Gas Stations Sucessfully Sued For Charging Too Little For Gas

Published on November 21st, 2006

Discounts on gas add fuel to fools’ ire

This month, King Soopers and City Market (both owned by Kroger) were forced by a federal jury decision to cut out a program called Buy Groceries/Get Gas — which offered consumers modest savings on gas purchases.

Two “independent” gasoline stations in Montrose brought the suit and were awarded $1.4 million in damages. The jury found the big stores had violated Colorado’s Unfair Practices Act, illegally selling gas below cost.

Yes, King Soopers was selling gasoline too cheap. It’s illegal.

So let’s quickly review an old economics adage: Charge too much and you’re price gouging. Charge too little and you’re predatory pricing. Charge the same as your competitor and you’re in collusion.

Many economists maintain that laws like the Unfair Practices Act are relics.

And this pretty much says it all:

The only winners in this case are a couple of gas-station owners in Montrose and their lawyers – all of whom now will be rewarded handsomely for being unable to offer competitive prices to consumers.

10 users responded in " Gas Stations Sucessfully Sued For Charging Too Little For Gas "

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# 1 Venom Monger said, on November 21st, 2006 at 5:34 am

The only winners?

Take the more objective view: the original purpose of these laws were to keep the big guys (think Wal Mart, who is pushing to repeal them in various places) from selling gas at a loss for the purpose of putting the little guys out of business.

No thanks. I’ll pay a couple of cents extra to keep my options open. It’s already too late for a lot fo businesses. They’ve pretty much killed off most of the local pet stores, florists, independent grocers, hardware stores, and so on.

# 2 Richard Ahlquist said, on November 21st, 2006 at 5:46 am

Thats a little short sighted Venom. No matter what the price for gas people will buy it. My proof? I see it every day. I live in a rural area in Georgia. There is a nearby Hess station that has been charging $1.98 for 2 months. Directly across the street is a Chevron charging $2.02-2.09 depending on the day. The next offramp down the freeway (about 1.5 miles) is a Shell charging $2.19. Guess what? People still buy gas at the Shell. Why? Because its convenient. It may cost someone another $2.20 for a 10 gallon fill-up but they don’t care if its easier for them to go there. Heck I have filled up at the Chevron some days because the Hess doesn’t carry the selection of energy drinks I like.

Predatory pricing can be a problem, but blanket laws in this case are not the answer. It needs to be handled on a case by case basis. Kroger here also runs a groceries / gas program. With your Kroger card its $.03/gal cheaper than their posted price and if you hit $100 in groceries your next fill-up that $.03 jumps to $.10. Is it predatory? No, its a discount for a loyal customer.

Pricing slightly below cost isnt always a bad thing, its only when its applied in huge amounts, like stores who come into a community price the competition and set all their prices below or at the same level because they are big enough to take the soaking. However offering a kickback in small amounts for loyalty isn’t a crime.

# 3 BdgBill said, on November 21st, 2006 at 7:12 am

I work in the oil biz. You can be sure that if allowed to, the big companies would give away gas for a couple of months to kill off the independents and then proceed to charge whatever they please.

In some markets it’s really the independent unbranded marketers that are controlling pricing for the area.

#2 – Just because you see cars at the pumps of the more expensive stations does not mean they are doing well. Margins are typically around 5-8 cents a gallon for regular gas. People will buy gas at stations they percieve as being more expensive but typically buy much less (just enough to last until I go to Costco this weekend).

# 4 Mike Voice said, on November 21st, 2006 at 8:59 am

1 No thanks. I’ll pay a couple of cents extra to keep my options open. It’s already too late for a lot fo businesses.

Agreed.

Anytime a company can use other income to subsidize under-cutting competitors by selling an item at below cost is worrisome to me.

Micro$oft cutting-off Net$capes “oxygen”.

Micro$oft doing the same to spreadsheet and word processing competitors by pricing the Office bundle “aggressively”.

“Dumping” of steel, DRAM chips, lumber, etc…

# 5 Mucous said, on November 21st, 2006 at 9:24 am

You know, the saddest part is that bringing gas prices down so more Americans can drive larger vehicles, more miles is the most important thing there is to maintain a life that’s worth living.

# 6 tallwookie said, on November 21st, 2006 at 12:53 pm

#3 – good point.

However – I bet the civilians in that town are less than amused about the proceedings

# 7 AB CD said, on November 21st, 2006 at 2:40 pm

Mike, when did Microsoft ever price lower than their competitors for word processing? And when have they charged for Internet Explorer after Netscape got run out of town?

# 8 mark said, on November 21st, 2006 at 6:28 pm

To #7 – You think Microsoft isn’t paying the employees who work on IE? You don’t think you’re paying Microsoft to pay those employees when you buy Windows (or are forced to buy windows because it’s not an option not to buy it, even though you’ll delete it an install Gentoo as soon as you get your new computer home….)? MS did not create IE out of the goodness of their hearts.

# 9 meetsy said, on November 21st, 2006 at 11:56 pm

whoooo…hooo, whoa whoa…back up the truck…in RURAL GEORGIA you are only paying a buck ninety-eight? $1.98????!!!! Are you a time traveler or in a time warp? Please!!!
In WA, and CA the prices haven’t dipped much below 2.50 for months and months…and OR is only a tad lower because they dont’ charge sales tax…but, right now …we’re firmly at 2.60 at most places…(for regular).
Although in WA…if you buy 50 bucks or more at SAFEWAY Grocery stores you can get up to 10cents off for one purchase. But only once, then you need to spend another 50 bucks.
I’m sick of the prices…especially so since the fed chairman doesn’t count the increase in gas prices in how he calculates “inflation”.

# 10 ECA said, on November 22nd, 2006 at 1:33 am

Interesting that the STATES NOTS HIT by Katrina are paying MORE for gas then THOSe in that area…
Im in Idaho and aint seen LESS then $2.50..

And we arnt that far from the pipelines…

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