in the open, and they're not inviting me, nor you. It's done in closed circuits, and it's not in printed matter.

If I see in the Platt's Oil Gram a week ahead of time that a major oil company is pulling subsidies to their dealers in a certain area, I know that will cause the others to follow suit within a very short period of time afterward. If I worked for Standard Oil, and read in the Platt's Oil Gram that another major oil company was pulling subsidy, I'll be pulling subsidy approximately the same time.

Then my retail price will be back at the highest price it could be, because I'm trying to make a dollar for my company. Also, I'd like to make a living for my family.

Independents watch major oil company activity. The majors watch each other.

The day of them having to get in a smoke-filled room to make these antitrust agreements is over. They don't have to. They also don't have to get on the telephone and talk about it.

And if they did, again, they're not going to do it where anyone could listen to it.

The evidence of conspiracy that I can see is the major oil companies are constantly looking for new business in the Phoenix area. They are branding numerous new stations with their own major brands at the same time independent companies are disappearing.

Phillips Petroleum is one that is doing this. Their Phillips brand is disappearing, and there are no brand (or Blue Goose) stations, cropping up in the place of them. That is a direct company operation competing with the independent market.

Once they have eliminated the independent marketer they can go back and use their brands again, and, at that time, they will be able to control business.

Senator Moss. Why have the independent gasoline marketers waited so long to seek judicial or congressional action? In your testimony you stated that because of the fact they were independent, they didn't get together, but is that the reason?

Mr. MOORE. That basically is it, and most of them have not gotten together to agree on anything, by the very nature of being independent. Now, I got up in a meeting in Washington and tried to tell the gentlemen that our using the term "independent" was completely wrong. There was no way that we are independent. We're probably the most dependent industry in the world. We're dependent upon the major oil companies for our supply. We're dependent on them to keep the wholesale price where we can show a profit, and we are dependent on them that they will not pull the retail price down to where we have no profit. We are also dependent on the Federal Government to make sure we get supplies. So, how can we be independent?

There is no way. The only way that we can still use the term is that the majors haven't figured out how to deduct us from their income tax yet.

Senator Moss. Have you ever been threatened with a supply cut-off if you did not raise your prices?

Mr. MOORE. No, sir; That they don't do to the independent. The only thing they do is slow down deliveries, make sure the product isn't available.

That's apparently what's happened in the last 6 months. We have had several times, when we have no products at all. We were notified by Phillips Petroleum Co. that they had no products in Arizona, and they would truck gasoline to us from the coast. They did truck us some, but we had some stations out of one product or the other in the interim.

This is done at unique times. When the price looks like it is starting to move up. The independent has no gasoline. He certainly can't keep his price down. He's got to raise his retail price and limit the amount that's going out through his units.

Senator Moss. Mr. Berman, particularly, recommended that we break up the vertical integration of the oil industry. Do you think, if we did that, that would foster lower prices and greater supply?

Mr. MOORE. Yes, sir; as long as the restrictions were made in such a way that the majors could not retaliate in their wholesale or in their refining or in whatever capacity they would keep in the industry.

These major oil companies are set up to make tremendous returns for their stockholders. They're going to do it, and wherever the breakoff is, whether it's divorcement for marketing or refining, or whatever. Their profit returns are going to have to decline, and the Government's going to have to regulate on the idea of a utility, what they can do with the products they receive and the controlled branded units. This would no longer be the optimum and objective of most major oil companies, that is, having all controlled gallonage, everything with their brand in front of it, because that's brand identity. All of this massive, fictitious advertising they do on TV is utilized by having that brand name.

Now, I don't know of a gasoline on the market that doesn't have most of the things that are advertised on T.V. in it, such at Platformate. I don't know how you make ethyl gasolines without it going through a platformer or reformer. However Platformate is a patented

name.

Now, as I mentioned before, Union was supplying Phillips with our gasoline. Phillips was supplying us. Each of them are advertising different additives that they have in their products.

They didn't add anything to it once it got into the terminal. They have the gasoline put into 50,000- to 100,000-barrel tanks. There is no way to add the additives as it comes out of there economically.

So, whatever the additives are, they had to be in the gasoline coming from the refinery.

I maintain most of their advertisement is false. I'd like to see the FCC jump in, because it would knock out most of their advertising programs which cost the consumer millions of dollars.

Senator Moss. I'm sort of a bad boy on advertising, but I get the point.

Mr. MOORE. It's kind of ironic, but one little company called Metro 500 is now soliciting their customers to help them fight the big oil companies, and are asking them, "If you'd like to donate a dollar or two dollars, put it in this envelope, and send it in. Help us fight the devil, because that is the only way that you're going to receive ar equitable price on the street."

Right now we pay roughly 4 percent of our spending dollars for petroleum products. If the price of crude goes up, it will be hard to

determine what that figure will be. It may run up as high as 10 percent, because of all the derivatives, and side products, that are made that we don't even realize are coming from oil.

I think that the reason that the majors, honestly, are creating this shortage is to effect several things. One reason is to get a North Slope pipeline through. Another, brought up before, is to get the refineries. that they've been begging for so badly. The third one is to somehow be able to get the retail markets stabilized, and by stabilizing the retail market, the majors can make money from the marketing of gasoline. They never have before because they haven't had to.

The independents have made money on gasoline, because that's the only thing they had to make it on, so they figured out new ways to do

it.

The majors, always before, could show on their books that marketing made no money; refining made money and production of oil made money, but marketing didn't.

Their credit card programs and promotional programs that they've put on have eaten marketing profit up.

Coincidentally, most of those promotional programs are not paid. for by the major oil companies. The little dealer has to absorb most of that. Otherwise why would the say at participating dealers.

We started out as a major oil company dealer. We decided that we were tired of working for them, doing all the work and them making all the money. Well, right now, they've got us back in that stranglehold again.

And we probably would be happily to work for a major now if one of them wanted us.

Senator Moss. Do you think we've overbuilt on service stations? Some places, you will see a cluster of three or four, all together.

Mr. MOORE. Well, not necessarily. I think that they're poorly designed, as far as area is concerned. They're not put there for the convenience of the public necessarily. They're put there for maximum i exposure to the public.

I've maintained for some time, and I could be wrong on it, that putting stations on a corner does one thing, that is, cause a congested corner. You put four service stations there, and you've got a lot of problems with people getting in and out during peak traffic hours.

We aren't really overbuilt. I think we should, eventually, end up with fewer stations, but in better locations than we have now. We are not serving the public by having as many as we do.

Senator Moss. Have you ever considered enlarging your firm and becoming a distributor or otherwise vertically moving through the distribution chain?

Mr. MOORE. Yes, sir, but, economically, I don't see any way that we can get into that. The prices of wholesale gasoline to companies like our own, have risen as high as 21 percent in the last year. There's no way that we're going to be allowed to make enough money to even try to drill the first well, even to start the first refinery. We're too far down the totem pole to get there.

Senator Moss. Are you telling me you're unable to find a source of supply from independent refineries?

Mr. MOORE. Yes, sir. I've written to 65 different producers or wholesalers of gasoline throughout the United States and Canada. So far,

I haven't received one letter that says they want to sell us any prod ucts. Everyone indicated they didn't have enough to supply what needs they presently had.

One of those companies, I noticed last week in Phoenix branded six new stations. However, they didn't have any product available.

This was brought out in our suit and is part of the conspiracy idea. and I think the judge grasped the idea that it must be happening, but how in the world can you prove it?

Senator Moss. Do you have any estimate of how much the public is paying, in excess costs, due to the constraints being placed on the independent?

Mr. MOORE. No, sir: it would be hard to ascertain, but I know that in the past 6 months prices have been higher across the Nation than they've ever been in the past. Right now, with products being short to the independent, the independent in most areas has no way of dropping down from his top retail price and maintaining a level of breaking even, much less trying to make money. So, if the independent stays up, the majors narrow the gap between the price of the independent and their price. They steal back the business that the independent could have possibly gotten.

As far as putting a figure on it, it would be very difficult for anyone to determine.

Senator Moss. Thank you, Mr. Moore. I appreciate your testimony. At the beginning, you said Mr. Holgraf should sit there, and I assure you he's going to appear before us, and he will testify. We're trying to get all the information we can. I don't want you to think this is one-sided. We're going to hear the majors, and everybody, on this, and compile as complete a record as we can.

Mr. MOORE. Thank you.

Senator Moss. Thank you, sir.

[The attachments to the statement follow:]

"SIGMA POSITION"

Resolved, That the Federal Government should take whatever steps are necssary to prevent all major oil companies and all independent refineries from entting off supply or allocating supplies to independent private brand marketers while maintaining sales of product through their own outlets. Refineries should be required to sell refined products to independent private brand marketers in the same proportion they did during the period of July 1, 1971-June 30, 1972. Resolved further, That product imports should be granted solely to private brand independent marketers with provision for convertibility to crude.

"THE SERIOUS PROBLEMS OF PRIVATE BRAND GASOLINE MARKETERS"

An important segment of the national economy, the private brand marketing of gasoline, is today more seriously threatened in its continued existence than at any time in our history. If assistance is not received from the legislative and executive branches of government, the cumulative effect of pressures being addressed to the private brand gasoline marketers will produce its elimination and a resultant monopoly in favor of the major integrated petroleum companies in this country.

Often not fully appreciated, the private brand marketers of gasoline make a significant contribution to the economy of our country in the form of capital investment and employment opportunities and to the interest of the consumers. As the Federal Trade Commission has stated after an exhaustive study: "The record is clear that independent refiners and marketers exert a beneficial | influence upon competition that is disproportionate to their actual representa

tion within the petroleum industry; they have long been innovators of marketing methods and have been the primary agents in translating efficiencies at the production and distribution levels into lower prices at the retail level. They play a part in the industrial pattern that is entirely disproportionate to their size in keeping markets competitive, flexible and dynamic * * *”

and the elimination of that competition will visit serious adverse consequences on the public interest.

While precise data on the number of private brand retail gasoline stations in the United States is not available, so-called "price-marketing" of gasoline increased significantly in the decade of the 60's to the economic benefit of the consumer. The private brand segment: Operates thousands of service stations; provides employment to many thousand people; contributes millions in tax revenues to federal, state and local treasuries.

It is, therefore, a substantial segment of the economic sector that is threatened. The single most urgent problem demanding attention now is supply. Historically the private brand gasoline marketers, selling their product to the consumers at two or more cents less than major brand stations, have obtained their product from independent refiners and from the excess production of the majors. Recent years have seen the elimination of the independent refinery and the gradual disappearance of this important source of product to the independent marketer. Independent refineries have been acquired by majors, have been merged into integrated oil company structures or have ceased finished product production because of inadequacy of crude supply. The consequence of all this has been a gradual but progressive tightening of supply for the independents, reaching a crisis stage at this time. An important element of the supply problem is the operation of the mandatory oil import control program which favors the integrated company, but provides little or no help to the beleaguered private brand segment of the industry. The oil import program is no longer justifiable if it ever was-and its termination or substantial effective liberalization must be soon accomplished if private brand marketing is to survive.

Recent "band-aid" measures which purport to liberalize imports are but window dressing and of little practical value. Liberalization of the award of allowances of quotas to hard-presssed gasoline retailers is of no value when the tickets granted by the federal authority cannot be redeemed for product. Crude oil must be available to refineries to produce gasoline to meet demand and an assured quantity of that production must be available to the private brand marketer. "Tickets" without product do not represent a solution of the problem.

The situation, although now critical, is further aggravated by the recently announced policy decision of the Canadian government to limit crude oil exports to the United States, Canadian crude, under present federal policies, is essential to the operation of many independent refineries and this decision means additional loss of supply to the independent sector. It means too that even more existing refining capacity will go unused.

Inadequate supply is unquestionably the private brander's most serious problem. Long-standing supply contracts are being terminated on short notice. Exhaustive searches for alternative supply sources at competitive prices are unavailing. Stations are closing or facing imminent closing. Employees are laid off or facing unemployment. And no help is in sight. The major oil companies say it will get worse before it gets better-if that is true, and it will be if government does not act, many independent marketers face bankruptcy and financial ruin and the integrated oil companies tighten their stranglehold on the market.

The ingenuity of government must be addressed to finding a reasonable and fair solution to the supply problem and, pending its resolution, a way must be found to equitably distribute the economic consequence of shortage so it is not borne exclusively by the independent marketer-the one least able to bear that burden.

While supply of product is essential to the continued existence of the private brand marketer, the industry is faced with other problems of a critical nature that also require legislative and executive branch attention:

1. Secondary Brand Marketing. A marketing mechanism recently introduced by the major oil companies, seriously threatening the private brand segment of the industry, is known as "secondary brand marketing." Several intergrated petroleum companies are now using their substantial capital advantage to acquire and construct service stations marketing gasoline under a different, or secondary, brand