Star-Tribune Editorial Board

An effort to repeal an archaic Wyoming law that prohibits sales below cost should succeed, but not for the reason offered by its supporters.

There was a time when the law probably made sense. It was passed by this state and several others in the 1930s in the wake of the Depression, and was designed to prevent deflation by keeping prices up.

But the net effect of the law today is that it hurts consumers, who could be paying less for products if it wasn't on the books.

State government has a role to play in preventing utility companies from overcharging their customers. But it's not the job of state government to tell businesses in nonregulated industries that they need to charge more for their products than they want to.

Two Natrona County Republican state senators, Charlie Scott and Tim Stubson, tried to repeal the law earlier this year, only to have their effort killed by the Minerals, Business and Economic Development Committee. Scott says his interest in the issue was sparked by a citizen who noted that despite Wal-Mart's low-cost generic drugs policy, many couldn't be sold for $4 in Wyoming because of the old below-cost law.

But the bill ran into opposition from the Wyoming Petroleum Marketers Association, which maintained it would hurt small businesses.

Scott and Stubson plan to try again. They say repeal of the law could reduce gasoline prices.

The claim could earn the bill some support, but we doubt that it's true. Gasoline retailers now have the lowest profit margin they've had since the 1970s. Out of that $4 per gallon you pay at the pump, they're only making between 8 cents and 10 cents. How much more can they afford to cut?

Let's look at the issue from a different perspective. In the 1980s and early 1990s, several states passed below-cost laws, specifically directed at motor fuel markets.

A 2004 University of Wisconsin-Whitewater study examined the impact of such laws. Researchers found that on average, five years after the law went into effect, gasoline prices had been reduced about 1 cent per gallon. The data shows that whether a state has a below-cost law or not, the effect on the price consumers pay is negligible.

Supporters of below-cost laws argue that without them, large gas retailers can charge lower, predatory prices to drive their smaller competition out of business, then charge what they want. But that hasn't happened in the states that don't have such laws.

The bottom line is that it shouldn't be up to the government to create a level playing field for everyone. Larger companies have many natural competitive advantages that their smaller counterparts have to overcome if they want to stay in business. Successful Wyoming businesses will find ways to do so -- without the government's help.