WASHINGTON (Jan. 30) – Currently, numerous states have laws on the books that establish minimum prices or mark-ups that wholesalers and retailers must charge for certain goods. These laws undermine the free market and ultimately prevent businesses from pricing competitively and passing savings onto consumers.
In a new policy paper, R Street Director of Commercial Freedom and Senior Fellow C. Jarrett Dieterle examines Wisconsin’s Unfair Sales Act and discusses why laws like this lack economic sense.
Outdated minimum pricing and minimum mark-up laws are still prevalent in states around the country and dictate the lowest prices that businesses can charge for many goods, including popular items like gasoline and alcohol. These laws conflict with long-standing retailing traditions, such as loss leader pricing, that allow consumers to buy products at the lowest price possible. Most economists, including those at the Federal Trade Commission, believe minimum pricing laws hurt consumers and are unnecessary.
The author adds, “Prohibitions against selling products below cost, or laws that mandate a certain level of mark-up, directly undercut the ability of sellers to offer the lowest prices possible to consumers.”