Federal Court Refuses to Enforce Unfair Sales Act

Arlington, Va.—On Friday, a federal court refused to enforce Wisconsin’s minimum markup law on the grounds that it’s unconstitutional. The U.S. District Court for the Eastern District of Wisconsin found that Flying J, a company with gas stations in Black River Falls and Oak Creek, could not be punished for violating the state’s antiquated law that forbids the sale of inexpensive gasoline.

“The federal court made an excellent decision by protecting Flying J from an irrational and arbitrary attack,” 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 suit challenging Wisconsin’s Unfair Sales Act as unconstitutional. “Friday’s ruling protects one business, while Raj’s case is about protecting everyone in the state. We look forward to pressing our case to make sure that all the citizens of Wisconsin are protected from their state’s absurd ban on cheap gas.”

In June, IJ filed suit in Dane County Circuit Court in Madison on behalf of Wisconsin gas station owner Raj Bhandari looking to restore common sense to gas pricing in the state. In 2006, Raj purchased and renovated a gas station on the verge of bankruptcy. He quickly turned the business around, in part by offering high quality service at competitive prices. He also began building ties with the community by offering discounted gas to senior citizens and supporters of a youth sports group. Raj soon learned that, incredibly, his popular discounts could subject him to fines of up to $2,500 per gallon.

Friday’s ruling does not prevent Wisconsin from enforcing its minimum markup law against other entrepreneurs because the state was not a party to the federal case. Raj’s suit seeks a court order permanently securing the rights of entrepreneurs and consumers statewide.

The Wisconsin Unfair Sales Act, a 1930s relic, makes it illegal to sell gasoline without marking it up either 6 percent over cost or 9.18 percent over the local wholesale price—whichever is higher. Three different state supreme courts have struck down similar minimum markup laws without any negative effects on consumers or small businesses.

IJ President and General Counsel Chip Mellor concluded, “Small businesses are the heart of the American economy and the American Dream. Yet across the nation, the power of government is being abused to deny entrepreneurs their right to earn an honest living. The Institute for Justice will not rest until this fundamental right—the right to economic liberty—is secure for all Americans.”