Sherman Act Did Not Preempt Wisconsin’s Gasoline Pricing Regulations

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The U.S. Court of Appeals in Chicago last week ruled that Wisconsin’s gasoline pricing regulations under the Wisconsin Unfair Sales Act did not violate federal antitrust laws. The Wisconsin Unfair Sales Act, which prohibits retailers of motor vehicle fuel from selling the fuel below cost, was not unconstitutional on the ground that it was preempted by the Sherman Act.

To be preempted, the state regulatory scheme had to irreconcilably conflict with the federal scheme, the appellate court explained. The Act requires similar markups by wholesalers and refiners who sell motor vehicle fuel at retail.

A supplier of motor vehicle fuel, which maintained that it could sell motor vehicle fuel for substantially less than the statutory minimum and still make a profit, sued to enjoin enforcement of the minimum markup provisions of the Act as they related to motor vehicle fuel. The supplier argued that the motor vehicle fuel provisions facilitated price fixing by establishing a minimum price for gasoline among retailers, allowing competitors to meet but not beat others’ prices, and providing a private mechanism for enforcement. Wisconsin had created a scheme that allows retail sellers of gasoline to collude on prices to the detriment of consumers, it was alleged.

However, the Wisconsin Unfair Sales Act did not mandate or authorize Wisconsin gasoline dealers to engage in conduct that was illegal under the Sherman Act, the court ruled. The state set the minimum price formula, and the Act, on its face, did not require or authorize private participation in setting the minimum price. Thus, the minimum markup provisions were unilaterally imposed by the state and therefore not preempted by the Sherman Act.

Permanent Injunction Dissolved

A permanent injunction barring Wisconsin from enforcing the Act was dissolved, even though the state did not appeal the lower court’s decision in favor of the complaining supplier. In March 2009, Wisconsin Attorney General J.B. Van Hollen announced that his office would not appeal the district court’s decision striking down the “minimum markup law.” Van Hollen said in the statement that clarifying the statute was a task better left for the state legislature than the federal appellate court.

Trade Association Intervention

The Wisconsin Petroleum Marketers & Convenience Store Association (WPMCA), an organization representing more than 80 percent of the convenience stores in Wisconsin, did, however, file an appeal. The WPMCA was permitted to intervene after the state officials declined to appeal.

In a September 3 statement, the WPMCA said that “the decision marks the 10th time an appellate court has ruled in favor of keeping the law in place.”

The text of the September 3, 2010, decision in Flying J, Inc. v. J.B. Van Hollen, Attorney General of Wisconsin, No. 09-1883, will appear in CCH Trade Cases.