Law doesn’t provide the protections or the benefits to consumers that its supporters claim
May 18, 2017 – Milwaukee, WI – The Wisconsin Institute for Law & Liberty released a new study, “A Policy in Search of a Solution: A Study on the Impact of Minimum Markup Laws on Small Businesses and Gas Stations,” to definitively determine whether minimum markup laws actually serve to protect small businesses.
Wisconsin’s minimum markup law, known as the Unfair Sales Act, was created in the 1930’s during the Great Depression. It mandates s that businesses markup the price of gas, groceries, prescription drugs, school supplies and more. While the public has been hurt with the higher prices, defenders of the law say it protects “the little guy” from the danger of predatory pricing by large and powerful corporations.
But a new WILL study debunks that talking point.
Co-authored by WILL’s William Flanders, PhD, and Ike Brannon, PhD, Visiting Fellow at the Cato Institute, the study uses econometric analysis of data from all 50 states to determine the relationship between state’s minimum markup laws and the number of small business retailers and the number of gas stations in a state. The key findings include:
- Minimum markup laws have no effect on the number of small business retailers in a state.
- General minimum markup laws have no effect on the number of gas stations in a state.
- Gasoline-specific minimum markup laws have no effect on the number of gas stations in a state.
“For too long, minimum markup laws have been defended as an essential bulwark for small business,” said WILL Research Director Williams Flanders PhD. “With this study we can put that talking point to bed and hasten the demise of this relic of a law.”
“Our study finds no evidence that the minimum markup rule protects small gas station and retailers, which is the only justification for such a law,” said Ike Brannon. “The reality is its only impact is to keep gasoline prices higher than they otherwise would be.””
With two legislative proposals that would scale back the minimum markup law, the evidence from this study ought to serve as an impetus for reform in Wisconsin.