Federal Court Strikes Down Wisconsin’s Cheap Gas Ban

J. Justin Wilson
J. Justin Wilson · February 12, 2009

Arlington, Va.—Yesterday, a federal court declared Wisconsin’s minimum markup requirements for gasoline unconstitutional in a lawsuit brought by Flying J, a company that sells gasoline in Black River Falls and Oak Creek, Wis.  Until yesterday’s decision by Chief Judge Rudolph T. Randa of the Eastern District of Wisconsin, the state’s Unfair Sales Act made it illegal to sell retail gasoline without marking it up at least 9.18% over the local wholesale price.
“Yesterday’s decision means that the government can no longer threaten Wisconsin entrepreneurs with thousands of dollars in fines because their gas prices aren’t high enough,” said Robert McNamara, a staff attorney with the Institute for Justice (IJ), a national public interest law firm currently representing Wisconsin gas station entrepreneur Raj Bhandari in a state-court challenge to the Unfair Sales Act.  “It makes no more sense for the state to protect consumers from gasoline that is too inexpensive than it would to protect them from pillows that are too soft.”

The federal court ruling comes on the heels of last month’s ruling in Bhandari’s case, in which the Dane County Circuit Court in Madison found that the law’s minimum-markup requirement did not violate the state constitution.  The federal ruling, however, will prevent the state from enforcing the requirement against anyone in the state—including Bhandari.

The federal court pointed to evidence from the Federal Trade Commission and the Wisconsin Policy Research Institute, which found that the Unfair Sales Act resulted in higher gas prices in the state and “benefit[ed] retail gas station owners at the expense of consumers.”  The court found that the state had “fail[ed] to contradict or undermine this evidence.”

Bhandari’s lawsuit was originally filed in June 2007.  Prior to 2007, Bhandari had enjoyed great success at his Merrill, Wis., gas station by offering discounted gas to senior citizens and supporters of a local youth sports group.  In addition to earning him a lot of positive attention from his community, however, these discounts also caught the eye of the state Department of Agriculture, Trade, and Consumer Protection, which warned him that the discount programs could subject him to fines of up to $2,500 per gallon.

“With this ruling, Raj will once again be able use his work ethic and business judgment to provide his customers with the best service at the lowest price he can.” concluded McNamara.  “This is a victory for small-business owners everywhere.”