Kansas Motor Fuels Legislation - Staff Comment

UNITED STATES OF AMERICAFEDERAL TRADE COMMISSIONWASHINGTON, D.C. 20580Bureau of CompetitionBureau of EconomicsOffice of Policy PlanningMarch 12, 2004The Honorable Les DonovanAssistant Majority Leader, Kansas SenateKansas State Capitol,Room Number: 120-Sth300 SW 10 St.Topeka, KS 66612Re: Comment on Kansas House Bill No. 2330Dear Senator Donovan:The staffs of the Federal Trade Commission’s Bureau of Competition, Bureau ofEconomics, and Office of Policy Planning are pleased to respond to your request for commentson Kansas House of Representatives Bill No. 2330 (the “Bill”), which concerns the sale of motorfuel. The bill would prohibit a “marketer” or “retailer” from selling motor fuel below cost,without any showing that the below-cost sale harmed competition. The Bill would allow thestate to seek injunctive and monetary relief, and would allow aggrieved private parties to seekinjunctive relief and legal fees.In your letter of February12, 2004, you asked us to comment on the proposed Bill, andespecially on its “impact on the consumers of Kansas and on fair competition within the state’sborders.” A summary of our comments appears below:• Low prices benefit consumers. Consumers are harmed only if below-cost pricesallow a dominant competitor to raise prices later to supracompetitive levels. • Economic studies, legal studies, and court decisions indicate that below-costpricing that leads to monopoly occurs infrequently. Below-cost sales of ...