Logistics Management

Dave Schneider

The Slick Slope of Regulation…
June 23, 2008

For most of use that are gray of hair and have been around for a while, we remember the dark days of transportation regulation as a bit of nightmare. A federal government agency commission controlled the rates that carriers got to charge. There was limited competition, and in many cases no real incentive for innovation that could reduce costs.

Lately there has been quite a bit of populist rhetoric by persons seeking political office about establishing a “windfall” profits tax upon the oil companies that do business here in the US. This is a fall back to another “nightmare” of times, it was done in the past and, as some argue, not only did not work, but is the cause of some of the oil market conditions that we face.

On June 5 Illinois Senator Dick Durbin introduced a bill that would reduce and regulate the processing fees that Visa, MasterCard, and other credit card companies charge retailers. Mr. Durbin suggests that these interchange fees increase the costs that are paid by consumers.

I don’t know about you, but I was brought up to believe that there was NO FREE LUNCH.

I, and many others, have entered business to provide a livelihood for ourselves, our families, and our associates. We do that by providing goods and services that cover costs and generate a profit. Without profit there is little incentive to run the business.

The oil companies are in business to make a profit providing goods (energy, chemicals, and lubrication products) and services (exploration, refining, distribution, and marketing) to customers. The credit card processors are in business to provide a service (a fast and reliable credit clearing house process) to retailers so that the retailer can grow their business by providing easy payment processes to their customers. In both cases these companies are engaged in commerce to make a profit.

In a free market economy such as we enjoy here in the US companies are given the freedom to choose what price they charge for the goods and services they provide. The market place provides a form of natural control over the profit margin. If the price is too high the customers stop buying the goods or service. We can see that in action today with the reduced demand on oil and gasoline, as American drivers drive less and move to smaller automobiles.

If the retailers find that they cannot compete on price with the credit card fees, they will provide some form of competitive pricing for case business. Remember the old Cash vs. Credit Price on the gas pumps? And how many stores or restraints have you been to where there was a minimum charge on credit purchases?

Funny, I was listening to the Florida State CFO (yeah, State CFO) rail against off shore drilling, spouting some half truths about how much risk it would put the Florida economy into.  She did not care if there was drilling in Alaska, or the mountains of Colorado, or off shore in Louisanna.  Just don't do it off my shores.  "Not In My Back Yard" reaction and "noise".  

At what point does everyone wake up and realize that we are cutting our freedom away in a death march of a thousnad cuts?  Windfall tax oil.  Limit Creidt Card Fees.  What is next, you can only drive a 1,500 pound automobile?  Would we accept being told that we can have only one child, and we can not have less than one? 

Posted by Dave Schneider on June 23, 2008 | Comments (1)