6% Albatross?

LOMCSA hopes letting go of markup a major concession that will result in compromise legislation

Published in CSP Daily News

BATON ROUGE -- A debate was expected to take place yesterday at the Louisiana state Capitol as lawmakers consider competing bills to change a controversial state law requiring gasoline retailers to mark up their fuel prices, reported The Times-Picayune.

Both sides said they want to ensure low gasoline prices for the public. Efforts to forge a compromise unraveled last week, according to the report, so rather than hearing a bill that the opposing sides had agreed to support, the House Commerce Committee will hear testimony on two bills with different [image-nocss] objectives. All last-ditch efforts have failed, said committee chairman State Representative Gillis Pinac (D), who as had attempted to bring the two sides together. It'll be a very interesting agenda, because there are very valid points on both sides of the issue.

The issue concerns a little-known and largely unenforced state law dating from 1940 called the Unfair Sales Act. It requires retailers of all kinds to mark up their prices 6% over costs, and there is much disagreement about how to define those terms. The object of the law is to prevent predatory low pricing that would drive competitors out of business and establish a monopoly. Critics of the law say that it is not only unfriendly to consumers, but also unnecessary, because federal anti-trust laws already exist to crack down on monopolistic behavior.

There has been little controversy about the law except in its application to gasoline prices, the report said. The Louisiana Oil Marketers & Convenience Store Association (LOMCSA), which represents about 2,700 stores and 110 gasoline wholesalers in the state, has supported the law as it applies to fuel pricing and has sought stronger state enforcement. The group's concern heightened several years ago when Wal-Mart stores in Louisiana added gas stations owned and operated by Murphy Oil.

More recently, as reported in CSP Daily News, the issue came to public attention after Agriculture Commissioner Bob Odom decided he had the right to enforce the pricing law for gas stations, which his agency already checks for octane levels and gallon measurements. A Senate panel rejected his authority to conduct the price audits, and the publicity led lawmakers to file bills to change the law.

State Rep. William Daniel (D) has filed House Bill 183 and planned to offer amendments during the hearing yesterday. His measure would repeal the unfair-sales law as it applies to retail gasoline and diesel fuel. It would allow for free-market pricing of fuel as long as the seller does not sell at a price that does permanent damage to the marketplace, Daniel said in a statement. Let's get the government out of the gas-pricing business once and for all.

The committee also will hear House Bill 763 by State Rep. Taylor Townsend (D), who has the support of LOMCSA. In a significant concession, the oil marketers in the past week have agreed to legislation that would eliminate the minimum 6% markup, the report said. The bill would make it unlawful to sell motor fuel below the retailers' cost plus taxes, applicable fees and transportation charges, when the intent is to impair or injure competition.

Rucker Leake III, president of Leake Oil Co. and the current president of LOMCSA, said the group's decision to let go of the price markup was a major concession that he had hoped would result in compromise legislation. The issue for us is the removal of the 6%. It became an albatross, he told the newspaper. We want to be able to bring the consumer absolutely the greatest stability in the industry to enjoy healthy, healthy competition.

Daniel said the problem with the Townsend bill is that, even though it gets rid of the markup, it still places a burdensome set of regulations on the industry and contains complicated legal language that would be hard for retailers to interpret. Under Townsend's version, retailers would have difficulty reducing the price of gasoline for fear of being prosecuted for it, Daniel said. We don't want everyone to hire attorneys to lower the price of gas, he said.

Leake said Townsend's bill does a better job preserving a competitive environment.

Pinac acknowledged that the two factions are still far apart on some important definitions, said the report. With the hope of a compromise lost, Pinac said he would prefer to create a committee to study the issue and the impact of proposed legislation. Once lawmakers start changing the law for petroleum products, they probably should look at retail products across the board and the potential impact of a bill that would eliminate the Unfair Sales Act altogether, he said. It brings in all kind of demons into this discussion, Pinac said.

(See related story in this issue of CSP Daily News for more on gasoline prices in Louisiana.)