Playing Gasoline Price Yo Yo

Free Market In Wilmington (NOT)

The manager of a Wilmington station, whom shall remain anonymous, describes the method of local gasoline price setting. “Each day I am required to check prices at other stations and report them to corporate headquarters who, in turn, tell me the price for the day.

In my opinion a competitive market means that one station would lower prices in order to increase volume of sales and entice customers to spend on convenience store purchases. But that is seldom the case in our city.

There is a name for this pricing system although no one in the industry appears to want to talk about it.

Price Cycling

http://en.wikipedia.org/wiki/Edgeworth_price_cycle

This constant up-and-down movement is a phenomenon called price cycling, said Patrick DeHaan, senior petroleum analyst for GasBuddy.com.

Price cycling, also referred to as the “follow the leader” approach, is common among gas stations in the Midwest, he said. One station raises its prices, and the others follow quickly.

Then it is followed by a number of price decreases until the price is close to marginal cost, according to a Federal Trade Commission report. This in turn triggers another large price increase, causing a roller-coaster effect.

Gas stations in similar geographic areas tend to price match, so the cost of gas appears to go up or down at the same time, according to the Attorney General’s Office. If stations explicitly agree together to raise or lower prices (also called “price fixing”), that is illegal under state and federal antitrust law.

However, without proof of an actual, explicit agreement, stations matching each other’s price increases is not illegal, the office says.

Maybe Ohio should look to Michigan for guidance.

Michigan-Successfully-Prosecutes

Congratulations are in order for the Michigan Attorney General's office, which earlier this year successfully prosecuted five cases of retail gasoline price fixing. 
Stations investigated and prosecuted for price-fixing were all located within two miles of each other in Madison Heights. An investigation by District Attorney Bill Schuette's office determined that five stations were setting their prices at an artificial level, within a penny or two of each other. The scheme, which violates Michigan's antitrust law, was an attempt to increase profits from gasoline sales by eliminating competition in the Madison Heights area.
Schuette's office began the investigation after a tip from another gas staton owner revealed that he was pressured to participate in the price-fixing operation. The investigation showed that the stations all set their prices in relation to each other on five occasions last February and March. Michigan's Antitrust Reform Act (MARA) prohibits price-fixing agreements because they undermine competitive market forces and cause artificially higher prices for consumers. 
Here are the gas stations that pleaded guilty in the 6th Circuit Court to violating Michigan's Antitrust Act: 
Read more at http://blog.gasbuddy.com/posts/Michigan-Successfully-Prosecutes-Gasoline-Price-Fixing/1715-486180-837.aspx#TEu7LBEUq7ktDDP5.99

Paul Hunter