WILL Press Release | Announces Lawsuit Challenging Constitutionality of Wisconsin’s Minimum Markup Law
Plaintiffs assert that it impedes their right to earn a living, freely exercise their right to engage in commerce
August 23, 2016 – Milwaukee, WI – The Wisconsin Institute for Law & Liberty has filed a lawsuit in Vilas County Circuit Court on behalf of plaintiffs Krist Oil and Robert Lotto challenging the constitutionality and legality of Wisconsin’s Minimum Markup Law.
WILL has asked for a trial in order to force the State of Wisconsin to prove that it has a reasonable and compelling interest in impeding commerce and protecting Wisconsin’s consumers from low prices.
Unlike previous legal challenges, WILL and plaintiffs are asking the Court to resolve the law’s contravention of Wisconsin’s constitutional guarantee to earn a living and to benefit from free markets.
A fact sheet is appended to this press release. WILL has also prepared a video outlining the case and explaining the current law and its adverse effect on competition.
WILL president and general counsel Rick Esenberg on the lawsuit, said, “It’s important that the State of Wisconsin publicly stand up and argue how Wisconsin’s constitutional guarantee to earn a living is secondary to ensuring that protected special interests shouldn’t have to be subject to competition and that consumers should pay higher prices than market forces would call for.”
“We certainly understand that the legislature has great discretion when it comes to making policy,” Esenberg said, “but the courts should also make clear that politicians cannot play favorites based on some fanciful and implausible notion of public benefit.”
Although the legislature is certainly capable of repealing the law (and should do so), that does not change the fact that – today – the law violates the fundamental rights of Wisconsin businesses and consumers and should be declared unconstitutional by the courts.
Background on WILL lawsuit challenging Wisconsin’s Minimum Markup Law
- Plaintiff Krist Oil is a family-owned, Michigan-based gasoline and petroleum product retailer with over seventy locations in Wisconsin and Michigan, including roughly half in northern and northeastern Wisconsin
- The lawsuit was filed on Monday, August 22 in Vilas County. Krist Oil operates a gas station and convenience store in Eagle River.
- Krist Oil believes that its business objectives are best served by providing consumers of gasoline with the best product at the lowest possible prices. The same is true with respect to other products that Krist Oil sells in connection with its convenience store operations. The company is able to freely pursue its business strategy in Michigan, which does not control the prices that it can charge. But it is not able to do so in Wisconsin.
- Plaintiff Robert Lotto is a Wisconsin citizen and resident of Green Bay. Mr. Lotto buys gasoline in Green Bay and surrounding cities and towns. Like everybody else, Mr. Lotto wants to purchase gasoline at the lowest possible price and searches for the lowest priced gasoline that he can purchase. Mr. Lotto is harmed by the Wisconsin law since it requires him to pay a price for gasoline and other products that are higher than what the competitive price would be if Wisconsin’s Minimum Markup Law were not in place.
- There have been several unsuccessful challenges to Wisconsin’s Unfair Sales Act. None of them have resolved the constitutional issue presented in this case.
- The only issue considered and decided by the Court of Appeals in the recent case of Bhandari v. Nilsestuen was whether the Unfair Sales Act violates the equal protection provisions of the Wisconsin Constitution. The Court of Appeals concluded, wrongly we believe, that it did not. But more importantly, in this case Krist Oil raises robust substantial due process claims that were not considered or decide by the Bhandari court. The focus of our complaint is that the Unfair Sales Act unlawfully restricts the economic liberty and right to earn a living guaranteed by the Wisconsin Constitution without furthering any legitimate, substantial, or compelling governmental interest. And, in contrast to Bhandari, Krist Oil is joined in this case by a consumer, Robert Lotto. Lotto alleges that the Unfair Sales Act denies him and all Wisconsin citizens the benefits of free and open competition without furthering any legitimate, substantial, or compelling governmental interest.
- There have been other state court challenges to the Unfair Sales Act in earlier years. As in Bhandari, none of those courts considered or resolved the constitutional issues presented in this case.
- The other significant and well-publicized challenge to Wisconsin’s Unfair Sales Act was in a federal court case, Flying J v. Van Hollen. That case did not involve a challenge under the Wisconsin Constitution, but rather the claim that Wisconsin’s Unfair Sales Act promoted an unlawful restraint of trade in violation of federal antitrust laws, and therefore was preempted under the Supremacy clause of the U.S. Constitution. The U.S Court of Appeals for the Seventh circuit eventually held that federal law does not preempt the statute.
- No such claims are made in this case, which involves only Wisconsin law.
Wisconsin’s Minimum Markup Law/The Unfair Sales Act
- Enacted in 1939 as a part of progressive policies to create producer cartels in the marketplace
- Requires a 6% markup for retail sales of alcohol and tobacco, and a 9.18% markup for retail sales of motor fuel
- Prohibits retailers from selling any other products below cost
- Functions as a hidden tax on consumers, except that the taxes go directly into the pockets of private businesses
- Supporters of the law claim that without it, larger retailers will engage in predatory pricing and drive smaller, mom-and-pop retailers out of business. This is obfuscation: predatory pricing is rarely if ever attempted in the modern economy and, even if it were, is already prohibited by federal law and state statutes (Sherman Antitrust Act and Wis. Stat. ch. 133)
- Law imposes mandatory price increases now in order to “protect” against speculative (and very unlikely) price increases in the future
- Based on modern economic understanding, it is no longer rational – if it ever was – to believe the Minimum Markup Law protects consumers. The evidence shows it harms not only consumers, but all market participants.