Market Power

Musings by an academic economist on the power of markets and the power over markets.

Sunday, March 27, 2005

You Learn Something New Everyday

I didn't realize this: the state of Minnesota has a price floor on retail gasoline prices. From this story (subscription required) in the local paper:

The Mankato Sam's Club is under investigation by state regulators for allegedly selling gasoline at slightly below the minimum price allowed by law, according to a state lawmaker, but a company spokeswoman predicted the company will be cleared.
How does the law in Minnesota work?
The alleged violation involves a 2001 law that prohibits gas retailers from selling at below cost or below an adjusted wholesale price level as determined by the Commerce Department. Cornish said he has figures for Wednesday that suggest Sam's was selling gas about 2 cents below the minimum allowed by law.
Who complained about it? It wasn't consumers:
Cornish's actions followed complaints by officials with two gas stations in his legislative district, which covers rural Blue Earth County and parts of Waseca and Faribault counties. Cornish didn't identify the stations but said the owners have been watching the posted price at the Mankato Sam's Club, which began selling gas this winter.
This is ridiculous. I don't fault the other gas stations for choosing to turn in Sam's Club rather than competing and lowering their prices (in this particular instance). They know their cost structure and would probably have been in violation of the law if they had done so. But I do fault the law for not allowing the competition to take place, and in that case, I bet these other gas stations (in general if not in particular) had a lot to do with getting the law enacted.