This is an archived article that was published on sltrib.com in 2005, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
At a time when fuel prices are straining family budgets, some Utah legislators want to extend a state law aimed at preventing big gas retailers like Wal-Mart and Albertsons from lowering their prices.
The lawmakers support the measure despite a warning from Utah's attorney general that it is unconstitutional and doesn't do what it says: protect smaller station owners and consumers.
Two years ago, the AG's office stopped trying to enforce the Utah Motor Fuels Marketing Act, a law that prohibits anyone from selling gasoline below cost in an attempt to drive their competitors out of business. And on Wednesday, Assistant Attorney General Tony Patterson told members of the Business and Labor Interim Committee the law should be allowed to expire.
"This law wasn't designed to protect consumers, it was written to protect retailers," Patterson said. "The Federal Trade Commission along with state and federal courts across the country have found that predatory pricing, which leads to a monopoly, rarely if ever occurs."
The Motor Fuels Marketing Act was adopted in 1981 at a time when many Utah legislators were convinced that the nation's big oil companies were poised to swoop in and take over the retail distribution of gasoline in the state. By making it illegal to sell below cost, legislators hoped to protect the state's small retailers so the big oil companies would never get the freedom to charge exorbitant prices for their gasoline.
The threat, though, never materialized. In the years since the law was passed, the nation's big oil companies backed away from much of their involvement in the retail gasoline marketplace nationwide. Now there are complaints that megaretailers such as Smith's Food and Wal-Mart are charging illegally low prices for their gasoline.
"The market changed," Patterson said. "And this law didn't prevent it from changing."
Nor did it uncover any big conspiracy.
In the 1990s, prior to the emergence of the megaretailers, some small gasoline sellers in Utah complained that big retail chains such as Maverik Country Stores were selling gasoline below cost. The AG's office investigated and found that wasn't the case.
"Everytime we'd investigate, we'd end up putting a company through a costly investigation only to find they weren't violating the law," Patterson said, indicating those probes typically were sparked by the complaint of a competitor.
"We don't want to use the big stick of government to beat down competition."
Plus, the Utah Constitution supports letting the marketplace set prices, Patterson said.
But Sen. Scott Jenkins, a Republican from Plain City, believes large retailers, not the government, are hurting competition, which in turn could harm consumers.
"Many of the retailers I've talked to say they make no money from the sale of gasoline. While the big retailers ought to be able to use their purchasing power to lower prices, they shouldn't be able to push the price down and keep it down until they drive someone out of business," Jenkins said.
John Hill, executive director of the Utah Petroleum Marketers and Retailers Association, argued the presence of independent service stations and convenience stores fosters competition and helps keep the price of gasoline down for everyone. And Rolayne Fairclough of AAA Utah said if the Legislature allows the law to sunset - it is scheduled to expire July 1, 2006 - gas prices would actually go up.
"Lack of competition in Utah is one of the key factors keeping our prices high right now," she said.
On a motion by Rep. Jackie Biskupski, D-Salt Lake City, the interim committee voted 9-4 to recommend that the Legislature extend the law another five years.
"It is clear that this law is serving a purpose," she said.
Patterson, however, said Jenkins' fears that large retailers will limit competition are unfounded. "Albertsons is not going to put ConocoPhillips out of business."
He said companies such as Wal-Mart, Costco and Albertsons are using their purchasing power to buy large quantities of gas cheaply. "Do we want to tell someone like Smith's that they can't use their market muscle to get a lower price so they can pass it on to their customers?"