Wisconsin State Legislature February 20, 2009 ‘The Honorable J.B. Van Hollen Attorney General of the State of Wisconsin P.O. Box 7857 ‘Madison, Wi 53707-7857 via, DELIVERY Dear Attorney General Van Hollen: We are writing today to encourage you to allow Chief Judge of the Eastern District of Wisconsin, Rudolph Randa’s decision in Flying J, Inc v. J.B. Van Hollen (08-C-110) to stand. {As you know (or should know), Judge Randa’s opinion relied entirely on a century of clear, consistent and unambiguous antitrust precedent established by the United States Supreme Court. itis difficult to find any compelling factors that would support a reversal, particularly at the appellate level ‘The only recent, significant reversal in this line of case law occurred in Leegin (2007) as it relates to the “rule of reason” standard in vertical price restraints. As Judge Randa pointed out, however, the State failed to demonstrate an economic justification to impose this restraint even under this newer standard. The court also noted that the economic evidence provided by the Federal Trade Commission and other scholarly research undermines any legitimate economic purpose for the Unfair Sales Act. The opinion lays bare the only purpose the Unfair Sales Act was designed to serve; itis a state- enforced private price fixing scheme that displaces price-based competition by authorizing and enforcing cartel conduct among private retailers. Sellers may lower their price to match (but not undercut) a competitor. A seller that undercuts the cartel price can be sued by a competitor and fined up to $5,000 per day by the state. Short of a substantial change in economic theory at the U.S. Supreme Court, Wisconsin's Unfair ‘Sales Act is destined to rest on the ash-heap of dozens of similar state laws that have been struck down over the decades. Despite the compelling weight of the decision, we know the Wisconsin Petroleum Marketers and Convenient Store Association has requested that you appeal Judge Randa’s decision. WPMCA members have been contacting legislators asking them to make the same request. STATE CAPITOL P.O. Box 8953 | Madison, Wisconsin | 53707-8953Matt Hauser, writing on behalf of the cartel, makes the absurd claim that the decision will have the “effect of shutting down independent retailers” because of predatory pricing from large competitors. Mr. Hauser appears to be unaware of the purpose of the Sherman Antitrust ‘Act and Wisconsin’s “Mini-Sherman” law (Wis Stat § 133.03). Predatory pricing is already illegal and continues to be following this decision. Wisconsin's Unfair Sales Act has nothing to do with predatory pricing; it is, as Judge Randa notes, “state involvement over what is essentially a private price-fixing arrangement.” We anticipated this decision following the October 2007 opinion by Federal Magistrate William Callahan in forebear Lotus Business Group, LLC v. Flying J, Inc. (07-C-0144}. Subsequent to that decision, we attempted to obtain the support ‘of the WPMCA for legislation (2007 AB 820) that directly addresses predatory pricing practices. We provided a two-pronged enforcement mechanism that deals with both actual and potential predatory pricing. We based our standards on those used by the Federal Trade Commission and the same line of court opinions that produced the Randa decision. What has become clear is that despite the economic and legal facts, the case law, the experience of the forty-nine other states (no other state has a law that even approximates Wisconsin's), the WPMCA does not want price-based competition. They want to maintain the price cartel. This ultimately is the crux of the problem with The Unfair Sales Act. The law has no purpose other than to protect the interests of individual competitors to the detriment of consumers. ‘The law discourages pro-competitive conduct even when there is no possibility of harming competitors or competition The motor fuel provisions have exposed the weakness in the rest of the Unfair Sales Act as well. The supporters prefer litigation because it precludes and delays legislation action. We prefer a solution that protects small retailers and consumers and brings certainty to the law. In 2003, Wisconsin’s Supreme Court adopted the U.S. Supreme Court's standard for predatory pricing. In Conley Publishing Group, Ltd. v. Journal Communications, inc. (2003 WI 119}, the court observed: "...The mechanism by which a firm engages in predatory pricing - lowering prices ~is the same mechanism by which a firm stimulates competition; because cutting prices in order to increase business often is the very essence of competition; mistaken inferences are especially costly, because they chill the very conduct the antitrust laws are designed to protect. It would be ironic indeed if the standards for predatory pricing liability were so low that antitrust suits themselves became a tool for keeping prices high.” Justice Prosser, writing for the majority, added: “Adoption of a predatory pricing standard authorizing successful claims when no harmful activity has occurred would be detrimental to market competition and consumer welfare in Wisconsin.”‘The Unfair Sales Act undermines and works against all of these principles. We again ask that you stand with consumers, the United States Supreme Court and the Wisconsin Supreme Court. Let Chief Judge Randa’s ruling stand. Standing with the cartel is bad politics, bad policy and bad law. a Mb: Te Sincerely, LA) Leah Vukmir Bill Kramer STATE REPRESENTATIVE ‘STATE REPRESENTATIVE 14" Assembly Di 97" Assembly District cc: F. James Sensenbrenner, Representative, U.S. House of Representatives James E. Doyle, Governor, State of Wisconsin Mike Sheridan, Speaker, Wisconsin State Assembly Russ Decker, Majority Leader, Wisconsin State Senate Jeff Fitzgerald, Republican Assembly Leader, Wisconsin State Assembly ‘Scott Fitzgerald, Republican Senate Leader, Wisconsin State Senate