Senator Moss. I'm not sure we can print it in the record. Mr. TUBBS. They would give me no reason except "marketing conditions," but in the whole area, in the Ogden or Weber County area, they are putting Phillips dealers out, and putting girls in miniskirts in there, and selling gasoline only. They're closing the lube bays, and that's the way they're going. They're operating them under what they call the "Super Bonanza” and it's a direct operation of Phillips. They have Phillips' employees operating these stations now. Senator Moss. Is this super bonanza the "fighting gasoline,” that they say they're going to fight the independents with? Mr. TUBBS. I couldn't tell you, sir. I'm not that familiar with it, but bonanza is, an independent marketer. owned by Phillips in the Ogden area for several years. Senator Moss. Do you think that Phillips will reopen your station under new management, or do you think they're going to sell? Mr. TUBBS. They will put a girl in there, under their own management, sir. Senator Moss. That will be just a plain, serve-it-yourself type of operation? Mr. TUBBS. Right, gasoline only, serve-yourself. There won't be any attendants there, only a girl to receive the money. Senator Moss. I understand, from your testimony, you've not been too happy about the companies selling products to independents, for sale as unbranded gasoline? If a company were to permit you to shop around for gasoline and other products, do you believe that you could successfully compete with the unbranded gasoline dealers, or, at least, make a better profit showing on gasoline sales? Mr. TUBBS. In the past, we possibly could have, but at the present time, the way the marketing situation is with the other competitors. I doubt whether we could get it from anybody else. Senator Moss. You're saying that the market is tight and that gasoline is in somewhat short supply now? Mr. TUBBS. Whether it's short supply or a political move to help the oil companies raise their depletion allowances I couldn't tell you, but I feel you'd have a real rough time finding someone to supply you with gasoline. Senator Moss. Do you think, if you were able to buy your station, Phillips would allow you to continue hanging a Phillips sign out if you marketed their products exclusively? Mr. TUBBS. I think they would. And I'm sure some of the other stations in the area, some that weren't too good of a real estate value, that are up for sale, and some of the dealers have bought them. I offered to buy my service station, and they refused to even talk to me about it. Senator Moss. So they didn't want to talk to you about buying your particular station? Mr. TUBBS. No, sir. They refused to talk to me about it. Senator Moss. Were you able to sell any products other than those supplied to you by Phillips? Mr. TUBBS. Yes, sir. They put pressure on us. If we did so, we had to keep our off-brands oil in the back room. If we sold other brands of tires, we had pressure from the representatives, the sales "reps," not to sell them, and to sell Phillips' brand tires and products. Senator Moss. Did you ever reduce your prices below what Phillips had suggested? Mr. TUBBS. No, sir. Senator Moss. Did you ever reduce your prices below what Phillips suggested as the market prices? Mr. TUBBS. I couldn't do it and make any profits on it. There's been times in my area where Phillips has been selling gasoline there below mine, at one station for 29.9 and I paid 29.6 for it, plus a cent and a half a gallon rent. I couldn't compete any way. Senator Moss. So you had to maintain the suggested price in order to stay in business at all? Mr. TUBBS. Yes, sir; even at that, we're making approximately the same margin on gasoline now as we were 17 or 18 years ago. Senator Moss. Do you know of any dealers that did try to cut below the suggested price of their major supplier? Mr. TUBBS. I'm sure they have the right to do it, but it is just not economically feasible to cut below what they recommend. You just can't market it-if you're going to give it away, you might just as well close your doors. Senator Moss. Did the Phillips line include tires and batters and other products? Mr. TUBBS. Yes, sir. They had a full TBA line. Senator Moss. I see. Did you ever sell any of these products, other than Phillips products? Mr. TUBBS. Not up until the last 7 or 8 months. I basically stayed with the Phillips products. Senator Moss. Do you thing a retail gasoline dealer such as yourself would be able to secure automative supplies more cheaply by buying them from someone other than the oil companies? Mr. TUBBS. No question about it-no question at all. Senator Moss. Do you think if you had that degree of freedom you could stay in business and make a profit? Mr. TUBES. Yes, sir. I'm going into another business just close to it anyway, in the automative trade-automotive supply Senator Moss. I see. Mr. TUBBS. So I could really care less about what the oil companies do now. I won't be in the gas business after the 1st of May; no, sir. Senator Moss. You will not be in the gasoline business, but you will be in automotive supply? Mr. TUBBS. I'll have a service center. I was fortunate; I was more fortunate than most of the Phillips dealers in the area. I owned a piece. of property less than a quarter of a block away from my station on the main highway, so I was able to build a new business. It is being built at this time. Senator Moss. I think you testified in your statement that your profit came principally from back-room operations, repair and adjustment? Mr. TUBBS. There is no question about last year. My gasoline sales would probably represent about 45 percent of my total income, or total gross income, and probably less than 4 or 5 percent of my net profit at the end of the year-it would be less than that. Senator Moss. You put in these long hours. Do you have a family? Do you have any help of your family, or did you, in running the station? Mr. TUBBS. Oh, yes. I have help. I have a three-bay station. I hire two full-time men, plus several part-time. I have two sons working with me in the business, also. We will all transfer over to our new business, of course. Senator Moss. Well, we appreciate having your testimony, and it certainly outlines a serious facet of the problem that we're concerned with, and gives us a lot of concern. Thank you, Mr. Tubbs. We appreciate it. We'll now hear from Mr. Gary Anderson, who is president of the Utah Association of Petroleum Retailers; Mr. Anderson is from Salt Lake City. We are glad to have you, Mr. Anderson. You may proceed, sir. STATEMENT OF GARY ANDERSON Mr. ANDERSON. Thank you, Senator Moss. My name is Gary Anderson. I am the president of the Utah Association of Petroleum Retailers (UAPR) and I am a Texaco dealer leasing a service station from Texaco at 4800 South Highland Drive in Salt Lake City, Utah. I have been a Texaco dealer for 2 years and prior to that I was employed as a district sales representative for Texaco, that is, a Texaco employee in charge of the sale of Texaco products to Texaco dealers. Gasoline dealers in the State are in bad shape. Their businesses require long hours, substantial investments, and the purchase and sale of products at uncompetitive prices. We operate on marginal profits. Let me tell you some basic facts. I am a college graduate. I am a dealer for one of the leading major oil companies in a good location and I work 70 hours a week. Last year I made under $5,500. I am embarrassed to admit that. I paid most of my help more than I earned. About 90 percent of my profits, moreover, came from leasing U-Haul trailers. I lost money or the sale of gasoline, yet the sale of gasoline accounted for 70 to 75 per cent of my gross revenue. My situation is not unique. Dealers in the Salt Lake area average, and I emphasize "average," approximately $538 a month. Gasoline dealers have no stability or security as independent business men. The dealer turnover rate in the Salt Lake City area is between 30 and 40 percent per year. It costs the dealers money, it costs the major oil companies money, and the public suffers. Consumers are not served by inexperienced and transitory dealers. When I worked for Texaco, I was a district sales representative initially in South Salt Lake. I had 13 dealer accounts. Only 2 years later, only five of those dealers were still in business. I then moved to North Salt Lake. Again. I had 13 dealer accounts. Only one of those dealers is still in business How can it happen that in the leading industry in the United States dominated by giant corporations realizing enormous profits, that dealers who generate a substantial portion of this revenue are in such sad condition? The economic reasons for this sad condition, I think, are obvious. Dealers are forced to purchase the products that they sell from the major oil companies who lease them their gasoline stations. Gasoline is a commodity, yet, if I lease a Texaco gasoline station, I must purchase gasoline from Texaco even if I could purchase the same quality gasoline at lower prices from another supplier. Major oil companies constantly exchange gasoline with each other. It is the only way they can operate on a national basis. Their products are blended in pipelines so that they are indistinguishable. In this market, in Salt Lake, Texaco purchases the gasoline that it sells from American Oil. Yet, if a dealer attempts to purchase gasoline of equal quality from somebody other than his landlord at a lower price, he is out of his station and subject to litigation. We market tires, batteries, and accessories. We are under constant pressure to buy these items from our major oil companies even though in many instances we can purchase items of superior quality at lower prices from other suppliers. We even have difficulty selling off-brand motor oils. We have to hide them in our back room. Our failure to be able to purchase quality products from whomever we wish at competitive prices costs us money and, more important to you, it costs the consumer money, too. Major oil companies control the prices at which we sell gasoline. They tell us the prices they want us to sell at, and if we try to sell at a different price, you can count on a prompt visit from your district sales representative. In a gasoline war, the major oil companies flood the market with depressed price allowances which places the economic power of the major oil companies in competition with the grossly disproportionate economic ability of individual dealers. The use of depressed price allowances intensifies and prolongs gas price wars and leads to chronic dealer failures. At the same time that major oil companies are controlling their prices through suggested retail prices, high dealer tank wagon prices. and depressed price allowances, they are selling the same gasoline that they sell to us in direct competition under private brands that they control. It is a common occurrence for a major oil company dealer to find himself competing with some gasoline marketed by his own company at prices from 4 to 10 cents below the price at which he is asked to sell. Most important of all, the desires of the major oil companies are enforced through short-term leases that add coercive pressure to whatever the major oil company wants. The primary asset that any dealer has is the goodwill that he can develop at his location, but a dealer has no assurance under the present short-term leasing system that he can retain the benefits of the goodwill of his dealership. Dealers who have been in their station for years are terminated without apparent rhyme or reason on short notice. Generally, the longest lease offered by major oil companies to their dealers is for 1 year. We are not generally given the option to purchase our station or secure a long-term lease. Without assurances that we can retain our places of business, it is almost impossible to expect us to exercise the competitive judgment of independent businessmen. If we are going to do a good job for ourselves and the public, we must be able to operate our businesses as independent businessmen. We must purchase and sell quality products and services at competitive prices. The dealer and the public now suffer as a result of the awesome control that major oil companies have over the retail distribution of gasoline. I earnestly ask this committee to promptly enact a dealer day-in-court legislation. Dealer day-incourt legislation will not only provide security to dealers from the arbitrary power of major oil companies, it will go far in helping dealers compete as independent businessmen, dealer by dealer, in the sale and distribution of gasoline and related motoring products and services. The public, in the end, can only benefit from such competition. Senator Moss. Thank you very much, Mr. Anderson, for your statement. I understand that Justin Stewart is your counsel; is that right? Senator Moss. Would you come up, Justin? I intend to ask two or three questions. You may want to state something. If you want, you may volunteer the answer to some of these questions when they come up. STATEMENT OF JUSTIN STEWART Mr. STEWART. I wanted, Senator, to just add a little. I've written out some testimony here, but a good deal of it's already been covered by other statements that have been made. I'd like to emphasize one or two things; particularly, the situation in northern Utah with Phillips lessee-dealers. Mr. Tubbs who just testified is one of the clients I'm representing in that case. We have been successful in the State court in enjoining Phillips from pressuring their dealers to sign the so-called mutual consents to cancel their lease and gasoline purchase agreements. As Mr. Tubbs said, Phillips attempted to coerce him into signing a cancellation agreement. He got legal advice and did not, but there were several Phillips dealers who did sign cancellations under Phillips pressure to the dealers detriment. We hope that we can get some damages for the dealers because of the way Phillips persuaded the dealers. Phillips had a right to cancel leases and sales agreements unilaterally, while in fact Phillips had no such right. I would like to reinforce what Congressman Owens said about chang ing the law with respect to the jurisdictional requirements of the Robinson-Patman Act. Texaco dealers in Utah won more than $2 million damages against Texaco, and then the price discrimination award was reversed in the Court of Appeals for the 10th Circuit, solely jurisdiction simply because Texaco bought its gasoline in Utah from American Oil. Even though Texaco sold crude oil to American in Colorado which crude it imported into Utah, the 10th circuit held rigidly that the ! only way that the Robinson-Patman Act can confer jurisdiction on a U.S. Circuit Court, is if at least one of the sales sued upon went across 1 |