "Yes.  Consumers are harmed by "below-cost" pricing only if, because of low prices, a dominant competitor is able later to raise prices to supracompetitive levels.  Economic studies, legal studies, and court decisions indicate that below-cost pricing that leads to monopoly occurs infrequently.  Below-cost sales of motor vehicle fuel that lead to monopoly are especially unlikely." 

Will there be some businesses that close their doors if this Act is repealed and replaced as the two legislators are proposing?  It is likely that some of that will occur.  The vast majority of motor fuel merchants are already part of major chains, so the impact to that marketplace will be minimal other than for decreasing profits that flow from the law.  Small businesses have already adjusted in major part to the threat of the Wal-Marts and Targets and Sam's Clubs and Costco warehouses.  Those who were going to be pushed out of business have been.  Those who were going to survive, have carved out their niches and are prospering.  There are very few 'Mom and Pop' pharmacies today, but there is a very vibrant and competitive marketplace nonetheless.  While pharmacies bear familiar regional and national names, there is no monopoly, and that will be the look of the new landscape.

All this is neither good nor bad on its face.  It is the free market functioning as the free market should and does function without governmental interference. The simple existence of an artificial barrier to competition, that favors the competitors and not the consumers, is the problem and not the solution.

Us consumers need to get on this bandwagon and we need to tell our elected representatives what we want.  And we need to let them know that we'll be there in the polling booth in spite of how much the current monopolists might desire to overthrow this 'democracy' in action.  Call Sen. Darling and Rep. Jeskiewitz and ask them to become co-sponsors.  And, let's give Rep. Wasserman a chance to join the party, too.

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