FOR YOUR INFORMATION...............................APRIL 22, 1992
COLORADO GAS PRICING BILL COULD RAISE CONSUMER PRICES, FTC CAUTIONS
Proposed legislation before the Colorado legislature to broaden prohibitions against below-cost retail pricing of gasoline could raise gas prices for consumers in Colorado, Federal Trade Commission staff said in testimony before the State, Veterans, and Military Affairs Committee of the Colorado State Senate.
The proposed legislation, Senate Bill No. 92-203, to amend the Colorado Unfair Practices Act, "would tend to discourage competition and thereby could cause gasoline prices in Colorado to increase," according to Claude C. Wild III, Director of the FTC's Denver Regional Office. The bill "may inhibit vigorous competition and add costs to the distribution of gasoline in Colorado that do not exist in other states," he told the Committee at its hearing today.
Wild's FTC-staff testimony cited 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," he said.
Wild pointed out that "[m]ajor 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."
- more - Colorado Gas Pricing--04/22/92)
Further, Wild 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 or price discrimination were found, it would be subject to prosecution under the existing Colorado Unfair Practices Act and federal laws, including the Sherman Act, the Federal Trade Commission Act, and the Clayton Act, including its Robinson-Patman Act amendments.
He also said that if the bill passes, "it may deter short term price discounts designed to attract new customers," and "prevent refiners from realizing all the efficiencies of vertical integration that can often reduce transaction and search costs and lower prices to consumers."
The testimony was delivered at the request of Colorado State Senator Tom Norton, Chairman of the State, Veterans and Military Affairs Committee. The testimony represents 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 Commis- sion or any individual Commissioner.
Copies of the testimony 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: Howard Shapiro, Office of Public Affairs 202-326-2176
STAFF CONTACT: Claude C. Wild III, Denver Regional Office 1405 Curtis Street, Suite 2900 Denver, Colorado 80202 303-844-2271