Wisconsin Appeals Court Upholds Minimum Gas Markup Law

Station owner says Unfair Sales Act singles out gasoline retailers for regulation

MADISON, Wis. -- A Wisconsin appeals court upheld the state's minimum gasoline markup law as constitutional on Thursday, determining that it helps achieve the legislature's goal of creating fair and robust competition at the pump, said the Associated Press.

The 4th District Court of Appeals' ruling stemmed from a lawsuit filed nearly five years ago by Merrill gas station owner Raj Bhandari. He argued that the minimum markup law, known as the Unfair Sales Act, violates the state constitution's equal protection clause because it unfairly singles out gasoline retailers for regulation.

"We're very disappointed," Bhandari's lawyer, Robert McNamara, an attorney with the Virginia-based Institute for Justice, a libertarian nonprofit law firm, told the news agency. "We think the court got it wrong. We remain committed to the idea that the Unfair Sales Act is a law designed to shovel more money into the pockets of established businesses at the expense of entrepreneurs and consumers."

The law dates back to the 1930s. The measure makes it illegal for retailers to sell gasoline without marking it up either 6% over what they paid or 9.18% over the local wholesale price--whichever is higher. Violators face fines from regulators and can be sued by competitors for selling gasoline too cheaply. Supporters say the law prevents large gasoline retailers from undercutting smaller competitors, driving them out of business and then raising their prices.

State regulators warned Bhandari in April 2007 to end programs he created offering discounts of two cents per gallon for senior citizens and three cents per gallon for donors to a youth hockey league, saying the programs may violate the minimum markup law. Bhandari ended the discounts, saying his sales dropped by about 20% as a result.

He filed a lawsuit in Madison in June 2007 claiming the Wisconsin Constitution protects business owners' right to earn a living free from unnecessary government regulation. Dane County Circuit Judge Maryann Sumi dismissed the case in 2009, saying Bhandari failed to prove beyond a reasonable doubt the law is unconstitutional.

Bhandari argued on appeal that the law unconstitutionally divides Wisconsin retailers into gasoline sellers, who are subject to the minimum markup law, and everyone else.

But the appeals court affirmed Sumi's decision Thursday.

The court found the legislature wanted the law to guard against unfair sales practices such as undercutting competitors, and a marketing professor who testified for the state Department of Agriculture, Trade & Consumer Protection concluded the law strengthens competition and produces lower prices. The court concluded a plausible policy reason exists for the two retailer classifications.

McNamara maintained the law prevents retailers like Bhandari from passing along savings they might find, discouraging innovation.

"It requires everyone to operate according to a hard price floor that has nothing to do with any retailer's costs," he said.