One more reason not to live in the People's Republic of MD

[JST]

http://www.volokh.com/archives/archive_2005_05_01-2005_05_07.shtml#1115386128

Oy.

[rumatt]

:scratch:

[clyde]

There's a reason for it, that made sense to someone at the time, but it is one of the things that make MD one of the backwardass states. Overall, it still doesn't hold a candle to it's neighbor to the south, though.

[TD]

The Post had an article about this in this morning's paper as well. The reason for the law was explained early on in the article and I have to admit it does make some sense to me.

...the result of a little-noticed Maryland law that took effect in 2001. The General Assembly mandated that stations cannot charge less than what they pay for gas -- unless they're lowering prices to compete with a nearby station.

Independent service station owners pressed lawmakers for the measure as a way to protect themselves from big retailers selling gas below cost to drive them out of business and limit competition. Maryland is one of at least 13 states to adopt similar laws, which are not in effect in the District or Virginia.

http://www.washingtonpost.com/wp-dyn/content/article/2005/05/05/AR2005050502032.html

[nate]

That is a stupid law.

[TD]

That is a stupid law.

I knew you'd reply.

[JST]

The Post had an article about this in this morning's paper as well. The reason for the law was explained early on in the article and I have to admit it does make some sense to me.

...the result of a little-noticed Maryland law that took effect in 2001. The General Assembly mandated that stations cannot charge less than what they pay for gas -- unless they're lowering prices to compete with a nearby station.

Independent service station owners pressed lawmakers for the measure as a way to protect themselves from big retailers selling gas below cost to drive them out of business and limit competition. Maryland is one of at least 13 states to adopt similar laws, which are not in effect in the District or Virginia.

http://www.washingtonpost.com/wp-dyn/content/article/2005/05/05/AR2005050502032.html

Bah.

Indepedent service stations make little or no money on gasoline sales; most make whatever money they make from doing car repairs or (increasingly) selling Jerky Chew and bad coffee. It's barely credible that a fall-off in gasoline sales (even to zero) would drive them out of business.

Even if low prices did drive the local stations out of business, so what? Why should we establish protectionist regulations that favor a certain class of business owners over the stockholders of Wal-Mart or Sheetz? We don't do it in other retail markets, like for soap, lamps or area rugs. Can you imagine a mom and pop store asking for price protection so that it could continue to sell high-priced groceries in competition with, say, Giant?

Besides, is it really likely that if Wal-Mart and Sheetz DID drive all of the independents out of business, they would be able to raise prices and collect monopoly rents? How would a major retailer be able to do this, when there are many other major retailers that presumably would still be able to act as competitors? If major retailers are using gas as a loss-leader to drive traffic (and there is some evidence that they are), why would they suddenly stop doing this? If that actually happened, and monopoly rents were being collected, why couldn't the regulators take action then?

This is special-interest protectionism, pure and simple. Let the market work.

[nate]

That is a stupid law.

I knew you'd reply.

I was expecting you to say that they should have raised it to $12.00 per gallon ;)

[nate]

Can you imagine a mom and pop store asking for price protection so that it could continue to sell high-priced groceries in competition with, say, Giant

They do it all the time.

A nationwide fight over Wal-Mart is the leading example.

Locally, it happens all the time through the zoning process. In the end, we end up paying huge economic rents to "protect" businesses or to "keep the local character"...

[BahnBaum]

[quote=JST] They do it all the time.

A nationwide fight over Wal-Mart is the leading example.

Locally, it happens all the time through the zoning process. In the end, we end up paying huge economic rents to "protect" businesses or to "keep the local character"...

That's not price protection.

If you want the lower prices, drive to the Walmart in the next town.

Alex

[RKT BMR]

[quote=JST] They do it all the time.

A nationwide fight over Wal-Mart is the leading example.

Locally, it happens all the time through the zoning process. In the end, we end up paying huge economic rents to "protect" businesses or to "keep the local character"...

That's not price protection.

If you want the lower prices, drive to the Walmart in the next town.

AlexGeez...

This sounds about as justifiable a position as, "if you want quaint, move to the next town".

What about freedom, people? Liberty?

[BahnBaum]

[quote=JST] They do it all the time.

A nationwide fight over Wal-Mart is the leading example.

Locally, it happens all the time through the zoning process. In the end, we end up paying huge economic rents to "protect" businesses or to "keep the local character"...

That's not price protection.

If you want the lower prices, drive to the Walmart in the next town.

AlexGeez...

This sounds about as justifiable a position as, "if you want quaint, move to the next town".

What about freedom, people? Liberty?

I'm just saying that local communities that try to keep the Walmarts of the world out of your locality isn't the same as price protection as described by JST in the first post.

Alex

[ZBB]

Yuck... gov't intervention in the market is always bad.

Let's say this law applied to all retailers for all products. Let's say you are a retailer (even Walmart). Let's say you buy something to sell thinking its the next great thing and it bombs. Let's say it bombs so bad that the maker of it goes out of business and you can't return the unsold product. So what are you going to do? If the law wasn't in place, you could drop the price below cost just to get rid of it and recoup at least a portion of your investment in inventory. But with the law, you can't do that -- you'd have to either stick it out trying to sell it for $0.01 profit, or write the entire amout off.

The law also encourages more Wallmart sized businesses -- who typically have the purchasing power to get better discounts from manufactures, and then can sell at retail at a lower price that is still profitable. I realize that's harder to do with commodities like oil/gasoline. Now that is not necessarily a bad thing, but it does help drive individuality out of the markeplace and help increase the spread of chains.

Too bad economics is one of the least taught subject in American schools, and even when its taught, its often done incorrectly. :thumbdow:







(Can you tell I was an Econ major in undergrad and have an MBA in International Finance? I actually did a double major in undergrad with PoliSci as the 2nd major -- and it was always amusing when the PoliSci professors tried to explain an economic theory -- they always got a bit of it wrong.)

[blee]

:lol: For once I've read something that makes Maryland law more oppressive than Virginia. What a crock.