When I first wrote about Black Friday sales, it was truly Black Friday, in the singular sense. Since that time, the shopping extravaganza has morphed into a multi-day binge of deals. Interestingly, the shopkeepers who offer some of the best deals are criminals. Yes, criminals -- because many of the prices-so-low-your-head-will-explode sales are illegal in Idaho. Retailers risk big fines and prison time just for offering them.
In 1939, the Idaho Legislature passed a law called the Unfair Sales Act. The law reads, “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.”
The archaic, economically misguided, and anti-consumer language from the Great Depression-era Legislature remains in place and has been largely untouched since that time. The law requires retail items to be marked up by at least 6 percent. It is not just illegal to sell things below cost, per Idaho law the state government mandates the markup be at least 6 percent. That’s what makes loss-leader sales and numerous other low prices, such as those that occur on Black Friday, illegal.
The law doesn’t require a purchase for state law to be violated: merely advertising an item, which is below that 6 percent markup threshold, is punishable by a $500 fine and six months in prison for each violation. Conceivably, 30,000 newspaper circulars containing a dozen illegally-priced items would net a $180 million fine. Enforcement of the law remains possible, as does the decision to deploy it as a hammer against a retailer who gets crossways with the state’s price controls.
Idaho isn’t the only state to have passed price-regulating laws over the years, but other states have begun reversing those policies as pre-Christmas shopping sales have grown in popularity and enforcement has become impractical. In 2013, Oklahoma relaxed its Unfair Sales Act to allow below cost sales after national retailers refused to offer Oklahomans Black Friday deals because of the that state’s price restrictions.
A couple years ago in Idaho, one state lawmaker drafted a proposal to repeal the Unfair Sales Act, only to be rebuffed by his colleagues. In 2016, the Legislature may again be presented with an opportunity to eliminate this law that dictates how low a price retailers can offer consumers.
Idaho’s law isn’t designed to protect consumers; it has the opposite effect. In 2003, the Federal Trade Commission examined Wisconsin’s version of this law 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.”
On Black Friday, we thankfully get to see a robust free market in action, because Idaho’s relic Unfair Sales Act has been conveniently ignored or forgotten. But now you know about it. And so do Idaho retailers. And wholesalers. And regulators. I hope legislators repeal the Unfair Sales Act in 2016, so I might find something else to write about this time next year, and shoppers can keep more of their money or donate it to those who are in need.