Wednesday, January 10, 2007
On this day:

More on gas prices, Kangaroo, and Costco

Saturday, the Huntsville Times editorialized on the Kangaroo-Costco squabble:
Free market?

Well, it's either a free market or it isn't. You can't have it both ways, but some people apparently want to try.

A chain of convenience stores has sued the warehouse-buying club Costco on the grounds that Costco, which operates two stores in Alabama and 500 nationwide, is violating the state's gasoline-price law.

The suit, filed in federal court by The Pantry Inc., owner of the Kangaroo Express convenience store chain, alleges that Costco sells gasoline at below cost, according to The Birmingham News.

"Cost" here is defined as the wholesale cost of the gasoline plus the cost of facilities, equipment and employees necessary to deliver it to customers.

Alabama's law, spurious as it may seem, was upheld by the federal courts in the 1990s. The greatest impact of the law is felt not by Costco - with its two state stores - but by retail giant Wal-Mart, with no fewer than nine locations in Madison County (several of which sell gasoline) and many more statewide.

The idea behind the law is that gasoline, for some reason, should be subject to a price floor. That, in turn, keeps smaller gasoline retailers in business. But such laws are not applied to soft drinks, sport jackets or toilet paper. Stores, large and small, regularly advertise some items at below cost as loss leaders to attract customers.

If an argument can be made for gasoline price controls, it can be made more effectively for a ceiling, not a floor.

Remember: In the case of Costco, people can't buy gas there unless they are members, and household memberships start at $45 a year. In addition, Costco gas pumps are usually open hours earlier than the store itself, so cheap gas as a loss leader seems a marginal idea at best.

Consumers, if they wish, ought to be able to buy gasoline at the lowest prices offered in the marketplace, even if that means paying $45 a year and driving across town or farther to save 4 cents, or whatever, on each gallon.

Costco is not for everyone. Neither is the corner convenience store. Let people vote with their hard-earned dollars.

I agree with that, and would add that in this case, the only way to "let people vote with their hard-earned dollars" is for the legislature to repeal the ill-conceived Alabama Motor Fuel Marketing Act.