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.
# # #
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
(V920013)
(cologas)