Ed Weglarz is executive
director of the Service Station Dealers Association of Michigan, and the owner
of 10 service stations in Michigan. According to Weglarz, he and his associates
are facing a "David and Goliath" scenario that requires immediate assistance
from the Michigan Legislature.
Who is the evil Philistine giant
service station owners are facing? Everyone’s favorite retail ogre, of course:
Wal-Mart. Mr. Weglarz and his friends have gotten Sen. Mark Schauer, D-Battle
Creek and Rep. Charles LaSata, R-St. Joseph, to sponsor a bill that would
prohibit gas stations from selling gasoline above or below a certain price range
established by the state, subject to civil fines of up to $25,000 per day. The
idea is to prevent large retail chain stores like Wal-Mart and Sam’s Club from
engaging in "predatory pricing" and to ensure competition by saving local
"I’m tired of putting
money into my business rather than taking it out," Mr. Weglarz told the Senate
Committee on Labor and Commerce in January. "This is a David-Goliath scenario,
and we need you to give David a hand."
I always enjoy a good
Biblical metaphor, but this one doesn’t make sense. Unless I’ve misread my
Bible, Goliath didn’t become a fearsome giant by selling the Israelites what
they wanted at lower and lower prices. He terrorized the Israelites by force.
And while I don’t know Mr. Weglarz personally, I don’t think gas station owners
can credibly claim to be the righteous warriors who stand between auto owners
and the terror of high gasoline prices.
In fact, Mr. Weglarz is presently
trying to stand between Michigan drivers and what could amount to $200 million
in gasoline savings.
In this case, we are asked to
support the idea of gasoline price fixing based on the economic equivalent of
the "urban legend" — predatory pricing. Under the proposed bipartisan bill, the
state Legislature will decide a price range within which gasoline can be sold in
the state of Michigan. The real goal is to keep prices from falling to where
consumers would prefer them to go. These higher prices now will supposedly save
us from higher prices in the future. That makes about as much sense as having
the state Legislature in the business of managing service stations.
Haven’t we learned by now that
government is dreadfully inefficient at managing prices, or any other aspect of
business? If the appeal is to "fairness" rather than efficiency, government
certainly shouldn’t give marching orders to an entire segment of retailers based
on the conspiratorial visions of a few squeaky wheels. The best judge of
efficiency and fairness in the service station industry, as in other industries,
is the consumer. But Mr. Weglarz and his associates do not trust the consumer
to make those decisions. He is asking us to believe that it is in our interest
to save Michigan’s service station owners from the toils of competition. Those
would be the same toils that translate into consumer savings in every other
segment of Michigan’s economy.
"Predatory pricing" is
one of those "can’t prove it, can’t disprove it" terms, which makes it
convenient for tossing around by lobbyists and their allies in government.
While some ivory tower academics may persuade their students that pricing
conspiracies are a recurring threat in a free market, average consumers scratch
their heads at the notion. The fact is that one would be hard pressed to find
credible examples of consumer prices that, when adjusted for inflation,
taxation, and regulatory costs (all government-imposed), actually rose due to
the dynamic changes in retailing over the past 20 years. The fact is that
falling prices, with greater access to goods, has been the norm because of these
new retailers. And should these large retailers ever come to achieve the
cartoonish world domination predicted by their opponents, they would remain
vulnerable to the same dynamic market forces that enabled them to gain that
market share in the first place. (For more information on the myth of predatory
price cutting, see "Remembering a Classic That
Demolished a Myth: Revisiting Standard Oil and ‘Predatory Pricing,’" by Lawrence
https://www.mackinac.org/3884 and "Herbert Dow the Monopoly Breaker" by
Burton Folsom at
One demonstration of the dynamic
nature of the market is the fact that the name "service station" hardly applies
to most service stations anymore. Gone are the quaint days of "service" at many
stations. Forget mechanical repairs, getting your oil checked, or your fluids
topped off. Most "service" stations are simply a place to buy gasoline and a
few snacks. Consumers asked for these changes long before Wal-Mart ever
existed. They voted with their dollars. Markets, acting on the demands of
consumers, have been transforming service stations for some time. In Michigan,
Meijer has been selling gasoline for years. Before that, most people probably
never thought about buying their gasoline and their groceries in the same
Consider too that most people also
don’t see the need to get automotive service where they buy their gas, either.
Like most industries, we don’t recognize service stations even based on what
they looked like 20 years ago. Perhaps this would be a different discussion if
the old-style Norman Rockwell-era gas stations were still around. Who doesn’t
admire the old gas station as community cracker barrel idea? Some things just
can’t be replaced by lower prices.
But I doubt that Mr. Weglarz has
opened his stations to provide customers with a Mayberry experience. Forget the
"mom and pop" romance. He is probably in business to increase his family’s
prosperity. And like most retail customers, I shop where I can save my family
money. I wish Mr. Weglarz well in organizing his business to offer me the best
overall value. My guess is that he doesn’t need Lansing’s help.
Glenn A. Moots is assistant professor of economics at
Northwood University in Midland, Mich., and an adjunct scholar with the Mackinac
Center for Public Policy, a research and educational institute, also in