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.
# # #
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
(V920006)
(Ks-com)