- The Washington Times - Sunday, March 23, 2008

ANNAPOLIS — A Republican state lawmaker is pushing to repeal a “price floor” he says is keeping competition from driving down the cost of gas in Maryland.

Delegate Warren E. Miller has tried for the past three years to repeal a law that forces lower-cost gas stations, such as Wawa and Sheetz, to conform to the prices used by franchisee gas stations.

The franchisee stations, which are generally locally owned distributors for major oil companies such as Exxon, Citgo and Texaco, use a pricing system and fuel additives that make their gas cost slightly more than the unbranded gas sold at stations such as Sheetz and Wawa.

Mr. Miller, Howard Republican, said the law has stifled competition and has kept gas prices higher than they need to be.

“I thought that was the whole thing about capitalism in America: if you can do something cheaper and better, you’re supposed to do it,” Mr. Miller said.

Current Maryland law prohibits a retail service station from selling gas “below cost,” which is defined as the average “rack” reseller price determined by the Oil Price Information Service, a trade group.

A station cannot sell gas for a lower price than the rack price unless it can prove it was selling to meet competition, as part of a liquidation, for charity or because of a court or government order.

Local gas station owners say a repeal of the law would lead to “predatory pricing,” or setting prices cheaper in an effort to drive competitors out of business.

“They’re in it for the money. If they can get rid of the competition, that’s exactly what they’d like to do,” said Joe Parsley, who has leased a Shell station in Frederick, Md., since 1984 and has run gas stations since 1979. In 2000, Sheetz was pushing down from Pennsylvania into Frederick County and driving local gas stations out of business by “dramatically undercutting the market,” he said.

A full repeal of the price floor is unlikely, and Mr. Miller’s proposal has received very little attention this year — even as gas prices continue climbing toward $4 a gallon.

Under the current law, field agents from the state comptroller’s office are given three days to investigate complaints from competing gas stations and can force a station being investigated to raise its prices to the level of its competitors until the investigation is complete.

Mr. Miller is seeking a compromise that would allow stations being investigated to continue selling at their lower price for three days, until the comptroller’s office makes a determination. He said he thinks the compromise would ease the way toward a repeal next year, but state lawmakers say they are leery of any short-term gains possible through the repeal.

“For me, the concern is that for a temporary short-term gain, we aren’t driving folks out of business, and more importantly for the citizens of this state, we aren’t reducing the number of operators that are here,” said Delegate Dereck E. Davis, chairman of the House Economic Matters Committee, which is considering the repeal.

“I don’t want to create some kind of oligopoly,” said Mr. Davis, Prince George’s Democrat.

The average price of gasoline in Maryland is $3.25 for a gallon of unleaded. Maryland charges 23.5 cents per gallon tax.

Twenty-two states had “Sale Below Cost” or SBC laws similar to Maryland’s, as of 2002, according to a study published in the Journal of Urban Economics. Arkansas and Georgia both lost court battles shortly after enacting their laws and were forced to repeal them.

Supporters of the law say it was designed to help consumers. Paul Fiore, director of government affairs for the Washington, Maryland, Delaware Service Station and Automotive Repair Association, teamed with gas station owners in support of the bill in 2001.

“The law essentially maintains competition,” he said “The reality is the consumer is the winner in the end.”

John Townsend, a spokesman for AAA Mid-Atlantic, said the price floor is not friendly to motorists. He said it would be akin to the state’s forcing Wal-Mart to charge the same amount for diapers as the mom-and-pop store down the street to artificially keep local retailers in business.

“This is a corporate welfare law that boosts gasoline prices,” he said.

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