A pro-consumer, bipartisan plan

Suthers backs plan to fix pricing law

Published December 19, 2006 at midnight

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We expect that scores of wrong-headed bills will be introduced in the 2007 session of the legislature, some of which will pass despite our best efforts. But today we rejoice in a long overdue proposal that, if passed, should actually help the consumer.

Rep. Cheri Jahn, D-Wheat Ridge, and Sen. Steve Johnson, R-Fort Collins, announced Monday they will sponsor a measure that would, at long last, repair Colorado's so-called Unfair Practices Act.

The law, around since 1937, prohibits selling goods and services below cost. "Predatory pricing," advocates called it, making it sound as though consumers might suffer from low prices. At that time it was feared that a large company could sell a particular product so far below cost it would drive out all the competition - at which point it would jack up prices beyond all reason and gouge the consumer in perpetuity.

That doesn't actually happen in today's highly competitive economy, where firms move fast in unregulated markets to undercut each other. In fact we doubt it happened in the '30s, either.

But the law has had a negative effect recently in at least two fields where consumers are especially sensitive to prices: gasoline and pharmaceuticals.

A few months ago King Soopers, Safeway and other grocery chains offered discounts of up to 10 cents a gallon based on the amount of groceries purchased. But discounts have been discontinued at all of them in the wake of a federal court decision awarding treble damages to gasoline retailers in Montrose who complained that City Market, a Soopers subsidiary, was selling "below cost."

Likewise, the well-publicized decisions by Wal-Mart and Target to sell many generic drugs for as low as $4 per prescription haven't been implemented in Colorado because the companies fear the repercussions of the same law.

Attorney General John Suthers, in whose office Jahn and Johnson announced their bill, cited recent studies showing that consumers pay higher prices in states with the below-cost sales law. "More interesting," he added, "is that studies also show that independent dealers are not better off as a result of the laws - they obtain no greater returns."

The fact is, he noted, large companies aren't going to sell products well below cost for any length of time because they'll never recoup their losses. And "below cost" is a notoriously difficult figure to ascertain in a court of law.

The proposed bill, whose final draft isn't yet available, would repeal that part of the law as it applies to gasoline sales and amend the rest to encourage lower prices.

The goal is to "unshackle competition" while protecting independent retailers from being "victimized" by monopolistic practices, the AG said.

Appropriately, Suthers quoted the late economist Milton Friedman in announcing his support for the measure: "Many people want the government to protect the consumer, but a much more urgent problem is to protect the consumer from the government."

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