Sheboygan Press Editorial
Tue 10-Jul-2001
There's no instant replay camera for editorial boards, but perhaps there should be, especially on issues like the state's fair marketing law on gasoline.
On closer review, we believe Wisconsin should not repeal the 1939 law that requires retailers to mark up gasoline prices by 6 percent above their cost. In an editorial June 26, we mistakenly endorsed the repeal.
Senate Democrats put a provision for repeal of the markup law in their version of the state budget, and we're hoping that the conference committee working out difference between the Senate and Assembly budgets axes this Senate provision. If the repeal makes it through the conference committee, Gov. Scott McCallum should veto it.
Our viewpoint has been changed by a new, comprehensive study by James Peltier, a professor of marketing, and Mark Skidmore, an economics professor, at the University of Wisconsin-Whitewater. They found that while getting rid of the minimum markup reduces gas prices over the short term, it increases them in the long run. This is because the minimum markup prevents large, vertically integrated concerns such as Wal-Mart and its partner Murphy Oil Co. from using gasoline as a "loss leader" to attract customers. Over time, such a practice drives independent convenience stores and other smaller gas retailers out of business. The lack of competition, in turn, raises prices to consumers.
We should learn from the mistake of our neighbor Minnesota. . The Gopher State repealed its sale-below-cost law in 1995. But the Legislature has re-enacted a new version and Gov. Jesse Ventura has signed it into law. The new markup law goes into effect Aug. 1.
What Minnesota found out was that their independent stations were being driven out of business. That's primarily a result of the fact that convenience stores depend on gas sales for about half of their gross profits.
Gas prices in Minnesota without its markup law were 1.91 cents over the price that Wisconsin consumers paid, according to the Peltier-Skidmore study.
The Peltier-Skidmore research refutes an earlier, far-less-comprehensive study by the Wisconsin Policy Research Institute. The authors of that study used only three cities and a six-months survey of prices to draw the erroneous conclusion that Wisconsin's fair marketing law was costing consumers $50 million a year in higher gas prices. In actuality, the UW Whitewater professors found, Wisconsin's law saves consumers at least $25 million over what they would pay for gas without the fair marketing law.
Unfortunately, the American Automobile Association, many leader Democrats and other newspapers have been taken in by the Wisconsin Policy Research Institute's conclusions and have endorsed repeal of the fair marketing law.
We urge them to look at the Peltier-Skidmore research. Even though it was paid for by two organization representing independent businesses, it presents strong evidence that this state should keep it's fair marketing law.