Independent Dealers Claim Chevron Inflated Their Gas Price : Business: Independent service stations allege in suit that oil giant is attempting to drive them out of business.
Eighteen independent Chevron gasoline dealers from throughout Southern California filed a multimillion-dollar lawsuit against Chevron USA Products Co. and three employees Wednesday in San Diego Superior Court, alleging that the oil giant is attempting to drive them out of business by forcing the dealers to pay inflated prices for gasoline.
The lawsuit claims this amounts to an unfair business practice, which is rooted in a variable rent schedule for independent dealers and Chevron’s insistence that the independent sellers only buy wholesale gas directly from the corporation. The result is higher prices for motorists, the lawsuit alleges.
“What it amounts to is nothing more than blatant price-fixing of the dealers’ prices,” said Wayne Konitshek, executive director of the Golden State Service Station and Garage Owners Assn., the trade group that is backing independent dealers in the lawsuit.
“The dealer has no choice (other) than to buy only from Chevron; therefore, when Chevron raises the prices to him, he has no choice but to raise the price to the consumers,” Konitshek said.
The lawsuit, which was filed here to take advantage of San Diego County’s speedy civil trial rules, makes 18 allegations against Chevron, primarily claims of price-fixing and violations against the Cartwright Act, the state anti-trust legislation.
The dealers, all of whom run service stations in Southern California--including San Diego and Los Angeles--want Chevron to pay each of them a minimum of $100,000 for unfair practices conducted over the past four years, according to Randall B. Hamud, the San Diego attorney representing the dealers.
Hamud also said that the dealers are asking for at least $2.75 million in punitive damages to punish Chevron for 11 unlawful business practices. Total damages sought are between $7 million and $25 million, he said.
The complicated legal action stems from the dealers’ complaint that Chevron’s pricing schedule makes it nearly impossible for them to compete with company-operated stations, most of which are able to sell gasoline for much less--as much as 15 cents a gallon less.
The lawsuit alleges that Chevron’s contract with its dealers is unfair because the company forces its franchises to purchase gas directly from the company--even though private wholesale firms can offer the same gasoline for a significantly lower price. The obligation renders the independent stations unable to compete with the company-run outlets, the suit charges.
Chevron officials defended their policy of requiring dealers to purchase gasoline from the corporation.
“The problem with that is if they buy from an independent distributor, they’re not buying Chevron gas,” said Mike Libbey, spokesman for Chevron at the company’s headquarters in San Francisco.
“The customer expects the same product . . . and that is the top priority for us,” he said.
According to the lawsuit, Chevron is also attempting to circumvent the 1978 federal Petroleum Marketing Practices Act, which is designed to protect independent dealers from the corporate oil giants. “Chevron has found a way to economically evict the dealers,” Konitshek said.
“They want to operate the service stations themselves,” he said. “They want to control the price of gas from the wellhead right to your, the consumer’s, gas tank. Every aspect of that chain they want to control,” he said.
To back up this accusation--which he said applies to all major oil companies--Konitshek said that over the past 20 years, the number of independent dealers in the country has plummeted from 300,000 to 90,000.
“Each company has their own way of doing it,” Konitshek said. “Chevron’s way is to compete down the corner from their own dealers, sell gas to the public cheaper than the dealer could possibly sell gas, charge him a rent (so) that he cannot possibly compete with their own company, and the public doesn’t know the difference.”
Libbey said he has heard these accusations of oil company conspiracies before. He attacked as “simply not true” the charge that Chevron and other oil companies are trying to gain control of gas stations.
Out of the about 1,530 Chevron stations in the California as of last January, only 123--or 8%--were company owned and operated, he said. However, Libbey noted that the majority of service stations in the state--920--were independent dealer-operated facilities on land either owned or leased by the corporation.
The lawsuit also claims that the dealers have been overcharged on rent for years. Konitshek said that in addition to rents that in some cases are four times what Chevron pays for the land, the alleged discriminatory rent schedule essentially means that dealers pay more if they sell more product, Konitshek said.
Libbey said that Chevron adjusted its rent policy earlier this year “to come in line with industry practices.”
The first step in the legal battle will be to ask Superior Court Judge J. Richard Haden to issue a preliminary injunction that will allow the dealers to purchase gasoline from independent distributors. A hearing date for this matter has not yet been set.
The 18 dealers involved in the lawsuit hold an interest in 33 service stations. Hamud said that he expects to see more dealers join the lawsuit in the near future.
