Getting burned at the pump

by Larry Meyer
MRA Chairman and CEO

Do you believe the prices on gas pumps these days? Would you believe there’s a bill in the Michigan legislature that would lead to even higher prices by forcing retailers to mark up the retail price of gasoline by a greater amount over their wholesale cost—even when they can sell it for less?

Michigan lawmakers are considering legislation (House Bill 4757) that would force the most efficient and competitive stations to raise their prices and prevent them from passing cost savings to motorists.

Industry experts say the legislation would push up pump prices by 2-3 cents per gallon—at a time when gas prices are at an all-time high. Low-income Michiganians will suffer the most.

The price hike will cost consumers an estimated $100-150 million but will not benefit the public—no new roads or bridges will be built with it. It is simply a transfer of wealth from all Michigan consumers to the pockets of a few gasoline station owners.

Wait—it gets worse. An earlier draft of the House bill mandated a minimum markup of 13.38 cents per gallon—bad enough. But the latest draft forces retailers to disclose and justify all costs of doing business (including executive salaries and other costs outside the immediate market where the gasoline is sold) when challenged by a competitor on price.

Such regulation is a slippery slope—which industry or trade line will be next? Eric Rule’s Legislative Bulletin on page 4 explains in more detail this new wrinkle, which is particularly dangerous to the retail industry.

I testified last month before the House Transportation Committee, explaining why MRA believes this bill is a gross over-regulation of Michigan’s businesses and will rob consumers of lower prices by rewarding business inefficiency and strangling competition.

The U.S. Federal Trade Commission has consistently ruled that these types of laws are anti-consumer and unnecessary, since current antitrust laws are sufficient to control predatory pricing. According to the FTC and legal scholars, the most likely effect is to discourage honest price competition.

This is bald-faced special-interest legislation requested by a few—gasoline station owners—and not the many—Michigan consumers. It is seller collusion, not consumer protection, and is designed to protect market share from would-be competitors.

You can help defeat this legislation. Here are two ways to get involved: let your lawmakers know you oppose this bill, and contribute to MRA PAC, which is working hard to educate legislators on this serious threat to free-market forces.

For more information on this bill and about contributing to PAC, call MRA's Governmental Affairs at 800.366.3699 or e-mail Eric Rule at errule@retailers.com.