FOR YOUR INFORMATION............................FEBRUARY 27, 1992
KANSAS' PROPOSED FUEL LEGISLATION COULD RAISE GASOLINE PRICES, FTC STAFF ADVISES
Proposed legislation before the Kansas legislature to broaden prohibitions against below-cost retail pricing of gasoline could raise gas prices for consumers in Kansas, Federal Trade Commission staff said in comments made public today. The proposed legislation, House Bill No. 2628, to amend the Kansas Motor Fuel Marketing Act, "would tend to insulate gasoline refiners and marketers from competition, and thereby could cause gasoline prices in Kansas to increase," according to the FTC staff letter signed by Claude C. Wild III, Director of the FTC's Denver Regional Office. "Bill 2628 may inhibit vigorous competition and add costs to the distribution of gasoline in Kansas that do not exist in other states," the letter says.
The staff comments cite state and Department of Energy studies that tend to refute an apparent premise of the Bill -- that refiners who own retail outlets sell gasoline to those outlets at below-cost prices in an attempt to drive franchised and independent retailers out of business. "It is similarly charged that major gasoline marketers often have subsidized 'below cost' pricing at one location by high prices at another location, and that such practices harm competitors and consumers," the letter says. "Major refiners would have little incentive to charge discriminatory prices that would cause their franchised retailers to move to different suppliers or to go out of business. A refiner that discriminated in ways that injured its franchisees and dealers would probably lose sales, leading to a lower market share, greater excess refining capacity, and higher per unit costs."
Further, the staff said, "[t]he DOE studies, based on data from the 1970's and early 1980's, and the state studies done more recently have revealed no instances of predatory behavior by major gasoline refiners." And if predatory behavior were found, it would be subject to prosecution under existing state and federal laws, the staff added.
- more - Comments to Kansas Senate--02/27/92)
The FTC staff comments further say if the bill passes, "[s]hort term price discounts designed to attract new customers may be deterred," and "[r]efiners may be prevented from realizing all the efficiencies of vertical integration, which can often reduce transaction and search costs and lower prices to consumers."
Staff comments were submitted at the request of Kansas State Senator Bill Morris, Chairman of the Senate Transportation and Utilities Committee. The comments represent the views of the staff of the FTC's Denver Regional Office and its Bureau of Competition. They are not necessarily the views of the Commission or any individual Commissioner.
Copies of the comments are available from the FTC's Public Reference Branch, Room 130, 6th St. and Pennsylvania Ave., N.W., Washington, D.C. 20580; 202-326-2222; TTY 1-866-653-4261.
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MEDIA CONTACT: Brenda A. Mack, Office of Public Affairs 202-326-2182
STAFF CONTACT: Claude C. Wild III, Denver Regional Office 1405 Curtis Street, Suite 2900 Denver, Colorado 80202 303-844-2271