Predatory pricing

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(Host) Commentator Tim McQuiston says that there’s a lively debate going on in the legislature about a bill proposing to eliminate the practice of predatory pricing.

(McQuiston) Just before the Iraq War began last spring, petroleum prices spiked. Fuel oil hit a dollar seventy on average here in Vermont. But at the end of March, wasn’t such a big deal because the weather was starting to warm up. Oil prices slowly fell over the ensuing months. By October, they were down under one thirty.

Then they started to rise again, and rise and rise. My January bill was one fifty-six, and prices are still climbing toward one sixty. Gasoline has followed a similar curve, only worse.

With those recent price hikes as a backdrop, the Legislature is working on a “Predatory Pricing” bill. Predatory pricing is, usually, when a large retailer or wholesaler lowers prices to break the backs of its smaller competitors and drive them out of business. It then raises prices beyond reason because there’s no one else to buy from. Sound familiar?

Fuel pricing is a frequent progenitor of such laws. Several local gasoline distributors are supporting the bill because, they say, smaller companies could be at risk from large national distributors. It’s an easy concept to understand, but it makes many business advocates UN-easy.

While several states have enacted predatory pricing laws, including our friends in New Hampshire, critics say that such laws are anti-competitive, anti-free-market, anti-business. Vermont already has that stigma, they say, and doesn’t need another law to make it worse. They add that anti-trust laws already protect competition. And even supporters of the proposed Vermont law acknowledge that the difference between competitive pricing and predatory pricing is difficult to define and to

There is a bigger issue at work, however, than recent petroleum prices. Just as in a democracy where there must be safeguards to ensure that the people don’t vote for tyranny, the sole requirement of capitalism is to ensure continued capitalism. While every business may strive to become a monopoly, the free market requires us to make sure no one does. Freedom is one thing, guaranteeing it is another.

The Vermont Senate overwhelmingly passed the legislation. Now it’s on to the House where it will meet stiffer resistance.

The latest news is that OPEC is set to reduce oil output to make sure prices don’t fall too much when the Northern Hemisphere thaws out in April. And that’s not going to give Vermont lawmakers a warm and fuzzy feeling either.

This is Timothy McQuiston.

Timothy McQuiston is editor of Vermont Business Magazine.

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