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May 2010

Wisconsin Unfair Sales Act: Unfair to Whom?

During my six years as our state’s top Consumer Protection official, I had the responsibility to administer an often-misunderstood law called the Unfair Sales Act. This law is contained within Section 100.30 of the state statutes and generally prohibits retailers from selling items below cost through what are known as “loss leaders.” The Legislature passed this law in 1939 and the Supreme Court has upheld its constitutionality.

The law states in its opening, “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 Legislature has been concerned over a number of decades that large retailers have used their superior marketing power to sell items at a cost lower than what they obtained the item for from wholesalers, and that this is done to drive competitors out of business. In the short term, the consumer may temporarily see lower prices but in the long term see higher overall prices once the competitors have been eliminated.

Many in the Wisconsin cooperative community support the law because it creates or maintains competition, which benefits consumers over the long term.

This law has been under attack for many years and is under renewed attack. A bill, AB 482, seeks to exclude the sale of prescription drugs from the law. The Wisconsin State Assembly passed the bill on a voice vote with no individual legislator’s vote being recorded.

Unlike the Assembly, a Senate committee recently took a recorded vote on the bill and rejected the bill on a 3–2 vote. The bi-partisan opponents were Senators Kathleen Vinehout (D–Alma), Dale Schultz (R–Richland Center), and Dan Kapanke (R–La Crosse). Senator Vinehout argued against the bill by noting that the bill’s supporters testified that it was important to remove the “minimum mark-up” on drug prices. Indeed, the Milwaukee Journal Sentinel prominently mentioned the “mark-up” in an April 9 editorial. However, the non-partisan Legislative Council noted to legislators that there is no “mark-up” on prescription drugs. Given this, Senator Vinehout successfully argued that the bill’s proponents needed to first understand the law before attempting to amend it in a significant way.

This confusion suggests that drug retailers like Wal-Mart, a prominent bill supporter, may be selling drugs in Wisconsin at a price higher than the law requires. Given this, it will be interesting to see if Wal-Mart begins to sell some of its most popular drugs at a new lower price. Wal-Mart can already legally sell drugs for less to consumers if it purchased the drugs at a lower price than its competitors because of its superior buying power.

Milwaukee Democratic Senators Tim Carpenter and Senator Spencer Coggs voted for the bill. Normally a committee’s rejection of a bill would mean the bill’s death, but there is a possibility a senator could make a “pulling motion” to move the bill out of the committee for a full Senate floor vote before the Legislative session ends. 

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