Increasingly, state below-cost sales statutes are being used to combat unfair predatory pricing.
Cases have been pursued successfully in states possessing such statutes. Most recently, Oil Express reported that a Florida jobber and two Florida dealers had succeeded in obtaining an injunction against Murphy Oil.
Basically, Murphy and Wal-Mart had promoted a "gift card program" that allowed Wal-Mart customers to receive at least a three cents per gallon discount off the street price charged for gasoline by Murphy Oil.
Finding that the gift-card program had been used systematically to facilitate below-cost sales, and not merely to meet competition, the Florida trial court enjoined Murphy Oil from making below-cost sales unless it could prove that it was in good faith meeting the price of a competitor located within fifteen miles of the offending Wal-Mart facility.

Costco and Wal-Mart are selling gasoline below the marketing areas in Florida.
Gasoline station dealers who purchase convenience store items from Costco should boycott Costco and Wal-Mart while they undersell the gasoline market. All stations in the marketing area of a Costco and Wal-Mart should file a complaint for violation of the MFMPA of Florida for selling gasoline below cost. There is no way anyone can compete with a Costco Wal-Mart type situation. Contact FIDA for complaint forms.
Florida Independent Dealers Association is committed and very involved to correct the unjust position the gasoline dealer is in. It takes a lot of time, energy and money to make changes in the gasoline industry. Call and write your state Representatives and Senators to support and vote for HB 2109 and SB 810.

Here we are in the 6th month of the new Millennium where there are changes being made, the more it stays the same. Oil Companies are violating PMPA federal statute, MFMPA (below cost) state statute, predatory pricing to eliminate competition (dealers), zone pricing (in Connecticut, Mobil has 46 price zones!!!) right of first refusal to purchase gasoline station, and many forms of retaliation against the dealers. No one is immune from the Oil Companies intimidation.
Congressman Henry Hyde, R-Ill., says weather; zone gasoline prices are legal “depends on the intent of the wholesaler.” That’s like telling the fox to guard the chicken coop with good intentions.
Again we urge everyone to contact their state elected officials and ask them to co-sponsor; support and vote yes for HB 2109 and SB 810. Those bills will be very helpful for the gasoline dealers. It will stop companies like Costco, Wal-Mart, Murphy Oil Co. and others from breaking the Florida Statute (MFMPA) below cost.

Dave Young a former executive says he gave false or misleading testimony on Chevron’s behalf to state legislators during a long running investigation into retail pricing in Hawaii.
During the information from 1989-1995 pricing probe, he said under oath that his false or misleading testimony had been prepared for him by Chevron lawyers.
The lawsuit, originally scheduled to go to trial in February, is now set for a September 2001 start

Dodson Group Workers' Compensation Dividend program paid a 20% dividend for the second consecutive year on paid premiums February 1, 1999 to January 31, 2000.
Florida Independent (gasoline) Dealers Association/Dodson Group Workers' Compensation program is being well received by members of FIDA.
For more information, please contact:
Pat Moricca @ (407) 774-9700 or
Carl Schmachtenberger (800) 993-7840 (941) 492-5981

Exxon class action lawsuit was declared a mistrial charging Exxon cheated 10,000 dealers out of promised discounts for gasoline.
All jurors, except one voted in favor of the dealers. Exxon is the world's leading oil producer with revenues of over $100 billion and profits of about $6.5 billion for the year 1998.
New trial date is January 15,2001. Contact Pat Moricca for information @ (407) 774-9700

Last month, the federal district court in Maryland decided an important case involving a dealer's right to receive a bona fide offer of sale when his supplier determines to sell his leased station.
Under the PMPA, 15 U.S.C. §2802(b)(3)(D)(iii) to be exact, a supplier who desires to sell a leased station is required to make a "bona fide offer to sell, transfer, or assign the franchisee such franchisor's interests in such premises" or offer the franchisee "a right of first refusal of at least 45-days duration of an offer, made by another, to purchase such franchisor's interest in such premises."
The issue in L.M.P. Service, Inc. v. Shell Oil Co. was whether the supplier could impose a long-term supply agreement as a condition to its offer of sale. The court's answer was a resounding "no".
When Motiva determined to sell the dealer's leased station, it solicited third-party offers. Ultimately, it obtained an offer coupled with a ten-year supply agreement. Motiva then offered the dealer a right of first refusal to match the offer, including his mandatory acceptance of a supply agreement.
The dealer's attorney, Harry Storm, saw Motiva's action as self-contradictory. On the one hand, Motiva's basis for nonrenewal of the dealer's supply and lease agreement was its desire to terminate the franchise relationship by selling the station. On the other hand, as Mr. Storm wrote, if the supplier "is insisting on a supply agreement, then it obviously wants to continue a franchise relationship – – not end it."
Motiva stuck by its guns, and the dealer was forced to file suit. Judge Chasenow decided the case based on cross-motions for summary judgment.
Motiva assumed an arrogant tone in seeking to dismiss the dealer's claims. It argued that the dealer was "entirely in error asserting that there was some illegality in the former property owner's having a supply agreement with the new owner, whether the new owner is a third party or the former franchisee itself."
The court responded that Motiva had "missed the point entirely." Although Motiva was "correct that having a supply agreement with the new owner does not violate the PMPA, . . . making a supply agreement a term of the offer to sell the premises under §2802(b)(3)(D) does."
As the court recognized, what Motiva was really trying to do was to force a substantial change in the franchise relationship, through a threat of nonrenewal, if the dealer did not agree to purchase the station and enter into a long-term supply agreement. Finding Motiva's conduct to be illegal, the court said:
[Motiva] attempted to force a substantial change in the franchise relationship (conversion to a franchisee-owned property) using a threat of nonrenewal. The PMPA offers important protections to franchisees from arbitrary changes in the terms of the franchise agreement.
The court's decision appears sound. Motiva's offer to the dealer did not signal its desire to get out of the location, but rather to renew the franchise relationship under vastly changed circumstances.
Motiva did not, therefore, possess a statutory basis for threatening the dealer with nonrenewal.

BP/AMOCO CEO Sir John Browne admitted that the huge conglomerate would discard the Amoco brand and move towards worldwide rebranding to the BP name. Sir John Browne revealed the new plans in a speech at a Chicago executive conference. Browne told attendees that a move towards the single BP brand would begin later this year, meaning that one of the largest rebranding efforts in U.S. history will soon be witnessed.
Jobbers and dealers were not happy with the news with sentiments, that the Amoco brand is several steps above BP in markets throughout the country. Many jobbers and dealers have yet to get official word.
Sir John Browne has made statements indicating a belief that the world would have only three surviving brands by mid-decade: Shell, Exxon and BP.

SSDA-AT has submitted its comments to the FTC regarding the Exxon-Mobil merger due on January 30. The FTC is expected to render a decision on the sale of the stations to Tosco by mid-February. Tosco hopes to assume control of the stations by March 1.
Once the final approval is given by the FTC, SSDA-AT’s legal advisory team, appointed in Las Vegas last November, will vote whether or not to seek an injunction against the sale. This decision would be made the third or fourth week of February.
Association representatives at this time are continuing to exert political pressure on the FTC to honor all PMPA rights in the final decree. SSDA-AT is also meeting with Tosco officials and FTC officials in an attempt to negotiate PMPA rights, supply agreements, length of term, proprietary programs, and environmental indemnity. SSDA-AT remains positioned and committed to pursue all legal options to ensure that every dealer affected in the merger is awarded PMPA rights.

The new millennium (year 2000) is here. Not much has changed in the gasoline industry to help the gasoline retailers.
Federal and State Statutes (PMPA, MFMPA-below cost) are challenged and interrupted different from its intent by oil companies high powered attorneys, high rents, high gasoline prices, violation of the PMPA gasoline dealers right of first refusal, assignment of dealer leases to a third party (jobbers), lawsuits filed by gasoline dealers against oil companies, constant disruption of your business and life, In 1978 congress passed the PMPA, intended as a Bill of Rights for oil company franchisees (but) the federal courts have increasingly read the PMPA as a Bill of Rights for the oil companies.
It seems like a bad dream.

Congress is finally looking into high gasoline and heating oil prices. Gasoline prices are at the highest in 9 years. OPEC and the oil companies are making BIG profits from the crises. Some states are investigating price fixing against some oil companies. There should be a complete investigation by congress into the gasoline industry. The gasoline industry needs “Divorcement and Open Supply” legislation. Creating competition at the wholesale and retail level to keep gasoline prices in line with supply and demand, relating into lower gasoline prices for the consumer by thousands of independent dealers/owners, instead of a few (very few) oil company executives is the goal of "Divorcement and Open Supply".

Wal-Mart and Tesoro Petroleum have entered into an agreement allowing Tesoro to build and operate gasoline facilities at Wal-Mart sites throughout Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, Washington, and Wyoming. The facilities will include a small C-Store with a limited inventory of typical convenience store products. Tesoro estimates they will open 30 to 40 of these facilities within the first year.
Tesoro’s gasoline network currently is comprised of 245 units, of which 64 are company operated. All the Wal-Mart units will be company operated by Tesoro.Is Florida on the drawing board??

Chevrons letter dated 11-8-99 was sent to all Chevron lessee dealers in the Retail Marketing Sales-East and were notified of the Stand-By Market Value Rent Program commencing April 1, 2000 or later. Rents will double and triple with the new rental program.
Chevron is taking the position that, legislation initiatives sponsored by dealer trade associations, which (if enacted) would make it impossible for Chevron to conduct its business unless it is in a position to move quickly to Market Value Rent program for Chevron lessee dealers (conveniently left out company ops).
At Chevron sole discretion, there is no immediate effect on the rent dealers now pay because Chevron will temporarily waive these new rents back to a level equal to the rents payable under Chevrons current rental program.
Here is a classic example of harassment. If any legislation is passed and Chevron does not approve, the temporary rent waiver can be discontinued.
Unfortunately some Chevron lessee dealers who supported legislation to improve the gasoline industry will be silent.
It is despicable policy for any oil company to threaten its dealers with economic hardship if they exercise their constitutional rights or fulfill their civic responsibilities.

In a little known, last minute provision squeezed into the Extenders Tax Bill, Congress enacted a change in how installment sales should be recognized. Prior to enactment of this legislation, installment sales by accrual taxpayers were reported in the year of the receipt of the payment. Under this new tax provision, the entire sale must be recognized in the first year of the installment sale. This means that business owners who are selling their business on contract or "seller financing" have to pay taxes on the total sale in the first year. Under current law, the seller pays tax on the amount received each year during the contract.

In early October, the United States district court in Maryland entered some preliminary rulings in a case challenging Motiva's zone pricing, Montgomery Mall Service Center, Inc. v. Motiva Enterprises, Inc.
The decision is interesting because it considers a number of theories that have been developed to challenge this all-too-common pricing problem.
The facts alleged in Montgomery Mall Service Center follow a familiar pattern. The lessee dealer had been operating his Texaco station since 1972. When Motiva came in it eliminated the county-wide dealer tankwagon price, and placed the dealer in a pricing zone that consisted — surprise — of only his own station.
According to the dealer, Motiva hiked his wholesale price to the point that it was the highest in the county. The dealer suffered a substantial loss of volume, and litigation ensued.
The dealer's complaint proffered four reasons why Motiva's zone pricing was illegal:

1. By charging him a higher price than other Texaco dealers, Motiva committed unlawful price discrimination.

2. Motiva violated the open price term provision of the Uniform Commercial Code, §2-305, which requires the setting of a "good faith" price.

3. Motiva set or attempted to set retail prices in violation of the Maryland dealer retail price maintenance statute.

4. Motiva's institution of zone pricing constituted a breach of the dealer's lease and supply agreement.

The California Department of Energy reports oil companies in the state averaged 70 cents per gallon wholesale profit on gasoline the week of July 19, 1999.
This was the highest margin posted in the DOE’s weekly summary of refiner margin. DOE estimates oil company gasoline margin based on DTW less retailer profit, the cost of crude and taxes. Refiner margin for July through mid August averaged 57 cpg. As of August 16th, the last week posted, refiner profits were 55 cpg.
To bad they don’t put some of that “high margin” business strategy into practice at their company operated stations.

Seven Oil companies have been ordered to turn over financial records as part of a price fixing probe now underway in Alaska. Texaco, Chevron, Tesoro, Williams Alaska Petroleum, Petro Star, Delta Western, and Petro Marine have until Sept. 2nd to begin supplying information to help Attorney General Bruce Botelho to determine why oil prices in the state are the highest in the U.S.

"Divorcement and Open Supply" is government intervention and regulation.
THE REALTY...
"Divorcement and Open Supply" means NO intervention and NO regulation of the retail gasoline marketplace by ANY ENTITY... including the oil companies, who use their control of the market to elevate prices.

"Divorcement and Open Supply" is protectionism for a few independent dealers.
THE REALTY...
"Divorcement and Open Supply" is the true competitive marketplace. Retail gasoline prices are set by thousands of individual small business people in their community gasoline stations, rather than having retail prices set by a few (very few) Big Oil Co. pricing managers sitting in offices in other states, with no direct knowledge of the Florida market. And it keeps whatever profits are earned by those community businesses in the local economy ... for reinvestment in the local economy.

"Divorcement and Open Supply" legislation is needed to create competition at all levels (wholesale and retail) in the gasoline industry.
If the gasoline dealers were all able to buy gasoline on the open market, like Costco, Albertson etc, the price of gasoline would be lower to the consumer because of competition at the wholesale as well as the retail level. The oil companies have to much power, and hire lobbyist and powerful lawyers, to change the intent of federal and state laws. Its very costly and time consuming to challenge the oil companies. Thats why dealers should belong to a gasoline state association for information and benefits that save money.

No one can take on the oil companies by themselves. Florida Independent(gasoline) Dealers Association is a member of, National Coalition of Petroleum Retailers (NCPR), a national association of state affiliates. In numbers we have strength.
For this reason, Florida gasoline dealers need a state association, Florida Independent(gasoline) Dealers Association (FIDA) for support, no matter what brand.
Contact Pat Moricca @ (407) 774-9700 for information and application.

***FOR SALE***
BP Gasoline Station
With or without property
711 Lee Road (near I-4)
Orlando, FL 32810
Financing available,
contact Marcelle Katry (407)647-6669

======================================================= March-2000

On February 2nd, the FTC voted in favor of challenging the proposed merger of BP Amoco and Arco. The FTC said the merger would give the combined companies extraordinary power to control the oil market on the West Coast. The FTC specified three points in its challenge:
1.The combined companies would have excessive market power over West Coast refineries through its control of 75% of Alaskan crude oil production;
2.The merger would reduce competition for drilling rights in Alaska;
3.The combined companies would have excessive control of pipeline and storage facilities in Cushing, Oklahoma, a major crude oil distribution center.
California Attorney General Bill Lockyer has also filed a complaint opposing the merger. Lockyer alleges the merger would violate anti trust laws by lessening competition. Joining California in the complaint, which was filed in U.S. District Court in San Francisco on February 7th, were the states of Oregon and Washington.

Retailers in Florida have filed suit against Shell and joint venture partner Motiva in a bid to block the refiner from forcing dealers to waive their legal right to sue as part of lease renewal agreements being issued to East Coast and Texas dealers. The company’s ploy is part of a scheme to undermine franchisees that have already sued Shell over its controversial new rent program.
The lease also requires retailers to release all claims against Shell/Motiva growing out of previous franchises. That demand would cover Shell retailers in at least two class actions. Dealers were given until Nov. 1 to sign the new documents.
The retailers say they are unable to do much about the way Shell is treating them because the refiner is not only their supplier but also their banker and landlord. Their costs to market a gallon of gasoline range from 6-12cts, when labor (25%) and utilities (1-3cts) are factored in, but they are forbidden to buy cheaper fuel from jobbers. Shell’s declared goal is a return of investment of 12% and it is trying to maximize profits at their expense. That demand would cover Shell retailers in at least two class actions.
Dealers were given until Nov. 1 to sign the new documents. ======================================================= February-2000

It was learned that Jim Carroll, the respected Los Angeles-based dealer lawyer, died of cancer on Dec. 15. He is survived by his wife.
Carroll was a major figure among retailer attorneys and represented branded dealers in several PMPA lawsuits.
He will be missed by all gasoline retail dealers in the United States.

================================================================================ January-2000

The Honolulu Star Bulletin reports Hawaii’s gasoline market was so lucrative for Chevron that the company’s local refinery generated 14% of the company’s profits while processing only 3% of the company’s crude. In addition some of the product refined was shipped to the mainland, a less profitable market. The allegation is based partially on confidential Chevron documents turned over to the state in an investigation of the state’s high gas prices. The state is seeking $2 billion in damages and penalties from gasoline suppliers.
The complaint accuses Chevron, Hawaii’s market leader, and other defendants of fraudulently concealing information to hinder the state's investigation into excessive profit taking.
According to state officials, a May 1987 Chevron document, indicates profit from crude oil refined at the Hawaii refinery was four times that of the company’s average U.S. profit.

The days of the yawning rack price-DTW spread may be coming to a close as majors' oil companies face a slew of lawsuits filed by retailers who are mounting a concerted assault on Big Oil pricing policies.
Latest to be sued is Exxon and two Louisiana jobbers, Retif Oil and Lard Oil. In a suit filed in July, 15 current and former dealers say Exxon warned them in early 1999 that they would be out of business within two or three years, and then set about making that prophecy come true. It opened a low-ball company-ops in direct competition with their sites and supplied the jobber-retailers a 14-30cts/gal under DTW, allege the dealers, who are reeking treble anti-trust damages.
Along with rack-DTW prices, retailers are also taking aim at major’ zone pricing policies, rents, and general marketing tactics. Behind the legal onslaught is a belief by many dealers that they have outlived their usefulness for major oil companies. Big Oil is intent on ridding itself of small retailers in favor of chain marketers, hyermarkets and”super-dealers” who are able to operate multiple stations on lower profit margins, they say. Majors are deliberately trying to price them into extinction, retailers believe.
Shell has become the retailers’ top target. It is being sued by 30 California dealers on rent and its ETD C-store franchise is expected to come under fire shortly in another lawsuit. The franchise “is nothing except software, a few promos, and buying groups that never deliver anything worthwhile,” says one dealer attorney.
Shell aggravates retailers in particular because of its “pea-brained mentality,” says one lawyer. It wants to get an office-rated ROI on stations, a DTW price for fuel, and then tells dealers that they have to compete at the pump with discounters like Race Trac, Costco, company ops and Sheetz .

======================================================= December-99

As mergers continue, competition lessens. We do not have competition in the wholesale level, and the consumer pays a higher price for gasoline. With competition from all levels, wholesale, retail, independent gasoline dealer/owner, the consumer benifits with lower gasoline prices. Price of gasoline has gone up between 20 and 30 cents a gallon since mid Febuary 1999, to April 1999 in Florida. In California, the price went up as high as 50 plus cents a gallon at the same time. Gasoline prices have come down, but not to the level before the increases.

There is widespread dealer concern about a potential deal between Exxon/Mobil oil companies and the Federal Trade Commission, under which the oil companies would offer to sell off as many as 2400 service stations leased to independent dealers, and to terminate the dealers' leases, in return for the FTC's approval of the merger of the nation's largest and third largest integrated oil companies.

======================================================= November-99

With its multi-billion dollar buyout by Exxon before the Federal Trade Commission, some might think Mobil would adopt a low profile on pricing issues. But late last month, reps sent faxes to dealers in California listing specific pricing suggestions for all three grades of gasoline, labeled as "Mobil Oil Retail Price Recommendations," and apparently based on "competitive prices" in specific markets.
It is common for reps to verbally "suggest" prices to dealers, but rarer for majors to put them in writing and retailers fear the move may be an effort to set pump prices following the Supreme Court's landmark Kahn v. State Oil decision. That case held that suppliers could limit pump prices in some situations. They worry too that they could lose Mobil cash incentives if they fail to follow price suggestions.

When a Midwest dealer refused to pay Marathon $3,850/mo for his station under a computerized rent formula, the company put in a new retailer and charged him $2,300/mo - 40% less. Not surprisingly, the previous dealer sued. But in what a top dealer lawyer calls a "most troubling" decision, Marathon has been cleared of wrongdoing. A U.S. Appeals Court says the dealer failed to show Marathon’s use of the formula was not "in good faith" under PMPA.
The dealer’s proof concerning the disparity between the two rent offers and Marathon’s rent hike to him, which would have given the company a hefty 23% return on investment, was not deemed sufficient to justify a trial on the issue, says SSDA attorney Peter Gunst.
Evans v. Marathon Oil "appears to symbolize some courts’ almost pathological avoidance" of taking action that could conceivably rein in the ‘business judgment’ of a supplier," says Gunst. Congress’ aim in passing the PMPA was to hold suppliers liable when their true intent was to prevent renewal of a franchise. However, as a practical matter, "the supplier is unlikely to leave around a ‘smoking gun,’ announcing his intention to squash a dealer like a bug," says Gunst, attorney for the Service Station Dealers of America.

Shell may be losing patience with its refining and marketing joint venture partnership with Texaco.
The Equilon, Motiva and Equiva JV companies are well beyond targrts for cost-cutting and profitability and Shell’s top brass are extremely disappointed. Finacial performance has not met goals and operations at all three JV firms have been called sluggish and slow.
As a result, shell’s chairman, Steve Miller, says that each of the operations is being reviewed as part of an ongoing company-wide restructuring aimed at shedding $1 billion in assets. “ I don’t really rule out selling any asset,” Miller said in an interview with the Wall Street Journal. Letters-of intent for the sale of Equilon’s Wood River, Ill., and El dorado, Kan., refineries have already been inked, and Miller hinted that more assets could be sold.
Equilon’s West Coast refineries “are not nearly as good as you would like to see,” Miller said, but company officials deny suggestions that Shell may sell its interest in the joint ventures. “We have not heard anything like that,” says an Equilon spokeswomen. ================================================================================ October-1999

UPDATE! NORTHERN CALIFORNIA SHELL DEALERS LAWSUIT HAS BEEN ASSIGNED TO FEDERAL COURT FROM STATE COURT.
UPDATE!!! The Northern California Shell Dealers suit will be heard in Federal Court in Oakland on September 28th

A federal court has blocked the sale of 29 Amoco stations in Pittsburgh to Tosco, despite a Federal Trade Commission order requiring the sale as a condition for approval of BP’s purchase of Amoco. U.S. District Court Judge Donald E. Ziegler issued a temporary order barring the sale after Amoco dealers argued that their rights under the Petroleum Marketing Practices Act were ignored.
The dozen dealers claimed that Amoco unilaterally canceled their leases and that could put them out of business. The problem for the dealers, says their attorney, Richard DiSalle, is that no one in the Pittsburgh market is familiar with the Union 76 flag that Tosco had planned to fly at the stations. DiSalle argued that the FTC did not order the dealers’ stations to be divested - they were merely offered up to protect ownership of BP-branded company-operated sites.
"The defendants (BP Amoco) negotiated a consent order to save the cost of litigation to the defendants," Judge Ziegler ruled. That agreement cannot be allowed to protect them from penalties that might arise from harming the dealers, in breach of the PMPA.
Amoco says it is stunned by the decision and has not decided on its next step, but may appeal the ruling. Amoco believed the FTC order superseded PMPA requirements and says it is now effectively barred from complying with the FTC’s demand.
The situation could get stickier for BP Amoco if dealers in other markets decide to follow the Pittsburgh dealers’ lead. The FTC has ordered the company to divest stations in Charleston and Columbia, SC, Charlotte, NC, Memphis, TN, and Tallahassee, FL.

UPDATE 8-13-99

BP Amoco has settied out of court with a group of 12 Amoco retailers who won a court order blocking the sale of their 29 Pittsburgh stations to Tosco. While details of the settlement are confidential, the preliminary injunction against BP Amoco has been lifted and Amoco’s appeal has been withdrawn, says a lawyer for the retailers. ================================================================================ September-1999

The Plaintiffs include 23 Shell retail gasoline dealers have filed this lawsuit against Shell Oil Company, their landlord and supplier, and its related entity, Equilon Enterprises, LLC, based upon the unfair and unlawful actions taken by Shell against them.
The Plaintiff Dealers entered into franchise arrangements with Shell Oil company relying upon Shell’s assurances that Shell would treat the Plaintiff Dealers in a fair and reasonable manner and that Shell considered them to be partners where all have the potential to grow and prosper.
Plus many of the charges that are the same as other Shell dealer lawsuits throughout the United States.

The Assembly Judiciary Committee has approved Senate-passed legislation that would provide Attorney General Bill Lockyer with resources to bolster the state investigation into oil company mergers and gasoline pricing practices. The bill passed the Committee on a multi-partisan 12-2 vote, and will be heard next in the Appropriations Committee. The measure will require a two-thirds vote for passage on the Assembly floor.
The Attorney General is looking at the antitrust issues raised by the proposed mergers of British Petroleum and ARCO, and Mobil and Exxon. The Attorney General also is investigating gasoline and diesel fuel pricing practices in the wake of recent price spikes.
Senate Bill 1131, by Senate President Pro Tem John Burton, would provide $2.45 million immediately for the Attorney General's antitrust probe. The funds would support approximately 12 temporary positions, including five attorneys. "In California, there are essentially six firms that control 87 percent of the retail market for gasoline," Lockyer said. "That number may be considerably fewer because of the pending mergers. My role in evaluating these mergers is to preserve market competition for businesses and consumers. This bill would provide an important one-time boost to allow my office to focus on the complex and detailed issues raised by the pending oil company mergers and gas price investigation without draining resources from other merger reviews." ================================================================================ (August-1999)

Gasoline retailers are urging the Federal Trade Commission to give "serious consideration" to an order requiring BP to sell its newly acquired Amoco trademark and credit card operations if the agency truly wants to encourage new suppliers to enter markets to be divested by the giant refining company.
Competition is more likely to be stimulated by the growth of current market players with a toehold in a market, than by a newcomer that lacks needed marketing infrastructure.
Dealers from nine states met recently with the FTC to discuss the mega-mergers reshaping the industry. They told officials that they are particularly concerned about the FTC’s proposed BP Amoco consent decree. It must be modified to give dealers the right to buy their stations and sign supply agreements with anyone they wish.
Allowing retailers to buy their properties will allow them to negotiate supply at "rack plus" numbers, rather than at "artificially inflated dealer tank wagon prices," which will translate to lower pump prices. If the FTC sticks with the single buyer provision, prices will be higher for consumers because dealers will be paying DTWs that are 12-15¢ over rack and refiners will continue to escalate real estate occupancy costs, such as rent and maintenance.
The proposed consent decree amounts to a "potential lessee dealer death sentence" because the termination of supply contracts the agency has ordered will create a "reasonable event" under the PMPA that will allow BP Amoco to evict the dealers and allow station buyers to company-operate the outlets.
The FTC’s recognition that majors’ expanding use of company-operations and zone pricing that "targets selected dealers" threatens competition. If the FTC allows Exxon’s purchase of Mobil to go forward, it should look at requiring divestiture of one of the trademarks and ensure that dealers have the right to buy their stations.

Testifying at a joint hearing of the State Senate Energy, Utilities and Communication Committee and the Senate Transportation Committee, state Attorney General Bill Lockyer cited divestiture of the major oil companies from California's retail gasoline marketplace as a possible solution to the lack of competition in the oil industry. The hearing was called as a result of the record gasoline price increases in March and April. Lockyer, addressing the rocket like price increase and snail like decline, said his office had “initial indication of excess profit talking” of as much as fifteen million dollars a day by the oil companies. Lockyer is undertaking an investigation of the price run up to determine if there is a civil case to be made for unfair business practices and/or collusion among refiners to raise prices.
Gas prices shot up almost 70 cpg during March and April often in leaps of 5 to 10. The cost of crude during that time moved up about five dollars a barrel or 12 cpg. Simple math clearly determines the hefty profits raked in by the oil companies above the cost of crude. In late April prices began dropping but mostly on unbranded and rack product. Branded retailers, especially those direct served have seen the least downward movement. In fact in some areas of the state DTW has hardly fallen at all.
Also calling for investigation into the oil companies is State Senator Steve Peace author of SB 123, open branded supply legislation. Peace, speaking of the vertical integration of the oil industry said, “When you allow essential control up and down the whole system from oil drilling to the gasoline pump, the results are inevitable: a lack of true competition for price.”
The Chairwoman of the Senate Energy, Utilities and Communication Committee, Senator Debra Bowen, asked if the price increases weren't a symptom of “so much market power being concentrated in so few hands” as she expressed skepticism about the free market talk of those testifying on behalf of the oil companies. Later she spoke of divorcement as a possible solution to the lack of competition in the California gasoline market.

The U.S. Court of Appeals for the Third Circuit in Philadelphia handed a New Jersey dealer a victory over Mobil Oil , in the case of Sawhiney v Mobil, where Mobil sold stations to a jobber, and claimed to have "assigned" its contracts, without offering the dealer the right to buy. The case is our first victory on this issue in a federal appeales court since 1987, and turned on the language in the Mobil contract, that allowed them to assign to an affillate, not to a jobber. The case goes back to the District Court for further proceedings. NCPR attorney Jim Daskal.
Congratulations to Jim Daskal for his win in this very important effort.

On Friday, December 4, after a three week trial, a federal court jury in Detroit returned a verdict against Sun Company, Inc., and in favor of dealers Schwartz Service, Ltd. and T & J Enterprise in a case involving allegations of unfair and discriminatory tankwagon pricing at the dealers’ Sunoco stations in Flint, Michigan. The jury found that Sun’s DTW pricing violated the Uniform Commercial Code’s "Open Price Term" provision and the federal Robinson Patman Act for three times the amount of the verdict; a total damage award of $2.4 million. Further proceedings will follow as the dealers seek the recovery of attorneys’ fees, costs and a permanent injunction.
The case involved Sun’s DTW pricing between 1995 and 1997. Among other things, there was evidence adduced at trial that Sun sought to drive up retail prices through DTW price increases to the dealers and that Sun pursued a business plan to transfer the Flint market to jobber operation. In the process, Sunoco-jobber-supplied locations came into direct competition with the dealer locations. The jury rejected Sun’s claim that the difference in price between the rack and DTW prices was a reasonable "functional discount." The jury also rejected Sun’s "meeting competition" defense.

Oil Express reports a federal court in California has prohibited Shell Oil (Equilon) from terminating a dealer's lease over the company's decision not to upgrade the station's underground fuel tanks.
Shell terminated dealer Sal Zito's lease on the grounds that the cost of the upgrades, estimated at $77,000 by Shell, was not economically justified and “disproportionate to the value of the property.” They claimed the station only produced $1,100 per month in income. Dealer Zito presented the court with a $28,000 estimate for the work and countered Shell's “value of the property” claim by their offer to sell him the site for $1.09 million.
PMPA allows for lease termination for sudden relevant events but stipulates the refiner must have no more than 120 days knowledge of the event prior to the decision to terminate. The 1998 UST requirement was passed ten years prior to the event. Shell notified the dealer in September 1998 of their decision, claiming they had reached that decision in August when they determined the cost of the project. Records showed Shell had obtained permits for the project in October 1997 indicating they knew the cost at that time. The judge issued a mandatory injunction requiring Shell to upgrade the station's tanks.

In California, Open Supply SB 123 bill passed the state senate and is going to the state assembly and hopefully pass. No one has ever gone as far as California has with any Open Supply bill. It takes a lot of money and hard work. The gasoline dealers are in for a long, hard fight. The oil companies have hired 30 lobbyist and the California Service Station Association has 1 lobbyist in Sacramento, the state capitol. If you know anyone in California, a relative or a friend, call and ask them to contact their state assembly representitive and ask for their support and vote for SB 123 to lower gasoline prices.
The reason gasoline prices are higher is there isn't any competition at the wholesale level. Branded gasoline dealers are captive buyers of the oil companies. Bill SB 123 will create competition at the wholesale and retail level by allowing gasoline dealers to purchase their gasoline on the open market. The competition will relate into lower gasoline prices for the consumer.
I keep asking the same question! WHY ARE THE OIL COMPANIES OPPOSED TO TRUE COMPETITION?

For more information, contact Pat Moricca (407)774-9700. ================================================================================ (July-1999)

Here we go again! Exxon and Mobil oil companies plan to merge and create the largest oil company in the world, with market value of $237 billion. The merger will be the largest in history. This merger means less competition in the gasoline industry, a good reason why "Divorcement and Open Supply" should become law in the United States. Creating competition at the wholesale and retail level to keep prices in line with supply and demand, relating into lower gasoline prices for the consumer, by thousands of dealer/owners instead of a few (very few) oil company executives is the goal of "Divorcement and Open Supply."
Competition is shrinking every day with big oil company mergers (Shell-Texaco, BP- Amoco, Exxon-Mobil). The latest report in the gasoline industry is Royal Dutch (Shell Oil Co.) and Chevron are planing a merger including midsize/smaller oil company mergers/buyouts. Buyouts/mergers such as Kerr McGee-Oryx Energy Company, Diamond Shamrock Corp. buying Phillips Petroleum Company's north american oil refining and marketing businesses are some examples of a shrinking competive gasoline market.
Whenever "Divorcement and Open Supply" legislation is introduced, the oil companies' position is always that jobs will be lost. This is not true, because the manager or qualified person becomes the dealer of the gasoline station, and retains most of the present employees. Yet, when the oil companies merge or buyout, thousands of jobs are lost (Amoco-BP created a loss of approximatly 6000 jobs.) The oil companies call this PROGRESS!!
How many jobs will be lost when Exxon and Mobil merge? update 2-5-99 (approximatly 14000 jobs will be lost)

Why are the oil companies opposed to true competition?

Hawaii is a good example why "Divorcement and Open Supply" should become law.

A named defendant lawsuit has been filed against Shell Oil Company (includes Motiva and Equilon) in United States District Court for the Eastern District of Louisiana. A respected Texas law firm on a contingent basis has taken on the suit. The suit charges Shell with:
Price Discrimination: Shell sells to jobbers at discounts unavailable to lessee dealers. Such discounts, according to the suit, sometimes exceed 14 cpg. This practice gives the jobber or jobber supplied stations a competitive advantage over the lessee dealer and impairs the lessee dealer's ability to compete resulting in lost profit.

ILLEGAL TYING ARRANGEMENT: Charges Shell with violating Federal antitrust laws in regards to Island Card Readers (ICR). Shell, the suit charges, forces dealers to utilize only Shell's chosen bank to finance and process ICR's transactions. This prevents retailers from shopping other banks for a discounted credit card fee.

FRAUD: Charges the defendant companies with making “numerous false representations” concerning the operation of Shell franchisees as independent businesses and omitted information they were obligated to state. They charge Shell “set up a system whereby it dictates virtually every aspect of the dealer-lessee's business, i.e. rent, gas price (pool margin), retail prices...”

FRAUDULENT INDUCEMENT: Charges Shell with failure to disclose and/or making misrepresentations of pertinent information to perspective dealers. Had the information been disclosed this information would have resulted in the perspective dealer not entering into the franchise agreement.

TORTUOUS INTERFERENCE: With Prospective Contractual or Business Relations: Charges Shell has “taken steps to preclude and has, in fact precluded Plaintiff's (dealers), contractual rights to purchase Shell branded gas from suppliers other than Shell Oil Company.”

BREACH OF CONTRACT: Charges Shell with preventing dealers from exercising their contractual rights to operate independently based on their inability to set their own pool margins, inability to purchase gasoline from other sources, and inability to seek lower credit card processing rates.
The suit also charges Shell with breach of good faith and unfair competition. The suit seeks actual damages, threefold actual damages, attorney fees and punitive damages where appropriate.
At this time approximately two hundred dealers are plaintiffs in the suit with more dealers signing on. Dealers can get more information on this suit and other Shell dealer action by calling Pat Moricca at (407)774-9700 or Dennis DeCota at (415)-892-1243.

Pointing its finger at Chevron as the main culprit, the state of Hawaii has sued the oil companies for allegedly breaching antitrust and price fixing laws. Suffering under pump prices often 60 cents per gallon higher than other regions of the nation, the island chain seeks to recover nearly $500 million in damages.
Chevron operates the largest of two refineries located in Hawaii and controls approximately 60% of the fuel supplies sold in Hawaii. However, its alleged behavior, rather than market share, is what led "Honolulu Star Bulletin" headlines on Friday, Oct. 2nd.
One of the more stunning allegations contained within the suit is a claim Chevron executives met with competitors to discuss an agreement to keep Hawaii's gasoline prices artifically high. During these meetings, the suit alleges Chevron executives threatened retaliation against any competitor who cut gasoline prices.
As a consequence of the alleged meetings, the Governor and the Attorney General claim the oil companies moved pump prices in concert. Using Chevron and Shell Oil Company as an example, research by the state shows that in 102 price changes between July 1996 and July 1998 the price of the two oil companies were identical 93 times. In the remaining 9 instances, the differences were extremely small and only until one company had a chance to move prices to mirror the other.
The suit alleges the prices charged by the oil companies to Hawaii dealers were from 25 cents to 40 cents higher than typically found on the mainland. According to the state, the huge wholesale margins in Hawaii are "unconscionable," and resulted in "enormous profits" for the oil companies.
The suit also names Shell, Texaco, Unocal, Tosco and BHP, in addition to Chevron. All of the companies are denying any improper behavior.
This is a classic example why the gasoline industry needs " DIVORCEMENT and OPEN SUPPLY LEGISLATION". Competition from thousands of gasoline station dealers/owners, instead of a few oil companies would have been a saving for the consumers of Hawaii. Many of the major oil companies are being investigated for high wholesale gasoline prices and should include price fixing violations in the United States. ================================================================================ (June-1999)

NEW COMPETITORS IN THE GASOLINE INDUSTRY:

Albertsons' and Piggly Wiggly are the latest supermarket chains to make the jump into the gasoline market. Whos next.

BRANDED OPEN SUPPLY: TO EVERYONE BUT THE OIL COMPANIES, IT'S AS SIMPLE AS 123!

State Senator Steve Peace has again introduced legislation calling for branded open supply in California. The bill, SB 123, is a re-introduction of SB 404, which CSSARA sponsored in 1997. CSSARA will strongly support this legislation in 1999 and will seek alliances with other trade organizations to assure its success.
Under existing law, a refiner, distributor, manufacturer, or transporter of motor vehicle fuels is prohibited from discriminating in price between different purchasers if the effect of the discrimination is harmful to competition, as specified. This bill would provide that a refiner, distributor, manufacturer, or transporter of petroleum products may not prevent a branded gasoline franchisee from purchasing the franchisor's branded petroleum products from any location or through any vendor in the franchisor's wholesale network. In addition, the bill would also prohibit a refiner, distributor, manufacturer, or transporter of petroleum products from discriminating in price between different franchisee purchasers of the franchisor's branded petroleum products if the price discrimination effectively prevents a franchisee from taking advantage of price differences at different locations or between different vendors.

FINAL DECISION: