Dave Zweifel: Minimum markup helps the little guy

Dave Zweifel  —  7/27/2008 6:35 pm

Attacks on Wisconsin's minimum markup law, the progressive era regulation that has kept many of the state's independent businesses alive, have become as perennial as those day lilies blooming in the back yard.

This week another study by the corporate-funded think tank known as the Wisconsin Policy Research Institute asserts that "consumers ought to be irate" because the law is forcing them to pay inflated prices.

The latest assault on the state's Unfair Sales Act cynically claims that the law is responsible for higher gas prices. Author Christian Schneider contends the law requiring wholesalers to add 3 percent and retailers 6 percent to their costs meant just a few cents when gas was selling for $2 a gallon, but now that gas is near $4, it amounts to a lot of money.

Schneider's study is simply the latest front for the big guys who would like to put locally owned independents like Meffert Oil in Waunakee or Francois Oil in Belleville out of business.

It claims that Wisconsin drivers are paying some 8 cents per gallon more -- $278 million annually -- than they would pay if the law were repealed. But it can't explain why motorists in neighboring states without minimum markup laws, and with lower state gas taxes to boot, typically pay just as much as we do.

Indeed, a case can be made that the Unfair Sales Act promotes more competition by providing a level playing field for small local business people. Because the law allows independents to compete on prices, they stay in business and do what they do best: offer better and personalized service.

Just a few years back, two UW-Whitewater business researchers claimed that the existence of competing independent owners actually holds the prices to the minimum markup. Some researchers insist that the reason gas in California is so high stems from the fact that its independent dealers were driven out of business years ago.

Schneider's conclusions assume prices would come tumbling down if the markup law were repealed. But it's a lie to say oil companies compete on price. They have historically colluded on pricing and do so even more since they have merged into fewer and more powerful conglomerates.

Some insist that if home-owned oil dealers need to be protected from big oil, then why not the mom and pop hamburger stand from McDonald's? The little hamburger stand can do dozens of things to compete with McDonald's -- offer a bigger burger, add bigger slices of cheese, invent its own special recipe, buy better meat.

But a gallon of gas is a gallon of gas, and it's controlled by giants who operate in a mysterious economic world that has absolutely nothing to do with supply and demand.

We've devastated the main streets of too many communities by falling for the myth of lower prices perpetrated by giant faceless corporations that pay their workers little, send millions of jobs to other countries and line the pockets of millionaire executives.

Wisconsin has at least seen fit to help a fraction of our local businesses with the Unfair Sales Act. Contrary to what the Wisconsin Policy Research Institute and others like it say, the act has served our state -- and our business community -- well.

It deserves to be retained.

Dave Zweifel is editor emeritus of The Capital Times, Wisconsin's progressive daily online news source, where his column regularly appears.

Dave Zweifel  —  7/27/2008 6:35 pm