Wisconsin State Legislature February 20, 2009 Mr. Matthew Hauser President Wisconsin Petroleum Marketers and Convenience Store Association 121 S. Pinckney St, Suite 300 Madison, Wi 53703 ‘VIA FACSIMILE Dear Mr. Hauser, Following the October 2007 Flying decision (07-C-0144) and its impact on Wisconsin's “Unfair Sales ‘Act’, we introduced legislation (2007 AB 820) that would have addressed the concerns your association and your members have as they relate to predatory pricing and state enforcement. {At that time, your organization indicated that they opposed our legislation and preferred to seek legal remedies. While that decision was not biriding on the state, Flying J filed suit seeking an injunction against state enforcement of the motor vehicle fuel provisions of the Unfair Sales Act. (08-C-110). On February 11, 2009, Judge Rudolph Randa granted that injunction and found unconstitutional the motor vehicle fuel provisions of the Unfair Sales Act. For those who are familiar with federal antitrust law, the decision is not at all surprising, The Flying J case was the first proper court test of the state's antitrust immunity. That is, even though a state law conflicts with the Sherman Act, there are instances where the state’s interests may be immune from federal preemption. ‘The Unfair Sales Act fails the immunity test because a state may not “simply authorize price setting and enforce the prices established by private parties.” Further, as Judge Randa notes, “enforcement matters little when the Act being enforced creates a horizontal pricing mechanism. In your February 13th, letter to Attorney General, J.B. Van Hollen, you say that the decision will have the “effect of Shutting down independent retailers” because of predatory pricing from large competitors. Predatory pricing has always been illegal under the federal Sherman Antitrust Act and Wisconsin's “Mini-Sherman” law (Wis Stat § 133.03) ‘You also express confusion about the meaning of the ruling. Itis quite clear that no provision under the act is enforceable as it relates to motor vehicle fuel. The markup provisions for alcohol and tobacco products, while not part of this opinion are subject to the same immunity test that motor vehicle fuels failed. STATE CAPITOL | Madison, Wisconsin | 53707-8953‘The state cannot enforce horizontal (or vertical) price fixing schemes that allow manufacturers or wholesalers to determine a retailers selling price. This is particularly problematic when the statutorily defined cost has little to do with actual costs. Even as a below-cost-sale law, the Unfair Sales Act unlikely to survive a federal challenge. Obviously we are not experts and we are not offering legal advice, but even a casual familiarity with antitrust policy should make it clear that the era of the Unfair Sales Act has, for all practical purposes, come to an end. We are hopeful that the Attorney General refuses to appeal the decision. itis not in the state's interest. ‘As Judge Randa noted: “The national policy in favor of competition cannot be thwarted by casting such a ‘gauzy cloak of state involvement over what is essentially a private price-fixing arrangement.” ‘Again, we hope that you will reconsider your support for the Competitive Marketplace Act. We can work together to protect small retailers, consumers and competition. Sincerely, LI Votre hd KA Leah Vukmir Bill Kramer 14th Assembly District 97th Assembly District