Friday, November 23, 2007

Bargain legislation

State Representatives Bill Kramer and Leah Vukmir are proposing a repeal of the minimum mark up law. Their press release:

Legislators propose repeal of Depression-era Unfair Sales Act

Competitive Marketplace Act will reinvigorate marketplace, enhance competition

Madison – Today, Representative Leah Vukmir (R-Wauwatosa) and Representative Bill Kramer (R-Waukesha) unveiled legislation that will repeal Wisconsin’s archaic Unfair Sales Act and put into place a legislative framework that fosters competition, puts consumer welfare paramount, and reflects a vibrant 21st century marketplace.

The Competitive Marketplace Act will replace the Unfair Sales Act, also known as the Minimum Markup Law, which dictates that sellers of goods are forbidden from selling at prices below cost, and further requires that prices for gasoline, tobacco, and alcohol reflect a minimum percentage increase. Reps. Kramer and Vukmir believe the law perpetuates inefficiencies in the marketplace and is ultimately harmful to consumers.

Conversely, the Competitive Marketplace Act will create a dynamic marketplace – for all goods sold in Wisconsin – that puts the interests of the consumer first. As noted by Representative Vukmir, “The current structure of Wisconsin’s below cost sales law favors competitors over consumers. As we examined the statutes and legal arguments, it became clear that our laws inhibit vigorous competition to the detriment of consumers.”

The Unfair Sales Act, a law that Governor Doyle referred to as, “a relic of the 1930's” in calling for the repeal of the minimum markup provisions in the law, runs counter to predominant economic and legal theory. As a recent U.S. government report to the Organisation for Economic Co-operation and Development states, “To the extent that firms adjust their pricing to conform with state [below cost sales] laws, these laws are likely to have an adverse effect on consumer welfare by discouraging firms from competing as vigorously on price than they otherwise would and by protecting high-cost firms from competition from more efficient rivals.”

Representative Kramer said, “To consumers and economic and legal experts, our current marketplace appears to be a function of government-sanctioned price collusion. The prices of goods – from prescription drugs to cigarettes – should reflect market forces, not the machinations of arbitrary legislative intentions. The Competitive Marketplace Act will bring Wisconsin’s laws in line with federal doctrine and standards set forth by the United States Supreme Court.”

Highlights of the Competitive Marketplace Act:

  • Will redefine legislative policy to be congruent with our free market economic structures. The policy will state, “Competition is the best method of allocating resources in a free market. A competitive marketplace fosters quality, service, safety, durability and the opportunity for consumers to select from alternative goods, services and providers. It is the intent of this legislature to protect and promote a competitive free market that serves the interest of the consumers. The proper functioning of a free market necessarily requires competitive rivalries where each competitor leverages strategic pricing and innovative practices intended to obtain a larger share of the market from other competitors. Such practices, while potentially injurious to less efficient competitors are beneficial to consumers and serve the public interest of fostering a robust free market.”

  • It will replace the 1939 law with a legislative framework that more accurately reflects 21st Century retail and wholesale practices and longstanding, predominant economic and legal theory.

  • The statutes will reflect United States and Wisconsin Supreme Court standards for determining anticompetitive behavior. Recent decisions by the courts have clearly stated that competition, not competitors, should be the overriding interest in the marketplace. As Daniel Crane of the Benjamin Cardozo School of Law points out, “punishing excessively low prices is paradoxical because the very objective of […] antitrust laws is to secure low prices for consumers.”

  • The Act will reduce incentives for competitors to bring civil actions against one another by providing strict guidelines under which a determination of predatory pricing has occurred. However, it does provide an enforcement mechanism under the law if an appropriate authority can prove that predatory pricing has occurred.

  • The Competitive Marketplace Act will be circulated for co-sponsorship next week. We need only look at Wal-Mart's different prices given which side of the Wisconsin-Illinois border you shop to see the minimum mark up law for what it really is, a hidden tax on consumers, and often the consumers at the lower socio-economic strata. Even recent Wal-Mart converts like Mike and Anne Mathias would benefit from the repeal of the minimum mark up law, and its continued existence only serves to push business across the border.

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