Every year since 2012, I have written and complained about Idaho’s Depression-era law that hurts businesses and consumers. Here it is again:
In 1939, the Idaho Legislature passed the Unfair Sales Act. That statute says, “The practice of selling certain items of merchandise below cost in order to attract patronage is a deceptive form of advertising and an unfair method of competition. Such practice misleads the consumer, works back against the farmer, obstructs commerce and diverts business from dealers who maintain a fair price policy, with the result of unemployment, underpayment of employees, excessive working hours, nonpayment of taxes and an inevitable train of undesirable consequences including economic depression. This act is designed to make illegal such practice and to promote the general welfare of the state of Idaho.”
Idaho’s law requires that retail prices be marked up to cover the cost of doing business, and in the absence of evidence to the contrary, that the markup must be at least 6 percent. What that means is, those massively discounted items on sale, whether at the big box store or at a Main Street merchant, are illegal.
Thus, if you bought or plan to buy a virtual reality headset or the latest smartphone or a flat screen TV, and the product costs less than retail, you’re getting a great deal. But the seller is breaking state law, and at a considerable risk. The penalty for violations is $500 for each offense and up to six months in prison. The seller doesn’t have to receive any money from a customer to break the law; merely advertising a product at below cost is a crime.
Contrary to its lofty rhetoric, Idaho’s law isn’t designed to protect consumers; it is designed to have the opposite effect. In 2003, the Federal Trade Commission examined anti-competitive laws such as this one and wrote, “Minimum markup laws likely deter pro-competitive price cutting and can ultimately lead to higher prices for consumers. They can prevent efficient vendors from passing on savings to consumers, and they can discourage entry from new competitors that may be more efficient.”
I’ve said it before and I’ll say it again: Idaho’s law is bad public policy, and recognized as a known deterrent against a free market. Wherever a law like this exists, it harms the marketplace. For years, Idaho lawmakers have known that our state law is detrimental to businesses and their employees, as well as people who can afford a great Christmas only because some holiday sales are held despite the law.
Only the Legislature has the power to eliminate this anachronism, and so far, lawmakers have done little other than flirt with a repeal. Businesses in Idaho deserve better. They deserve to know that their government won’t go after them if they sell a product at below cost. For a businessman to know that he can participate in a Black Friday sale (or other post-Thanksgiving sales) without fear of government reprisal is the best Christmas present of all.