A Michigan-based supermarket trying to expand into Wisconsin has come up against an absurd law against selling products at “unfairly low” prices. As reported by MLive, the Meijer grocery store chain is facing complaints that its grand opening sales violated Wisconsin law for offering products at prices below cost. Why is that bad?
The official rationale behind Wisconsin’s Unfair Sales Act of 1939 is revealing:
"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. Such practice causes commercial dislocations, misleads the consumer, works back against the farmer, directly burdens and obstructs commerce, and diverts business from dealers who maintain a fair price policy. Bankruptcies among merchants who fail because of the competition of those who use such methods result in unemployment, disruption of leases, and nonpayment of taxes and loans, and contribute to an inevitable train of undesirable consequences, including economic depression."
Some of these are simply a consequence of any market competition, a process that inevitably results in some companies failing. But the idea that there is something uniquely harmful called “unfair competition” that occurs once a product is sold below cost is just false. There are many reasons companies sell certain products at certain times for less than the cost of production. For example, grand opening sales and seasonal sales are ordinary forms of competition. It’s common in many retail sectors to use a low-priced “loss leader” product to draw customers into your store hoping they will buy other high-priced items as well.
Read more at http://www.cato.org/blog/wisconsins-unfair-sales-act-folly-antidumping-laws
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