By Michael E. Miller
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In that environment the companies are having a field day. Texaco and Shell have admitted publicly that since they merged their marketing operations, both now price their gas the same. “They've equalized the price of two different products that ordinarily would be competing in the marketplace,” explains Los Angeles attorney Tom Bleau. The admission has inspired Bleau to file a price-fixing case against the companies in federal court, but there has been no concurrent peep from regulators.
Nor has a wave of station swaps among companies that began in the late Eighties resulted in any visible concern. In 1993, for example, Chevron swapped 66 stations in the Washington, D.C., area for 59 Exxon stations in South Florida; this past August, Shell sold all 27 of its stations in the Orlando area to BP Amoco. The swaps enable the companies to instantly increase their market share in regions where they already have a strong presence while bailing out of more marginal markets. Almost every one of the swaps has spelled trouble for dealers, who often are given a choice: Buy their stations at a premium or find something else to do.
With no help in sight from elected officials, and the court route posing a major financial risk, service station dealers are at a crossroads. Too stubborn to throw in the towel but too streetwise to ignore reality, they waffle between two distasteful options. “I've spent my life building this business, and I'm not gonna let them take it away from me,” Cleveland Shell dealer Jerry Gorczyca declares defiantly. Moments later he changes course. “I don't know if we're fighting a losing cause and we should just let go, or if we should keep on fighting.”
After 39 years Gorczyca is saddened by the changes he's seen, and not just in the gas business. Before, a man was only as good as his word. Relationships were built to last, with customers as well as suppliers, and loyalty was rewarded in kind. All the institutions that gave meaning to the word community -- florists, funeral parlors, hardware stores -- operated on the same principles. Those principles, Gorczyca laments, seem as distant today as the dealers he's seen driven away.
“What they built this country on, the small people, they're going to eliminate 'em.”
Running on Empty
Luis Konski sees the humor. A Miami attorney who makes part of his living suing major oil companies on behalf of dealers, he has experienced firsthand the arrogance -- and power -- of his adversaries. “It is very presumptuous of us to take on the big oil companies,” says Konski. “We should just lie down and let 'em walk all over us.”
Having worked dealer cases as long as anyone in the area, Konski runs into the same obstacles over and over again. The companies are very careful to put only certain things in writing, and the dealers are too trusting to realize that what they were told verbally means nothing. “They're promised the world, and it's all on a handshake,” he says. “An oral agreement is only as good as the paper it's written on.”
A Miami federal court case against Exxon offers special insight into oil company tactics, both before and after an action is filed. Beginning in 1982 Exxon introduced a “discount for cash” program to attract more price-conscious consumers. The company also instituted a three percent fee to the dealer on credit-card sales. To offset the fee, dealers were supposed to get a 1.7-cent-per-gallon reduction in their wholesale gas price. But documents and testimony showed that except for two brief periods in 1982 and 1991, the dealers never got the break over the twelve years of the program.
After a shocked group of dealers heard company executive Jim Carter admit at a national meeting that they hadn't been receiving the discount, they filed a class-action suit in 1991. The amount Exxon saved by depriving the 12,000 dealers in 37 states of their penny-plus per gallon is eye-popping, according to their attorney. With interest, says Jay Solowsky, “the aggregate is around a billion dollars.”
Exxon wasn't about to let the case proceed smoothly. As records show the company immediately flooded the court with every conceivable motion, slowed the discovery process, challenged witnesses, and otherwise obstructed progress. Eight years later the case finally went to a jury, which was unable to reach a verdict. A new trial is set for January 2001.
Even if the dealers win the next go-round, they face numerous appeals and challenges that eventually could reach the state Supreme Court. “We're probably looking at a four-year road,” Solowsky says. In the interim the dealers must wait, and the waiting is painful. “This is not a windfall for them,” he says. “This is money that was taken out of their pockets, and some of them desperately need it.”
Delay is nothing new to Solowsky, who has several oil company notches in his belt from previous cases. “They institutionalized the process of stonewalling,” he says.
As they while away the days, Florida dealers aren't likely to get much help from state lawmakers. Florida passed a divorcement statute in 1974 that fixed three percent as the maximum number of stations a refiner could run as company operations in the state. The law remained dormant while a series of appeals wound through state and federal courts, but ten years later, it was finally upheld.