C-STORE SUES WOODMAN'S ON GAS PRICE

MICHAEL HARRISON

JANESVILLE, Wis. -- If supermarkets with fueling stations have to follow state-set price guidelines for gasoline, will the same restrictions one day be imposed on a store's food products? That's the question posed by an attorney defending Woodman's Supermarkets here in a civil suit brought by a company that operates convenience stores.

The plaintiff, PDQ Co., Middletown, Wis., alleges that Woodman's, a seven-store chain with fueling centers at each location, has an unfair advantage over other retailers that sell fuel because the supermarket company is not adhering to a state law that imposes an automatic 9.18% markup per gallon.

PDQ's attorney, Robert Shumaker, said his client discovered that Woodman's prices do not reflect a markup above a fluctuating daily wholesale rate. That rate is published by a fuel industry service.

An attorney for Woodman's, Robert Elliott, told SN the controversial law "equates to welfare for businesses."

According to Elliott, the law, which expanded an earlier one that imposed a 3% markup, was put in place on the premise that it would help create a more level playing field for smaller retailers. Instead, it created "legalized price fixing" that thwarts the marketing strategy of a company like Woodman's, which advertises every day low prices for all products, including gas.

"If they do it for gas, what's to stop them from doing it to groceries?" Elliott said. "Why should [the state] subsidize convenience stores? And this isn't just Woodman's. This could put Wal-Mart [Supercenters] and all the others out of business."

The state price control is contained in the latest amendment to The Wisconsin Unfair Sales Act. Enacted in 1939, the law states "The practice of selling certain items of merchandise below cost in order to attract patronage is generally a form of deceptive advertising and an unfair method of competition in commerce."

The last amendment, which took effect last August, contains a "private remedy" that, according to PDQ's lawsuit, "allows a competitor who is injured by illegal sales below cost to sue a gasoline retailer who violates" the act.

The lawsuit alleges that Woodman's "violated the Unfair Sales Act on 24 different occasions in September and October, 1998. In addition, on Nov. 25, 1998, PDQ put Woodman's on notice of 22 additional alleged violations."

Woodman's, Elliott said, "will file an answer denying the charge and contesting the validity of the legislation."

In that, the supermarket chain has an ally in Scott Jansen, the Republican speaker of the state assembly who has come out against the Act. Jensen and other assembly members are planning a press conference to air their opposition Jan. 21 at Woodman's West in Westtown, near Madison.

"Each [legislative] session [Jensen] introduces legislation to eliminate what he calls the 'price police,' " said Steve Bass, the speaker's communications director.

"He opposes the entire minimum markup law. He believes when government tries to fix prices from the top down, it almost inevitably causes more problems than it solves. We're wiser to trust the market. We're allies of Woodman's on this because Woodman's is being adversely impacted by one small part of this larger law we've been trying to get repealed for years now," Bass told SN.