Seller Collusion

Seller Collusion

Walter Williams, prize-winning economist, explains how minimum price laws cost you money but are unlikely to go away.

Minimum gasoline prices

A couple of weeks ago, heading down to George Mason University, I pulled into my favorite Wawa gasoline station just off the Bel Air, Md., exit on I-95 South. At each of the 20 gasoline pumps, there was a sign posted that Wawa would no longer dispense free coffee to its gasoline customers. Why? The station was warned that dispensing free coffee put it in violation of Maryland’s gasoline minimum-price law.

Here’s my no-brainer question to you: Do you suppose that Maryland enacted its gasoline minimum-price law because irate customers complained to the state legislature that gasoline prices were too low? Even if you had just 1 ounce of brains, you’d correctly answer no. Then, the next question is just whose interest is served by, and just who lobbied for, Maryland’s gasoline minimum-price law? If you answered that it was probably Maryland’s independent gas-station owners, go to the head of the class.

Let’s first establish a general economic principle. Whenever one sees statutory or quasi-statutory minimum prices, he is looking at a seller collusion against customers in general as well as against particular sellers, those who are seen as charging too low a price. This economic principle applies whether you’re talking about minimum wages, minimum dairy prices or minimum real-estate sales commissions. Members of a seller collusion call for statutory and quasi-statutory minimum prices so they can charge customers higher prices than they could otherwise in the absence of a statutory minimum.