… at least when it comes to rides to the airport:
In 2009, the city passed a law requiring a $50 minimum fare for limousine and sedan rides to or from Portland International Airport. The law imposes a city-wide minimum fare that requires limos and sedans to charge at least 35 percent more than what taxis would charge for the same route and imposes a minimum wait time of at least one hour before customers can be picked up….
Portland’s Revenue Bureau recently targeted two limo and sedan companies—Towncar.com and Fiesta Limousine, both of which joined IJ to file suit against the city—for offering promotional fares on the daily deal website Groupon.com. When the companies offered their customers $32 one-way trips to the airport, city enforcers immediately threatened them with a combined $895,000 in fines and suspension of their operating permits. The companies canceled the promotions and refunded their customers.
This is, of course, rank economic protectionism of the worst sort. Consumers certainly don’t benefit from the rules — only taxicab companies do.
And believe it or not, this sort of thing is not at all rare. See, for example, Wisconsin’s minimum-markup law, which requires — I’m not making this up — a 9.2 percent markup on gasoline, and forbids establishments to use “loss leaders.” Those are items sold below cost to entice customers, who then buy other goods and services sold above cost, for a net gain to the retailer. Here in Virginia, gasoline retailers have sought similar statutes to prevent big-box stores such as Costco from underpricing them.
Of course, governments also often try to set not only price floors, but price ceilings — see, e.g., this recent New York Times story out of Venezuela on how price controls there are creating shortages of essential goods such as milk and toilet paper. Many states — including Virginia — have anti-price gouging statutes, even though so-called price-gouging in the aftermath of a disaster is an efficient way to prevent hoarding and encourage conservation:
Bucko’s was not circumventing the marketplace but responding to it. Asexplained when I asked why he had raised his prices so much that Friday: He had “sold more gas in one day than I ever had in a lifetime. The cashiers couldn’t keep up” — and he was afraid he was going to run out….
In fact, there were reports of “panic buying” throughout the region. According to the, , , “Area and state consumers were in what can only be described as panic buying Friday as gasoline prices spiked … .The crunch at the and some other local stations began Thursday night as motorists began topping off their tanks and filled cans of gasoline for their personal reserves.”
As it turns out, many service stations did run out of gasoline. On Sept. 15, in the news story, “Gas Woes Hurt Roanoke Station Owners,”reported that such stations “are hurting after Hurricane Ike sent prices soaring and put people in a frenzy. In fact, the Pure on Franklin Road is one of the many stations in our area that ran out of … . ran out Saturday and has not had as much business in their store since … .Other gas stations in our area including some Sheetz stations and at least one 7-Eleven are also waiting for a new shipment of gas.”
So, just to review: Supplies had dropped, and demand was skyrocketing. According to the attorney general’s office, Bucko’s committed the unconscionable sin of briefly raising gasoline prices by a dollar and change per gallon. This short-term hike had the effect of reducing demand — Bucko’s sold no more than 80 gallons at the steeper prices — the result of which was that Bucko’s, unlike many other gasoline retailers, did not run out of gasoline.
And let’s not forget that when two suppliers have identical prices, this leaves them open to charges of price-fixing and collusion.
In short, it’s a safe bet that if you’re selling a product or service, you’d be wise to make sure that your prices are not lower than your competitors’ prices, or higher than your competitors’ prices, or the same as your competitors’ prices.
Other than that, it’s a free market, pal.
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