W.Va. Legislators Debate Below-Cost Gas Sales

Assign issue to committee for a year-long study

Herb Snyder

Herb Snyder

CHARLESTON, W.Va. -- Legislators in West Virginia will spend a year studying whether to repeal the Mountain State's Unfair Trade Practices Act after senators were unsure whether proposed legislation would help or hurt consumers, said The Charleston Gazette. The law is intended to keep large companies from driving competitors out of business by providing goods or services such as gasoline below cost.

By law, retailers must mark up prices by at least 7% more than cost.

Opponents of the law contend that, instead of encouraging competition, it keeps consumer prices artificially high--especially for motor fuel.

"This bill is clearly about the citizens of West Virginia, to give them the opportunity to buy the least expensive gas on the market without artificial controls," State Senator Herb Snyder (D) said in a floor speech on Feb. 20 advocating for the act's repeal, according to the report. By the end of the Senate Judiciary Committee hearing, the bill to repeal the act (SB491) had been replaced with a resolution to study the issue in interim committee for a year.

That was after concerns were raised in committee that repealing the act would allow large corporate "big-box" retailers to drive smaller competitors out of business, ultimately giving them a price monopoly.

"This is the essence of the argument: Do we foster competition and drive down prices, or do we eliminate competition?" asked State Sen. Craig Blair (R).

Jan Vineyard, president of the West Virginia Oil Marketers & Grocers Association (OMEGA), argued that gasoline is a unique product in that its prices are posted on large, outdoor signs.

"You end up with price wars because of that price sign," she said.

Without the 7% markup, Vineyard said, big-box retailers that operate gas stations, such as Wal-Mart and Kroger's, would use gasoline as a loss-leader, selling at or below cost to attract customers to their stores.

"We do know that big-box retailers, when they're allowed to do what they want to, put others out of business," she said.

She also said the proposed bill was flawed, since it would authorize only the state attorney general to bring suits against companies that are selling products below cost. Currently, affected companies can file lawsuits against their competitors for unfair trade.

Vineyard said that would put the attorney general in a position of effectively having to sue for higher consumer prices.

"I don't think it would be very popular for him to say, "I'm going to raise gas prices," she said.

Instead of advancing the bill, the committee instead approved on a voice vote a motion by State Sen. Bob Williams (D) for a resolution to assign the issue to a legislative interim committee for a year-long study, said the report.