Wisconsin’s Minimum Mark-up Law – The Gift that Keeps on Giving

It’s beginning to look a lot like Christmas. The radio stations are playing Christmas music. Local communities are having their Christmas parades. The ads are coming out for special deals after Thanksgiving, and sometimes earlier. And the complaining has begun about Wisconsin’s minimum mark-up law.

Letter writer Richard Harris in the Oshkosh Northwestern is the first reported victim this year. Harris complained to the Oshkosh Northwestern a $288 lap top computer cost him $340, $357 after the sales tax. The explanation Harris heard from a Wal-Mart employee was that Wisconsin’s minimum mark-up law forced Wal-Mart to charge Wisconsin consumers more for the computer than what consumers in other states pay.

We’re special.

Unfortunately, the law does not just affect the price of cheap computers. Shoppers online who see special deals on all sorts of potential Christmas presents might see the indicator that the price advertised is not the price available to them, “prices may vary by store.”

Wisconsin’s minimum mark up law has different components to it. For consumer goods, the law mandates a price floor of cost plus transportation costs. Retailers cannot offer special deals on items below cost in an effort to draw customers into the stores with the hope they will buy other items as well.

That special television you saw advertised online cheaper than you ever thought possible? It might just be a mirage in the consumer desert.

If you are not ready for all of this Christmas shopping yet, think about Wisconsin’s minimum mark-up law will affect your Thanksgiving. Thanks to a federal judge, the part of Wisconsin’s minimum mark-up law that affects the price of gasoline was re-instated in September. Different categories of fuel sales have different mark-ups, but a retailer who is not a gasoline wholesaler or a refiner has to sell gasoline at cost minus any trade discounts plus all applicable taxes plus transportation costs plus any other costs plus 6%.

Even if a gas station attached to a grocery store wanted to sell you cheap gasoline in the hopes you will buy a hot dog from the rotisserie grill, the law requires the retailer to charge you the full price and then some. The Thanksgiving trip over the river and through the woods to grandma’s house is made unnecessarily expensive because the legislature refused to repeal the law.

Some fuel is treated more equal than others, to use Orwell’s phrase.

Governor Jim Doyle issued an order in 2006 preventing the Department of Agriculture, Trade, and Consumer Protection (DATCP) from enforcing the minimum mark-up law for ethanol.

After paying the extra cost of the ride to Grandma’s house, Thanksgiving dinner will be more expensive in Wisconsin, too. Wisconsin’s minimum mark-up law even applies to groceries. Last year when Wal-Mart decided to sell Thanksgiving dinner for eight people for under $20, the Milwaukee Journal Sentinel discovered that Wisconsinites were not able to take full advantage of the deal. Food items included in the deal elsewhere were not available here because individual items, such as the turkey, were required by law to cost more.

So when football fans gather across the country in front of their television sets with their turkey dinners, Packer fans may actually look enviously at Viking fans, at least when it comes to the relative costs of their game day meals.

Why does the state government think they should protect consumers by making them pay more? During the New Deal, government regulation of pricing was rampant. Part of the New Deal legacy is Wisconsin’s Unfair Sales Act, which has been modified over the years. Sometimes the minimum price floor was eased on some items, other times the penalties for violations were increased.

The law is supposedly to protect consumers from so-called predatory pricing. The fear is that some large national retailer would sell at well below cost in an effort to drive out the smaller competition. Once the small competition is eliminated, the larger retailer can suddenly jack prices through the roof.

However, the Federal Trade Commission already polices such anti-competitive price dumping using existing anti-trust laws. Meanwhile, small retailers often lose out on price anyway because they cannot compete with Wal-Mart’s larger purchasing power forcing down costs from their suppliers, or the effects of more sophisticated inventory control by larger retailers.

The Wisconsin legislature has bills pending to repeal the minimum mark-up law. It is time for some legislators to actually live up to the free-market principles they espouse. In other words, put their money where their mouth is, pun intended.

By James Wigderson
Special Guest Perspective for the MacIver Institute