Buc-ee’s arrival into Alabama has been met with enthusiastic crowds and a welcome mat from politicians.

But 11 days after the Texas-based company opened its first non-Texas travel station, another greeting surfaced: A federal lawsuit from the Oasis Travel Station located a mere 4 miles east on Interstate 10.

Other small-sized retailers are now equally as worried about Buc-ee’s fuel-pricing strategies. They believe the company, with its innocent-looking beaver logo, wants to sink its buckteeth into the coastal Alabama fuel market, driving away the homegrown competition.

“When they first opened, they came in 12 to 15 cents under costs,” said Paul Moore, who operates eight convenient stores in Baldwin County and has been in the business for 37 years. “That really pissed us off.”

Spotlight

The lawsuit has placed the 35-year-old “Alabama Motor Fuel Marketing Act” in the spotlight, a rarity for a law that has mostly avoided the media glare in recent times.

The law was enacted during the final years of George Wallace’s tenure as governor and was backed by Democrats – some who would later become Republicans – as a way to protect locally owned convenience stores and independent gas stations from predatory pricing.

“There is a layman’s reaction, if you will, of ‘What’s wrong with cheap gas?’” said H. Dean Mooty, a Montgomery-based attorney who represents Oasis in the federal court case and who has been involved other related cases over the years. “If that were allowed … the independent folks I represent and the Alabama-based folks, they could not compete and it would run them out of business.”

He added, “In theory, the person giving the gas away could set (prices) where they want it and ultimately, the consuming public would suffer.”

The Alabama Motor Fuel Marketing Act has been upheld in the courts, and the Legislature hasn’t publicly discussed a challenge to it in about 15 years.

Some lawmakers, contacted by AL.com in the past week, were hesitant to comment, being unfamiliar with the law or with the Oasis litigation.

Said state Sen. Chris Elliott, R-Daphne: “Obviously, we want to maintain a clear playing field for our businesses. I’m a free market guy and at the end of the day, there needs to be a middle ground.”

Economists: Bad law

Economists, for the most part, take a negative view on Alabama’s law and other laws like it. The state is believed to be one of about 15 with a law regulating retail fuel prices in order to protect smaller competitors from so-called big-box retailers.

The Alabama law, passed in 1984, prohibits big retailers from selling gasoline to the public for less than its costs to buy and transport it.

That prohibits a retailer from selling fuel below cost, or at a cost lower than charged by others within the same general area. The law is aimed at preventing giant retailers from gaining market monopolies.

Carson Bays, a professor emeritus of economics at the Harriot College of Arts and Sciences at East Carolina University – who has studied fuel prices laws in other states – believes there is no evidence that pricing strategies by big-box retailers allow them to eventually dominate a market, charging what they wish.

Bays said that advocates for laws similar to Alabama believe that if smaller retailers leave a particular market, “the predator will then recover the losses by charging a monopoly price” and hammering the consumers in the pocket book.

Said Bays, “The contention is nonsense. The gas retail industry in the U.S. includes over 100,000 outlets, and entry into the industry is relatively easy. Attempting to raise the price to the monopoly level would attract new entrants quickly and make the strategy ineffective.”

Dan Sutter, a professor of economics at Troy University, said economists believe the sales-below-cost laws are meant “more to protect some of the competitors in the market as opposed to protecting competition.”

“Clearly the intent of the law is to try and protect the smaller competitors, which are also locally owned as well,” said Sutter.

Sutter, Bays and coastal Alabama-based economist Semoon Chang say that long-established federal law protects consumers from monopolies.

Chang points to one specific federal law – the Robinson-Patman Act of 1936 – which prohibits anticompetitive pricing by producers and was designed to prevent small stores from being crushed by chain stores.

“My point is that Alabama does not need the ‘Alabama Motor Fuel Marketing Act,’” Chang said. “If the problem gets serious, players can fight in the courtroom over the possible application of the Robinson-Patman Act.”

‘Cheap gas prices’

Alabama’s law, though, has been upheld in the courts including the 1992 McGuire Oil Company vs. Mapco, Inc. case in which the Alabama Supreme Court weighed in. That case involved allegations of below-cost fuel pricing in Mobile during the late ‘80s.

Mooty said that other cases have been filed over the years involving Costco and Murphy Oil, which provides fuel sales at Walmarts.

And the Legislature has shied away from retooling the law. In 2004, following a Federal Trade Commission’s suggestion that the Alabama law restricts competition, the Legislature opted to take a pass before debating whether the law should be rescinded.

Mooty maintains that the law has helped keep Alabama fuel prices low compared to national averages. And he maintains that Buc-ee’s threw an unfair punch at competitors regionwide when its opened in Alabama on Jan. 21.

According to AAA, the average price of regular gasoline in the Daphne-Fairhope-Foley area was at $2.01 per gallon last week, and $1.99 per gallon about one month ago. The lawsuit claims Buc-ee’s opened by selling gasoline at a rounded figure of $1.80.

On Wednesday of the past week, a gallon of regular gasoline was selling for $2.13 at the Oasis Travel Station. At Buc-ee’s, gasoline was selling for $1.90.

The Oasis Travel Center in Robertsdale, Ala., off of Interstate 10 at the Wilcox Road exit. (John Sharp/jsharp@al.com).

“We think in the 35-year history of the law, Alabama has had some of the cheapest gas in the country and we maintain what we consider is fair competition has served the public with relatively cheap gas prices than the rest of the country,” Mooty said.

Consumers, at least on social media, have been critical of the lawsuit and believe Oasis should lower its prices rather than go to court.

“From the consumers standpoint, they care about gasoline and other products at a big-box retailer,” said Sutter at Troy University. “They want a retailer to be as efficient as they possibly can.”

Traviss Cassidy, an assistant professor of economics at the Culverhouse College of Business at the University of Alabama, said that laws like the Alabama Motor Fuel Marketing Act might benefit rural areas, but they harm retailers in more urban areas.

Buc-ee’s is only about 30 minutes from downtown Mobile, but it’s surrounded by rural fields. The small town of Loxley, on Jan. 28, annexed the travel station into its town limits as part of a fuel and sales tax-sharing agreement with the company.

“In rural areas, there are few retailers, so one small retailer going out of business can greatly increase market concentration and thus prices,” said Cassidy, referring to limited scholarly research on sales-below-cost laws on the fuel markets. “This is not the case in urban areas, where there are many retailers, so (sales-below-cost) laws may primarily serve to increase profits and prices by discouraging entry by low-cost firms.”

Buc-ee’s case

An attorney with Buc-ee’s told AL.com that the company is aware of the Alabama law. Texas has no such law.

Those who have followed Buc-ee’s expansion through Texas believe the company will be difficult to outmaneuver in the Alabama case.

“Buc-ee’s will likely dig their heels in on this,” said Venky Shankar, director of research at the Center for Retailing Studies at the Mays Business School at Texas A&M University

He said there are several factors working in the company’s favor: Oasis is going to have to prove that Buc-ee’s priced its fuel below cost, that it did so in order to drive out local competition, that it intended to raise prices once local competitors vanished, and that it’s done this kind of thing previously.

“The relevant Alabama law is akin to predatory pricing law and in this case, proving Buc-ee’s has violated the law will be difficult,” Shankar said.

Buc-ee’s legal team is used to jostling with smaller-sized retailers in federal court but those cases mostly involved trademark disputes.

The company lost a trademark infringement case in federal court last year that pitting Buc-ee’s against Nebraska-based Bucky’s convenient stores. The case was filed by Buc-ee’s after Bucky’s, which had been in business since the early ‘80s, opened convenience stores in the Houston area.

But a federal jury ruled in Buc-ee’s favor last May in a trademark battle between Buc-ee’s beaver logo and San Antonio-based Choke Canyon’s alligator logo. Buc-ee’s, in that case, persuaded jurors that that Choke Canyon – a rival travel station in Texas – was using a logo that confused highway travelers, causing them to pull off to a Choke Canyon rather than a Buc-ee’s.

Betsy Gelb, professor of marketing at the C.T. Bauer College of Business at the University of Houston, said “the fact that they won that suit suggests to me that in the eyes of the jury, they were right.”

Gelb said she’s unsure how the Alabama lawsuit might play out. But it might not matter, she said, given the popularity of Buc-ee’s as a highway travel destination. “They are just popular,” said Gelb. “That idea of clean restrooms. Who is against that, right?”