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IJ Takes On Wisconsin Effort To Quash Competition

By Bob McNamara

Raj Bhandari is everything you would want an entrepreneur to be.  He is innovative, self-sufficient and dedicated to giving back to his community.  And in Wisconsin, his hard work has led the state to brand him an outlaw.

IJ Staff Attorney Bob McNamara and client Raj Bhandari at a press conference announcing the launch of IJ’s legal challenge to Wisconsin’s minimum markup on gas prices.

Raj owns a gas station in Merrill, Wis., which he purchased in 2006 and brought back from the brink of bankruptcy by offering high-quality service and building strong ties with the local community.  One of the ways he improved his relationship with his customers was by offering public-spirited discounts:  one for senior citizens and one for people who donated to support a local youth hockey league.  The discounts were a hit, and Raj was doing what entrepreneurs are supposed to do:  making money for himself by providing something of value to his community.

Unfortunately, the state Department of Agriculture, Trade and Consumer Protection informed Raj that he risks tens of thousands of dollars in fines for his innovation because in Wisconsin, it is illegal to sell gasoline without a mandatory markup of between 6 percent and 9.18 percent.  Even as consumers nationwide are struggling with high gas prices, the state of Wisconsin is imposing anti-competitive regulations to make those prices even higher.

The law that scuttled Raj’s discounts is Wisconsin’s Unfair Sales Act, a relic of the 1930s that makes it illegal to sell gasoline without adding an arbitrary minimum markup over the average local wholesale price.  The law also makes it illegal to sell any merchandise below “cost.”  In essence, Wisconsin has banned a common business practice that helps entrepreneurs build roots in their communities while saving consumers money, and it has done so for no reason.

Protecting consumers from gasoline that is too inexpensive makes no more sense than protecting them from pillows that are too soft—but the harm caused by Wisconsin’s law is all too real.  Raj is barred from more than just offering senior-citizen discounts.  He would like to offer a wide range of special customer-loyalty programs—the sort of programs that are essential to a small business’ survival—but finds himself blocked at every turn by the state’s arbitrary ban on price competition.

Reporters ask IJ client Raj Bhandari about his challenge to Wisconsin’s government-imposed markups on gas prices while IJ Staff Attorney Bob McNamara, second from right, looks on.

Raj is not asking for special government protection.  All he wants is the opportunity to use his work ethic and business judgment to provide his customers with the best service at the lowest price he can.  And he is not alone in his plight.  Wisconsin’s law is stifling the creativity of entrepreneurs across the state—and businesses in the handful of other states that continue to cling to outdated laws like this one face similar difficulties.  Amazingly, Wisconsin and states like it still refuse to recognize a simple truth:  Consumers and entrepreneurs—not state capital bureaucrats—are best positioned to set the price of gas.

That is why, on June 26, 2007, Raj joined forces with the Institute for Justice to file a lawsuit urging Wisconsin’s courts to protect his right to economic liberty by striking down the state’s minimum markup law.  More than 30 states allow exactly the sort of competition that Wisconsin has banned, and three different state supreme courts have struck down laws much like Wisconsin’s over the past 15 years.  Together, Raj and IJ will make Wisconsin’s the fourth.

Bob McNamara is an IJ staff attorney.

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