Wisconsin’s Unfair Sales Act

A Policy in Search of a Problem:
A Study on the Impact of Minimum Markup laws on Small Businesses and Gas Stations

Among the key arguments for minimum markup laws is that they protect “the little guy” from the danger of predatory pricing by large and powerful corporations. Protection of small business from larger rivals was the stated purpose for the minimum markup laws that have existed around the country since the 1930s, including the one in Wisconsin. But claims that minimum markup requirements will protect small business have rarely been tested. If they are true, then one would expect that states with minimum markup protection would have a larger small business sector than states that do not. One would also expect that states that single out gas stations for special “minimum markup” treatment – like Wisconsin – would have more stations than those who do not.

This study tests these claims. Using a rigorous econometric analysis of data from all 50 states, we conducted an extensive analysis of the effect of minimum markup laws on the number of small business retailers and the number of gas stations in a state. Quite simply, we found that minimum markup laws do not achieve their stated purpose.

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