From DenverPost.com:
This month, King Soopers and City Market (both owned by Kroger) were forced by a federal jury decision to cut out a program called Buy Groceries/Get Gas — which offered consumers modest savings on gas purchases.
Two “independent” gasoline stations in Montrose brought the suit and were awarded $1.4 million in damages. The jury found the big stores had violated Colorado’s Unfair Practices Act, illegally selling gas below cost.
Yes, King Soopers was selling gasoline too cheap. It’s illegal.
So let’s quickly review an old economics adage: Charge too much and you’re price gouging. Charge too little and you’re predatory pricing. Charge the same as your competitor and you’re in collusion.
Many economists maintain that laws like the Unfair Practices Act are relics.
“Predatory pricing” laws were intended to stop larger corporations from selling products below cost and then, once the competition goes out of business, creating a monopoly.
This never happens in reality. Predatory pricing is what you or I would typically refer to as competition and low prices. Coloradans should applaud when they hear those scary words coupled.
But the danger is not only that King Soopers and City Market will be forced to halt some of their discounts on gas but that all grocery and big-box retailers that sell gas in Colorado — places like Sam’s Club, Wal-Mart and Costco - may have to stop.
“It has become case law, and other retailers will have to look at that and say, ‘How cautious do we want to be?”‘ Daugherty continues. “Others, obviously, have already discontinued similar programs. I’m not sure if more will follow.”
A few days after the verdict against King Soopers, the state’s second-largest grocery chain, Safeway, also suspended one of its gas-discount programs.
So what happens when Wal-Mart kicks off its $4 generic drug program in Colorado? What’s to stop a mom-and-pop pharmacy from suing?
King Soopers, City Market, Kroger, Montrose, Unfair Practices Act
2 responses so far ↓
1 Pierres Service » Blog Archive » It?s Illegal To Charge Too Little For Gasoline // Nov 28, 2006 at 3:36 pm
[...] The jury found the big stores had violated Colorado?s Unfair Practices Act, illegally selling gas below cost. Yes, King Soopers was selling gasoline too cheap. It?s illegal. So let?s quickly review an old economics adage: Charge too …Read more: here [...]
2 smithers // Nov 29, 2006 at 11:11 am
Does the law prohibit selling gasoline at a loss? Should it? Sometimes it’s good business to take a loss on one product — isn’t that what retailers call a “loss leader”? Still, as an American, I hate to see petroleum used that way, when every gallon puts money in the pocket of the likes of Hugo Chavez and the Arabs. Don’t forget that three Americans die every week for that oil! Why can’t King Sooper’s use American products as a loss leader?
I’m torn between libertarianism and patriotism.