Those dastardly corporations have really gone too far this time. I think you’ll agree. I mean, cheaper gasoline? How dare they?
A couple of months back, we were deluged with politicians’ whining and grandstanding about imaginary gasoline-price gouging.
The Senate GOP even dragged the CEOs of major oil companies down to Washington to confront them with that traditional Republican grievance: “How dare you make money?”
(How did those guys ever lose power?)
Let’s hope we can count on these defenders of the downtrodden to save us all. Colorado needs you.
For real this time.
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.
“We certainly know that we must monitor it because it is current law. And we monitor these laws all the time,” explains Trail Daugherty, representative for King Soopers, which will appeal the decision. “However, we do not agree with the way the law is being applied.”
The only winners in this case are a couple of gas-station owners in Montrose and their lawyers – all of whom now will be rewarded handsomely for being unable to offer competitive prices to consumers.
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? How about a burrito guy pushing a cart? Why not sue Chipotle?
When lawyers smell opportunity, trust me, they swarm.
Nobel Prize-winning economist Milton Friedman – one of this nation’s greatest champions of free markets and individual freedom — died last week. He once wrote that “the invisible hand in politics operates in the opposite direction to the invisible hand in the market.”
Will Democrats, who are about to control everything in Colorado, abolish the Unfair Practices Act and show us that politics can also be about economic sense?
Unlikely. Many Democrats are beholden to two special-interest groups: unions – which abhor box stores and couldn’t care less about affordable prices – and trial lawyers.
But, who knows, maybe we’ll be pleasantly surprised this session.
David Harsanyi’s column appears Monday and Thursday. He can be reached at 303-954-1255 or dharsanyi@denverpost.com.
