Gas Station Owner: Wis. Minimum Markup Law Is Unconstitutional

Tuesday, June 26th 2007, 6:00 pm

By: News On 6

MADISON, Wis. (AP) _ A Wisconsin gas station owner who claims regulators forced him to stop giving a 2-cent per gallon senior citizen discount filed a lawsuit Tuesday seeking to overturn a 1930s state law requiring retailers to mark up the price of gas.

Raj Bhandari argues in the lawsuit that Wisconsin's minimum markup law violates the state constitution's equal protection clause because retailers who sell gasoline are unfairly singled out for regulation.

``I should be allowed to give whatever discounts I want to give to the people in order to run my business,'' Bhandari told reporters Tuesday on the steps of the Dane County Courthouse in Madison.

Bhandari, who owns Center City BP in Merrill, Wis., about 150 miles north of Madison, stopped offering discounts of 2 cents per gallon to senior citizens and 3 cents per gallon for donors to a youth hockey league after being warned by state regulators in April the programs may violate the law. Gasoline sales dropped by about 20 percent as a result, he said.

His lawyers vowed to pursue the case to the state Supreme Court, arguing the constitution protects business owners' right to earn a living free from unnecessary government regulation.

The law, known as the Unfair Sales Act, makes it illegal for retailers to sell gasoline without marking it up either 6 percent over what they paid or 9.18 percent over the local wholesale price _ whichever is higher. Violators face stiff fines from regulators and can be sued by competitors for selling gas too cheap.

The law was intended to ensure fair competition and prevent larger companies from driving smaller ones out of business. It includes an exemption allowing gas stations to match competitors' prices.

The lawsuit, which names the Wisconsin Department of Agriculture, Trade and Consumer Protection and its secretary, Rod Nilsestuen, asks a judge to declare the law unconstitutional and to order the agency to stop enforcing it.

Robert McNamara, a lawyer for the Institute for Justice, an Arlington, Va.-based law firm representing Bhandari, said the law does nothing to protect small businesses or ensure competition and instead bans creative pricing programs.

In addition to the discounts, Bhandari says in the lawsuit he would like to offer free coffee with the purchase of gas and four gallons of free gas every ten visits.

``We are asking the courts to force the state of Wisconsin to respect Raj's right to earn an honest living and the right of entrepreneurs like him to offer their customers their goods at an attractive price,'' McNamara said. ``Entrepreneurs and consumers _ not state bureaucrats _ are in the best position to decide the cost of gas.''

DATCP official Janet Jenkins said the agency never determined whether Bhandari violated the law but informed him that a competitor complained about his discounts and he needed to make sure they were legal. Gas stations can offer discounts as long as they don't drop the price below the minimum or undercut their competitors, she said.

The law requires retailers to sell all products at least at the cost they paid. Only gas, alcohol and tobacco must be sold at about 9 percent above cost. McNamara said the lawsuit does not directly challenge the markup for alcohol and tobacco.

Jenkins said she had not seen the lawsuit and could not comment but noted the law had survived previous challenges. She said some economists believe the law protects small businesses and reduces prices in the long run while others argue it drives up prices by reducing competition.