STATEMENT OF SPEAR LANCASTER
MARYLAND TAXPAYERS ASSOCIATION, INC.
TO THE SENATE FINANCE COMMITTEE
IN SUPPORT OF SB503 and SB781
Business Regulation - Motor Fuel - Below Cost Sales
February 23, 2006

Good Afternoon. I am Spear Lancaster, a long-time independent business consultant in Anne Arundel County, and am here speaking for the Maryland Taxpayers Association, Inc. to urge your committee to approve SB503 and SB781 - - - to protect the Maryland consumer by restoring serious competition to the gas pump.

For years, Maryland state government has kept gasoline prices artificially high, by stopping competition through the so-called sales-below-cost law. Taxpayer and consumer advocates now seek to open up Maryland gas pumps to competition again. The National Taxpayers Union, Americans for Tax Reform, and AAA Mid-Atlantic all weighed in to support the companion House of Delegates HB127.

For example, the National Taxpayers Union testified on January 31:

Many decades ago, Nobel Laureate economist George J. Stigler studied regulation by government and found that while it is perhaps begun under the banner of helping consumers, ultimately, the regulated firms are able to take control of the process and it ends up being beneficial to them.

Clearly, this is what has happened here. The State of Maryland decided to involve itself in consumer matters, but in the case of gasoline, the regulation benefits the regulated industry (the vast bulk of gas retailers), while it harms consumers by keeping gas prices higher than they would otherwise be.

The Wall Street Journal last year put our anti-competitive law in a national context:

Known as "sales-below-cost" laws, these restrictions take different forms but all have the same purpose: to protect smaller gas stations from larger competitors who are willing to sell fuel at cut-rate prices. Some of these laws forbid retailers from selling gas below cost, while others actually force companies to mark up their prices. Many were passed back in the 1930s, relics of a bygone era when governments fretted that gas behemoths would use predatory pricing to gain a monopoly and drive out competitors. That threat, we now know, was never very likely, and in the meantime the laws have accomplished the exact opposite -- blocking new entrants to the market and preventing pro-competitive price-cutting. [Emphasis MTA's.]

The Maryland Taxpayers Association, Inc. urges your committee to approve these two consumer-interest bills, SB503 and SB781. The law they seek to repeal was bad economics in 2001. With today's gas prices, such legislation is inexcusable. Thank you.