Song of the South

Gas prices raising concerns in Louisiana, Alabama

Published in CSP Daily News

BATON ROUGE, La. -- Choosing between two competing bills to change the way Louisiana regulates prices at the pump, the state House Commerce Committee on Monday approved a measure that would reduce the state's requirement for gas stations to charge a 6% markup, while at the same time creating controversial rules to enforce the proposed system.

And in Alabama, Lauderdale County District Attorney Chris Connolly warned that cuts in gasoline prices at several Rogersville stations may not be legal under the state's Motor Fuel Act.

In [image-nocss] the Louisiana House, as reported yesterday in CSP Daily News, much of the three-hour debate centered on the anxiety expressed by several lawmakers trying to figure out which bill the public would view as most friendly to consumers by lowering gas prices, reported The Times-Picayune. Advocates of both bills made that claim, said the report.

The committee passed House Bill 763 by State Representative Taylor Townsend (D-Natchitoches, without objection. It would require gas retailers to price fuel at wholesale cost or higher, rather than at a 6% markup or higher as called for under current law.

House Bill 183 by State Rep. William Daniel IV (D), who wanted to eliminate all restrictions on retail gas pricing, was one vote shy of passing. The committee could have passed both bills and left it up to the House chamber and the Senate to decide their fate, the report said.

The issue concerns a state law dating from 1940 called the Unfair Sales Act. It requires retailers of all kinds to mark up their prices 6%. The object of the law is to prevent predatory low pricing and monopolies. Critics of the law say it is unfriendly to consumers and unnecessary because federal antitrust laws already prohibit monopolistic behavior.

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 newspaper said.

The group's concern increased several years ago when Wal-Mart stores in Louisiana started adding gas stations owned and operated by Murphy Oil Co. Murphy, which supported Daniel's bill, now has about 40 Wal-Mart locations in Louisiana.

LOMCSA backed Townsend's bill, which made a significant concession by backing off the 6% markup requirement. Townsend's bill also would clarify a fuzzy point in the current law by giving the attorney general and local district attorneys the foremost authority to enforce the law.

That enforcement provision was a critical issue, said the report. As reported in CSP Daily News, state Agriculture Commissioner Bob Odom recently began auditing gas stations for the 6% markup, but a state Senate panel last month voted to repeal his self-proclaimed authority. Odom's move to become the state's gas-price policeman was the primary reason the new bills were proposed, and both bills sought to remove Odom from the debate.

Both sides admitted they could not guarantee their bills would lower gas prices soon, said the paper.

Townsend argued that his bill would lower prices in the long run because it would keep more competitors in the market who might otherwise be driven out of business unfairly. Daniel said that his bill would have the best chance of reducing pump prices because it removes any minimum-price threshold. The threat of retail gas monopolies is a fiction anyway, Daniel contended.

Townsend's bill contains language for enforcement that could become the center of debate over the issue. It seeks to define the meaning of competition, cost and price in ways Daniel and his supporters find objectionable.

You don't want to have a piece of legislation you can't enforce, said Townsend, who argued that existing law is unclear on these terms. His bill defines competition as vying for motor fuel sales between any two sellers in the same relevant geographic market.

Daniel argued that below-cost gasoline pricing is only a problem if it hurts the overall market, not if it hurts a nearby competitor. He said Townsend's definition of competition opens the door for any gas retailer to seek court action against a nearby competitor, or to get a local district attorney or the state attorney general to investigate. That means the state would become the constant arbiter of disputes between competitors, and that Townsend's bill would set up a system that would hamper gas retailers with constant legal concerns and audits, Daniel said.

State Rep. Michael Walsworth (R), who usually opposes legislation that would put a greater regulatory burden on businesses, said he saw merits of both bills, but decided to favor Townsend's because he believes it has the best chance of becoming law this session, the report said.

The bill now goes to the House floor, but Committee Chairman Gil Pinac (D) said he has been trying to get the two sides to compromise on a single bill, reported The Times-Picayune.

Meanwhile, in Rogersville, Ala., several stations have dropped fuel prices, said the Associated Press, creating long lines of eager customers and prompting complaints by other stations that cannot keep up. While the lower pricessome as low as $1.88 per gallonwere a welcome sight to drivers, Connolly said that the prices may not be legal under Alabamas Motor Fuel Act.

We've had other complaints in other areas of the county about this happening, said Connolly. It was such a dramatic reduction that it's created a gas war out there.

Connolly said the law prohibits retailers from selling gas for less than what they paid for it to ensure fair competition and avoid fuel monopolies. He said he was not accusing any of the Rogersville retailers for wrongdoing, but has sent letters to eight stations in the area advising them of the law.

The gas war began last Wednesday when the Fuel King station offered unleaded gasoline for $1.99 per gallon. Customers flocked in, some from as far away as Huntsville, Decatur and Athens. Soon, Warren's BP across the highway followed suit as did Quick Mart CITGO. The prices dropped lower, reportedly to $1.88 per gallon, creating lines of cars stretched onto the highway.

We're trying to bring customers in and make them happy, you know, said Nick Patel, who works at the Fuel King.

As of Monday, the Fuel King brought the price back up with $1.99, though prices as low as $1.88 and $1.95 were spotted around Athens, according to www.alabamagasprices.com, a consumer website.

Janie Swan, manager of Warren's BP, said her store lowered its prices to keep up with Patel. [Friday morning he was 10 cents cheaper than us and we met up with him, she said.

Arlene A. Alexander, executive vice president of the Petroleum & Convenience Marketers of Alabama (PCMA), said gasoline wars are uncommon these days; however, she said the low prices offered around Rogersville may be in violation of the fuel act. I can't say it hasn't happened before, she said.