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STATE CAPITOL
P.O. Box 8953 | Madison, Wisconsin | 53707-8953
 
To:
 
All
 
Legislators
 
From:
 
Representatives
 
Bill
 
Kramer,
 
Leah
 
Vukmir,
 
Jason
 
Fields,
 
and
 
Senator
 
Tim
 
Carpenter
 
Date:
 
March
 
10,
 
2009
 
Re:
 
Co
‐
Sponsorship
 
of 
 
LRB
‐
0924/1;
 
The
 
Competitive
 
Marketplace
 
Act,
 
repealing
 
the
 
Unfair
 
Sales
 
Act,
 
or
 
the
 
minimum
 
markup
 
law
 
DEADLINE:
 
Friday,
 
March
 
20
th
,
 
2009,
 
by
 
5:00
 
PM.
 
SUMMARY
 
On
 
February
 
11,
 
2009,
 
Judge
 
Rudolph
 
Randa
 
of 
 
Wisconsin’s
 
Eastern
 
District
 
Court
 
issued
 
his
 
ruling
 
in
 
Flying
 
J,
 
Inc.
 
v.
 
Van
 
Hollen
 
where
 
he
 
struck
 
down
 
the
 
portion
 
of 
 
Wisconsin’s
 
Unfair
 
Sales
 
Act
 
that
 
mandated
 
up
 
to
 
a
 
nine
 
percent
 
markup
 
on
 
the
 
price
 
of 
 
gasoline.
 
Judge
 
Randa
 
held
 
that
 
Wisconsin’s
 
law
 
violated
 
federal
 
antitrust
 
laws,
 
also
 
known
 
as
 
the
 
Sherman
 
Act,
 
and
 
ultimately
 
harmed
 
consumers.
 
Today,
 
Attorney
 
General
 
JB
 
Van
 
Hollen
 
announced
 
that
 
he
 
would
 
not
 
appeal
 
this
 
decision.
 
Appropriately,
 
the
 
Attorney
 
General
 
noted,
 
“the
 
 public
 
 policy 
 
considerations
 
that 
 
underlie
 
the
 
minimum
 
markup
 
law 
 
can
 
be
 
better 
 
addressed 
 
by 
 
the
 
legislature
 
than
 
by 
 
a
 
court 
 
through
 
an
 
appeal.
 
It 
 
may 
 
well 
 
be
 
on
 
appeal 
 
that 
 
the
 
Court 
 
would 
 
attempt 
 
to
 
clarify 
 
the
 
statute,
 
in
 
effect,
 
rewriting
 
it.
 
That 
 
is
 
the
 
 job
 
of 
 
the
 
legislature.” 
 
THE
 
COMPETITIVE
 
MARKETPLACE
 
ACT
 
The
 
Competitive
 
Marketplace
 
Act
 
(CMA)
 
will
 
replace
 
the
 
existing
 
Unfair
 
Sales
 
Act.
 
The
 
CMA
 
addresses
 
the
 
concerns
 
of 
 
Wisconsin’s
 
business
 
owners
 
and
 
consumers
 
by
 
allowing
 
retailers
 
to
 
compete
 
freely
 
for
 
their
 
customers’
 
patronage.
 
In
 
drafting
 
this
 
legislation,
 
we
 
carefully
 
considered
 
the
 
potential
 
impact
 
that
 
repealing
 
the
 
current
 
law
 
would
 
have,
 
and
 
what
 
steps
 
could
 
be
 
taken
 
to
 
ensure
 
that
 
Wisconsin
 
has
 
a
 
competitive
 
and
 
vibrant
 
marketplace.
 
The
 
Competitive
 
Marketplace
 
Act
 
draws
 
its
 
language
 
and
 
construction
 
from
 
three
 
separate
 
sources
‐
the
 
Federal
 
Trade
 
Commission
 
Act,
 
the
 
Wisconsin
 
Supreme
 
Court
 
and
 
current
 
statutes.
 
 
 
The
 
Wisconsin
 
Supreme
 
Court
 
adopted
 
a
 
federal
 
standard
 
for
 
determining
 
anticompetitive
 
pricing
 
in
 
2003
 
and
 
we
 
have
 
incorporated
 
the
 
language
 
into
 
the
 
new
 
Act.
 
As
 
the
 
court
 
notes,
 
from
 
a
 
long
 
line
 
of 
 
federal
 
predatory
 
pricing
 
cases:
 
"predatory 
 
 pricing
 
schemes
 
are
 
rarely 
 
tried,
 
and 
 
even
 
more
 
rarely 
 
successful,
 
and 
 
the
 
costs
 
of 
 
an
 
erroneous
 
 finding
 
of 
 
liability 
 
are
 
high.
 
The
 
mechanism
 
by 
 
which
 
a
 
 firm
 
engages
 
in
 
 predatory 
 
 pricing
‐
lowering
 
 prices
‐
is
 
the
 
same
 
mechanism
 
by 
 
which
 
a
 
 firm
 
stimulates
 
competition;
 
because
 
cutting
 
 prices
 
in
 
order 
 
to
 
increase
 
business
 
often
 
is
 
the
 
very 
 
essence
 
of 
 
competition;
 
mistaken
 
inferences
 
are
 
especially 
 
costly,
 
because
 
they 
 
chill 
 
the
 
very 
 
conduct 
 
the
 
antitrust 
 
laws
 
are
 
designed 
 
to
 
 protect.
 
It 
 
would 
 
be
 
ironic
 
indeed 
 
if 
 
the
 
standards
 
 for 
 
 predatory 
 
 pricing
 
liability 
 
were
 
so
 
low 
 
that 
 
antitrust 
 
suits
 
themselves
 
became
 
a
 
tool 
 
 for 
 
keeping
 
 prices
 
high.” 
 
(at
 
¶27,
 
citations
 
omitted).
 
The
 
Court,
 
added,
 
“Adoption
 
of 
 
a
 
 predatory 
 
 pricing
 
standard 
 
authorizing
 
successful 
 
claims
 
when
 
no
 
harmful 
 
activity 
 
has
 
occurred 
 
would 
 
be
 
detrimental 
 
to
 
market 
 
competition
 
and 
 
consumer 
 
welfare
 
in
 
Wisconsin.” 
 
(at
 
¶28).
 
Thus,
 
the
 
Court
 
adopted
 
the
 
Brooke
 
Group
 
standard.
 
In
 
order
 
to
 
be
 
anticompetitive
 
(predatory),
 
the
 
seller’s
 
price
 
must
 
be
 
set
 
below
 
an
 
appropriate
 
measure
 
of 
 
the
 
seller’s
 
cost
 
and
 
the
 
seller
 
must
 
have
 
a
 
dangerous
 
probability
 
of 
 
recouping
 
the
 
seller’s
 
investment
 
in
 
below
−
cost
 
pricing
 
by
 
later
 
raising
 
prices
 
above
 
competitive
 
levels.
 
Under
 
the
 
Competitive
 
Marketplace
 
Act,
 
using
 
language
 
from
 
the
 
Federal
 
Trade
 
Commission
 
Act,
 
we
 
also
 
provide
 
the
 
Department
 
of 
 
Agriculture
 
Trade
 
and
 
Consumer
 
Protection
 
a
 
process
 
for
 
evaluating
 
and
 
preventing
 
below
‐
cost
 
pricing
 
conduct
 
that
 
is
 
likely
 
to
 
cause
 
direct,
 
substantial,
 
and
 
reasonably
 
foreseeable
 
injury
 
to
 
consumers.
 
DATCP
 
is
 
also
 
given
 
the
 
authority
 
to
 
create
 
rules
 
that
 
are
 
consistent
 
with
 
FTC
 
findings
 
regarding
 
predatory
 
pricing
 
practices.
 
These
 
provisions
 
will
 
allow
 
DATCP
 
to
 
evaluate
 
and
 
prevent
 
anticompetitive
 
pricing
 
practices
 
that
 
may
 
be
 
occurring
 
in
 
this
 
state
 
as
 
well
 
as
 
practices
 
that
 
the
 
FTC
 
discovers
 
in
 
other
 
states
 
The
 
Department
 
of 
 
Justice
 
may,
 
independently
 
or
 
together
 
with
 
DATCP,
 
investigate
 
and
 
stop
 
below
‐
cost
 
pricing
 
practices
 
that
 
are
 
likely
 
to
 
injure
 
competition
 
and
 
consumers.
 
If 
 
the
 
Department
 
of 
 
Justice
 
or
 
a
 
District
 
Attorney
 
believes
 
a
 
seller
 
is
 
employing
 
anticompetitive
 
pricing
 
practices,
 
they
 
may
 
bring
 
an
 
action
 
under
 
Wisconsin’s
 
mini
‐
Sherman
 
Antitrust
 
law
 
(Wis
 
Stat
 
§
 
133.03).
 
The
 
new
 
Act
 
increases
 
the
 
maximum
 
fine
 
for
 
violating
 
the
 
antitrust
 
laws
 
from
 
$100,000
 
to
 
$1,000,000.
 
Under
 
133.03,
 
a
 
violator
 
may
 
be
 
charged
 
with
 
a
 
Class
 
H
 
felony
 
and
 
injured
 
parties
 
have
 
the
 
right
 
to
 
seek
 
treble
 
damages
 
and
 
court
 
costs.
 
DETAILS
 
OF
 
THE
 
ACT
 
Under
 
the
 
bill,
 
anticompetitive
 
(predatory)
 
pricing
 
and
 
pricing
 
that
 
injures
 
competition
 
are
 
prohibited.
 
Anticompetitive
 
pricing
 
is
 
a
 
violation
 
of 
 
Wisconsin’s
 
antitrust
 
law.
 
Pricing
 
that
 
injures
 
or
 
could
 
injure
 
competition
 
is
 
enforced
 
by
 
The
 
Department
 
of 
 
Agriculture,
 
Trade
 
and
 
Consumer
 
Protection
 
and
 
the
 
Department
 
of 
 
Justice.
 
 
 
Anticompetitive
 
Pricing
 
(below
‐
cost
 
pricing)
 
Anticompetitive
 
pricing
 
occurs
 
when
 
a
 
seller’s
 
price
 
is
 
less
 
than
 
an
 
appropriate
 
measure
 
of 
 
the
 
sellers
 
cost
 
and
 
the
 
seller
 
has
 
a
 
dangerous
 
probability
 
of 
 
recouping
 
their
 
losses
 
in
 
below
‐
cost
 
pricing
 
by
 
later
 
increasing
 
their
 
price
 
above
 
a
 
competitive
 
level.
 
The
 
Department
 
of 
 
Justice
 
or
 
a
 
District
 
Attorney
 
may
 
commence
 
an
 
action
 
against
 
a
 
seller
 
who
 
engages
 
in
 
anticompetitive
 
pricing.
 
A
 
violator
 
may
 
be
 
found
 
guilty
 
of 
 
a
 
class
 
H
 
felony
 
and
 
may
 
be
 
fined
 
up
 
to
 
$1,000,000.
 
Parties
 
who
 
believe
 
they
 
have
 
been
 
injured
 
may
 
pursue
 
a
 
civil
 
action
 
against
 
a
 
seller
 
for
 
treble
 
(triple)
 
damages
 
and
 
court
 
costs.
 
Such
 
cases
 
may
 
include
 
a
 
class
 
action.
 
Pricing
 
that
 
Injures
 
Competition
 
Pricing
 
that
 
injures
 
competition
 
occurs
 
when
 
a
 
seller’s
 
price
 
is
 
less
 
than
 
an
 
appropriate
 
measure
 
of 
 
the
 
sellers
 
cost
 
and
 
poses
 
a
 
direct,
 
substantial
 
and
 
reasonably
 
foreseeable
 
injury
 
to
 
consumers
 
and
 
not
 
outweighed
 
by
 
countervailing
 
benefits
 
to
 
competition.
 
The
 
Department
 
of 
 
Agriculture,
 
Trade
 
and
 
Consumer
 
Protection,
 
may
 
conduct
 
a
 
hearing
 
to
 
determine
 
if 
 
a
 
seller’s
 
pricing
 
injures
 
competition
 
or
 
consumers.
 
If 
 
the
 
department
 
finds
 
that
 
the
 
seller’s
 
price
 
injures
 
competition,
 
the
 
department
 
shall
 
prepare
 
written
 
findings
 
and
 
may
 
issue
 
an
 
order
 
requiring
 
the
 
seller
 
to
 
cease
 
the
 
violation
 
and
 
assess
 
a
 
penalty
 
of 
 
up
 
to
 
$2,500.
 
Such
 
an
 
order
 
is
 
subject
 
to
 
 judicial
 
review.
 
The
 
Department
 
of 
 
Justice
 
may
 
independently
 
pursue
 
an
 
action
 
to
 
restrain
 
the
 
practice
 
under
 
a
 
temporary
 
or
 
permanent
 
injunction
 
and
 
assess
 
a
 
penalty
 
of 
 
up
 
to
 
$2,500.
 
Such
 
an
 
order
 
is
 
subject
 
to
 
 judicial
 
review.
 
As
 
an
 
alternative,
 
DATCP
 
or
 
the
 
Department
 
of 
 
Justice
 
may
 
accept
 
a
 
seller’s
 
written
 
agreement
 
to
 
stop
 
pricing
 
that
 
is
 
alleged
 
to
 
be
 
in
 
violation.
 
DATCP
 
may
 
promulgate
 
rules
 
for
 
administering
 
or
 
interpreting
 
the
 
Competitive
 
Marketplace
 
Act.
 
These
 
rules
 
must
 
be
 
consistent
 
with
 
federal
 
laws
 
and
 
controlling
 
legal
 
precedent
 
relating
 
to
 
predatory
 
pricing.
 
WHAT
 
IS
 
THE
 
CURRENT
 
STATE
 
OF
 
THE
 
LAW?
 
The
 
markup
 
provisions
 
for
 
alcohol
 
and
 
tobacco
 
products,
 
while
 
not
 
part
 
of 
 
the
 
opinion
 
are
 
subject
 
to
 
the
 
same
 
immunity
 
test
 
that
 
motor
 
vehicle
 
fuels
 
failed.
 
The
 
state
 
cannot
 
enforce
 
horizontal
 
(or
 
vertical)
 
price
 
fixing
 
schemes
 
that
 
allow
 
manufacturers
 
or
 
wholesalers
 
to
 
determine
 
a
 
retailers
 
selling
 
price.
 
This
 
is
 
particularly
 
problematic
 
when
 
the
 
statutorily
 
defined
 
cost
 
has
 
little
 
to
 
do
 
with
 
actual
 
costs.
 
Even
 
as
 
a
 
below
‐
cost
‐
sale
 
law,
 
the
 
Unfair
 
Sales
 
Act
 
is
 
unlikely
 
to
 
survive
 
a
 
federal
 
challenge
 
(the
 
Act
 
defines
 
"cost"
 
in
 
a
 
way
 
that
 
the
 
Federal
 
Trade
 
Commission
 
and
 
the
 
courts
 
point
 
out
 
lacks
 
a
 
firm
 
economic
 
foundation).
 
If 
 
you
 
would 
 
like
 
to
 
co
‐
sponsor 
 
LRB
‐
0924,
 
 please
 
contact 
 
Rep.
 
Kramer’s
 
office
 
at 
 
6
‐
8580 
 
by 
 
Friday,
 
March
 
20 
th
.
 
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