your efforts and, I believe, Mr. Corman, who also submitted on the
bill
Mr. Horton. Right.
Mr. McCamant (continuing). In this regard. And we think that
it is a subject requiring very serious study because there are many
suppliers who do not compete unfairly with any of the distributors
except in the field of Government procurement, and that is because
they are forced into it by GSA. And if the Congress has reaffirmed its
policy here that Government procurement should be consistent with
other Government policy, we think that this Commission should be a
very excellent instrument to investigate the problem.
Mr. HoRTON. Thank you.
Mr. DiNGELL. Mr. McCamant, we certainly thank you for your
presence and for your very helpful statement.
Mr. McCamant. Thank you, Mr. Chairman.
Mr. DiNGELL. Thank you very much.
79
Our next witness is Mr. H. C. Thompson, president, National Con-
gress of Petroleum Retailers.
Mr. Thompson, we are certainly pleased you could be with us today.
The Chair notes that you also have Mr. O. W. Britton here witli you,
executive director of tlie Eetail Gasoline Dealers Association of MicM-
gan, from the State I have the honor to represent.
Mr. Britton, we are happy you could be with us. And we are glad
to see our old friend Mr. William Snow, your general counsel, who is
well known and much respected by this committee.
Gentlemen, we are certainly happy you could be with us today.
TESTIMONY OF H. C. THOMPSON, PKESIDENT, NATIONAL CON-
GUESS OF PETEOLEUM EETAILERS; ACCOMPANIED BY 0. W.
BRITTON, EXECUTIVE DIRECTOR, RETAIL GASOLINE DEALERS
ASSOCIATION OF MICHIGAN; AND WILLIAM SNOW, GENERAL
COUNSEL
Mr. Thompson. Thank you, Mr. Chairman.
Mr. Snow, do you want to make a comment before I go ahead ?
Mr. Snow. Very briefly, Mr. Chairman.
The statement'^by Mr. Thompson for NCPR and by Mr. Britton
deals with marketplace realities, factual things.
The Robinson- Patman Act was passed to deal with problems in the
real world, not with economic theories — passed unanimously in the
Senate, almost so in the House. Those j^roblems are still with us even
though the economy races along so fast we don't see them, but we are
begimiing to feel them and they can become very much worse.
So it is in the real world that we live and that our members have to
struggle in, and these statements relate to that. And they relate to price
discrhnination, what is perhaps the most important aspect for us, and
that is as an instrument of coercion.
We happen to believe that the goal of the antitrust laws is liberty,
economic liberty of all of our citizens, and that this means that one
businessman should not be coerced by another.
James Madison said that in writing the Constitution, that there is
as much to fear from usurpation by a few, of the rights of all, as there
is by usurpation of Government. And economic coercion, price dis-
crimination, is a device of economic coercion in gasoline distribution.
So, Mr. Thompson, if you will, proceed.
Dr. DiNGELL. Mr. Thompson.
Mr. Thompson. Mr. Chairman and members of the subcommittee,
my name is H. C. Thompson. I am president of the Georgia Associa-
tion of Petroleum Retailers. We are the national trade association of
the retail petroleum and automotive service station — I repeat, I am
president of the National Congress of Petroleum Retailers.
Mr. Snow. Mr. Thompson is also president of the Georgia Associa-
tion.
Mr. Thompson. We are a congress of affiliated State and regional
associations in a majority of the States, the District of Columbia, and
Puerto Rico.
The individual retail members who make up our constituent associa-
80
tions comprise more thcan 90 percent of total trade association member-
ship in the retail petroleum industry.
We are deeply concerned with the subject matter of these hearings.
In fact, it is not stating it too strongly to say that it is the economic life
of our members which is involved. Nor is this something which we
have just recently discovered. In fact, the threat to smalf business in
our industry from price discrimination practices was one of the major
reasons leading to the formation of our national organization in 1947;
and one of our first official actions was to authorize support for the posi-
tion of the Federal Trade Commission in the Standard of Indiana case
which was then in the circuit court of appeals, and the filing of ami-
cus curiae briefs therein along with our affiliated association, the Re-
tail Gasoline Dealers Association of Michigan.
Moreover, as members of this subcommittee will remember, our posi-
tion in regard to price discrimination has been presented not only to
the Commission and to the Courts, but also right here in each session of
Congress from 1954 down to the present.
Consider for a moment what happens when a major gasoline sup-
plier with numerous service stations in a particular community gives
a substantial discount to one or a few of these retail outlets under an
arrangement whereby the retail ]irice will be reduced 2, 3 or 5 cents a
gallon in the favored stations. The competing lessee dealers of these
favored outlets must continue to buy the gasoline they sell from the
very same supplier who discriminates against them. By the terms of
their contract, they must pay the price which the supplier posts at the
bulk plant notwithstanding that this price is 1, 2, 3, or even 5 or more
cents higher than the price given to the favored stations.
They are forced by the discrimination to take a loss either by cutting
their margins below their cost of doing business or lose their customers
to the favored stations and see their businesses dry up while fixed
expenses such as minimum rent use up their capital.
The terribly disheartening thing is that the catastrophe of business
failure brought on by such discrimination overtakes the efficient, the
average, and the inefficient alike. The hardest working, most efficient
dealer can hang on a little longer in the face of this type of price dis-
crimination, but if the discrimination is deep enough or continues long
enough, efficiency has little to do with survdval.
Equally repressive hardships are imposed through the area form of
price discrimination — the tyj^e which occurs when a supplying com-
pany draws an imaginary line down the middle of the street or high-
way or across a piece of country land and charges dealers on one side
of this imaginary line 2, 3, 5 or more cents per gallon higher for gaso-
line, even though the dealers who have to pay the higher price are
within a few hundred feet, down the road or just across the street
from the dealers getting the lower price.
The extent of area price discrimination between contiguous and
closely related areas — even within a single State— is appalling * * *
sometimes being as high as 12 cents dilTerence from the price- war
area to perhaps only 50 miles away. When the price-war tank wagon
price goes down to 5.8 cents as it has done on various occasions and in
various places for a few weeks at a time during the 1960's, this does
not change the price charged one or two counties away which will ho,
81
from 16 cents to more than IS cents — or a difference of 10 to 12 cents
between prices in competing areas.
This comes as a shock to many people observing the oil industry
from the outside : But it is a fully documented fact that on a national
basis under normal market conditions, tlie independent brand chain
stations buy approximately half the gasoline they sell from major oil
company suppliers unbranded at 4 to 6 cents a gallon below the price
charged major brand retailers.
These same supplying companies then pressure their branded deal-
ers who are paying the 4 to 6 cents higher price to cut their margins
to meet the competition of the private brands.
These facts constitute the hard core of a tremendous amount of eco-
nomic suffering for major brand dealer-operated service stations — as
well as the means for engendering price wars, when suppliers put pres-
sure on their regular dealers to compete pricewise through cutting
their margins with competitors who are buying 4 to 6 cents cheaper.
In conclusion, experience has been our teacher as to the misery
which is involved and the reality of the practices wdiich I have been
describing.
They play a significant part in the 30- to 37-percent annual turn-
over ratio for service station dealers. Yet bad as these practices are and
have been as short range pricing tactics, they have even more serious
long-range implications. These long-range implications involve their
availability for use as instruments of control in the continuing trend
toward super concentration and industrywide power over prices, mar-
kets, and supply.
Only our strong commitment to the Robinson-Patman Act and its
vigorous enforcement — in conjunction with the same vigorous enforce-
ment of other antitrust statutes — can prevent the undermining of our
free enterprise system.
In simple truth, we need to strengthen our commitment to antitrust
principles and to the antiprice discrimination safeguard which the
Robinson-Patman Act provides. We strongly commend this subcom-
mittee for its concern with this most fundamental problem.
Mr. DiNGELL. Mr. Thompson, we certainly thank you for a very help-
ful statement. And the Chair notes that you have submitted to us also
an addendum which, if there is no objection, we will insert at this point
in the record.
(The material referred to follows:)
Addendum to Statement of H. C. Thompson, President,
National Congress of Petroleum Retailers, Inc.
Mr. Chairman and members of the committee : There has been and continues to
be a need for antitrust remedies to be made available to small businessmen
against sales at unreasonably low prices that tend to destroy competition or elimi-
nate a competitor.
During this calendar year the Georgia Association of Petroleum Retailers has
had a number of complaints filed by lessee gasoline retailers that will bear out a
present need for stronger laws in this area.
One such dealer complaint filed July 31, 1969 related that Gulf Oil Company
was favoring certain of their dealers in the same general marketing district by
the granting of a lower price to the favored dealers to the detriment of the un-
favored dealer. The complaining dealer explained that his business volume fell
from a normal of 1500 to 1600 gallons a day to 1200 to 1300 gallons a day.
82
In this ease a telephone call to Gulf Oil by the Association representative re-
sulted in the complaining dealer getting the same price as the nearby favored
dealers. His volume returned to normal in just a short period after the practice
was corrected.
Another dealer claimed on July 25, 1969 that American Oil Company was favor-
ing dealers around him by the granting of a temporary allowance off the regular
tankwagon price of some four and five cents a gallon whereas he was denied the
allowance. This dealer claimed a loss of gallonage of substantial amount re-
sulted when the price allowance was passed on to the customer by the favored
dealers.
Again, a telephone call to this Company resulted in the dealer getting the same
price allowance as the favored dealers with the resulting effect that his volume
returned to previous normal.
Still another dealer complained on May 24, 1969 that Pure Oil offered him a
seven and two-tenths cent a gallon reduction off regular tankwagon prices in the
form of a temporary allowance . . . and the company representative so notifying
advised that company suggested prices were now ten cents a gallon below the pre-
viously announced suggested price. Possessing a feeling of concern for his fellow
brand dealers this dealer refused to lower his retail price until other Pure dealers
in his area were given the temporary allowance. The allowance was granted to
all a few days later.
In another instance a Phillips dealer located on a major traffic intersection was
denied the same or feathered temporary allowances off tankwagon prices which
other Phillips dealers were receiving. He claimed a loss of daily volume of busi-
ness began when the price preferential treatment began. A company oi>erated Phil-
lips outlet located about one mile away on the same state highway and major
traffic artery posted a retail price at approximately the complaining dealer's
wholesale price charged by Phillips for gasoline he had purchased.
A telephone call to Phillips office by the Association official brought immediate
action and relief for the complaining dealer. This dealer reported within an hour
after having filed complaint and contact made with his supplier that he would
receive an acceptable feathered price allowance on future deliveries. The Asso-
ciation assisted this dealer in filing in writing for a refund of overcharge
imposed upon him. No action was taken by the company as far as is known.
This wasn't the first time this particular dealer had lost business as a result of
similar activity. This dealer finally, within the past few days, moved to another
brand outlet in the hopes of getting fairer treatment from another supplier. This
happened in 1969 — not years ago.
Why did those o-l companies react favorably to telephone calls about these
complaints and an Association request for fair treatment of its members? It
wasn't because they hoped to satisfy those concerned ... it was because they
had been caught this time in a practice prohibited under antitrust laws. But
where would the dealer bo if he had not received favorable action? Did they
have remedies available against the damaging practices? As I understand it
the answer to the last question is no, and the answer to the fir.st question vronld
not be any more favorable.
We must have legislation that will not only prevent or deter such practices
but we must have recourse for recovery for damages resulting from such treat-
ment of small businessmen. I ask you to look favorably upon retention of and
passage of antitrust legislation which is absolutely essential if we small busi-
nessmen are to survive.
Mr. DiNGELL. I certainly think yon have given a very fine state-
ment.
Mr. Britton, we are happy to recognize yon now.
Mr. Britton. Thank yon, sir.
]\f r. Snow had a very brief comment.
Mr. Snow. I just wanted the record to show the pricing data is ex-
tax in Mr. Thompson's statement, exclnsive of taxes.
Mr. DiNGELL. Ex-tax.
Mr. Snow. Ex-tax, that's right.
Mr. DiNGELL. Wonkl that apply to the addendmn ?
Mr. Snow. I don't Iwlieve the addendnm deals with that, sets forth
83
pricing data, but the pricing data in the industry is always exclusive
of tax, and this is the way it is shown here.
I am sorry to interrupt.
Mr. DiNGELL. That is perfectly all right.
TESTIMONY OF 0. W. BRITTON, EXECUTIVE DIRECTOR, RETAIL
GASOLINE DEALERS ASSOCIATION OF MICHIGAN
Mr. Britton. If the people in this room understood gasoline was
5.8 cents a gallon, they would think that was very ridiculous, but when
you add 11 cents to it you come to 16.8, so it looks a little better.
Mr. DiNGELL. It becomes a recognizable figure.
Mr. Britton.
Mr. Britton. Mr. Chairman and members of the subcommittee,
my name is O. W. Britton.
I am executive director of the Ketail Gasoline Dealers Association ol
Michigan, having succeeded to that office after the death a year ago of
Cash B. Hawley who was such an effective dealer leader for so many
years.
Before joining the association staff as membership director 5 years
ago, I had been an active service station dealer for more than 25 years —
both as a major brand dealer and as an independent owning my own
station, selling under my own brand and buying gasoline on specifica-
tions for resale. Thus, I have had personal experience both in the con-
trolled major brand end of the gasoline business and also in the rela-
tively freer part of it where majors and independent refiners have to
compete for your business.
What I have to say about price discrimination is based on this ex-
perience, as well as on my experience as an association executive.
The major companies all have nearly identical methods of doing
business so far as their relations with their major brand retailers are
concerned.
As late as the mid-1920's, most dealer stations were operated as
multibrand stations but price discrimination advantages to a dealer
who would sign up with a single brand eliminated this by the early
1930's.
In the meantime, the companies built a great man}^ stations of their
own, and in the thirties they were able to take over a good many dealer-
owned stations for the price of the mortgage.
But they soon found that it was more costly for them to operate
these stations with company personnel than to lease them back to the
dealers whose business they were able to control by many lease and
contract provisions.
Chain store taxes may have given them the idea, but the reason they
went to nearly 100 percent dealer operation was something else. It was
the fact that the little businessmen were more efficient than those giant
corporations in running retail service station businesses. And that
reason has continued down through the years.
Integrated companies have lessee dealers for just one reason — ^be-
cause it is profitable for them to do so — because we are economically
more efficient in the performance of these basic functions than the
giant integrated companies themselves.
I might just stop a moment.
84
If tlie oil companies o^ynecl the stations and hired the help to run
them today, the gasoline would cost each and every one of us 5 cents
more a gallon. You better believe that because I happen to know,
truthfully — the gasoline dealer today is fighting for his life and he
always has a very, very serious labor problem because he is in a posi-
tion where he is not able to hire qualified people like he should be if
this discrimination was stopped, so he would have a decent margin,
so he could hire qualified people and service to the public would be
much better, and also we would have a much healthier economy in
every way, shape, and form.
Thank you. I just had to say that.
So don't let any major oil company executive tell you that our oppo-
sition to price discrimination and the need for protection against such
discrimination are caused by our being inefficient and wanting soft
competition.
Of course, no oil company executive makes that silly claim when he
addresses a dealer meeting, as they do many times a year at both our
State and national conventions. But we do understand this claim is
being made as part of the insidious attack on the Eobinson-Patman
Act and as part of the lobbying drive to get immunity for those
destructive practices.
So please bear in mind that any claim that we small businessmen
are inefficient and are seeking protection for our inefficiency is dis-
proved by the hard facts of the real world in which we operate our
business.
The truth is, we lessee service station retailers are living proof of the
character and efficiency of independent small business.
The very fact of our continuing in business speaks for itself. If
lessee dealers, generally speaking, were not more efficient than com-
pany-operated stations in performing the retailing function, some
170,000 lessee dealers would be replaced by company managers pretty
fast.
Also, let me say a few words about the erroneous claim that price
discrimination is "hard competition" which means lower prices for
consumers. Here are the facts as to how price discrimination actually
works as we are experiencing right now in Detroit and have experi-
enced in Michigan many times before :
When a large part of the public is charged discriminatory high
prices while another part of the public is charged discriminatory low
prices to eliminate competition, with dealers squeezed to the breaking
point in between, tliere is one inevitable result :
The elimination of competition makes certain in the end everybody
in every area pays the high discriminatory price.
And the crushing of qualified dealers out of business with margins
that are too small to hire competent help and give good service to the
pu})lic means that the public, although compelled to pay discriminatory
high prices for gasoline is deprived of the dependable services which
are necessary for the safety and convenience of motoring.
Eemember in this situation that the first dealer is tied to the com-
pany through the lease and dealer agreement and has to pay the dis-
criminatory price the company charges him, however high or ruinous
it is to his business.
85
After tying him down, the}^ are free to kick him around witli price
discrimination since he is not able to buy gasoline from anybody else.
Then they call this "hard competition." I would call that a plain
misstatement of fact — and a plain misstatement fact is still exactly
that, even when hidden in fuzzy theoretical terms by high priced spe-
cial lobbyists and dispensers of propaganda at a price.
I would call that kind of competition "cowardly competition" and
"counterfeit competition." Cowardly, because it takes heartless ad-
vantage of men whom the compan}' first makes defenseless.
The company knows the injuries its practices will cause. It has set
up the situation to its advantage and the dealers' disadvantage; it
does this without giving the dealer any protection.
And tlion it takes heartless advantage of this economic death trap.
I call it counterfeit competion because it is bogus by any standards of
fair dealing and it victimizes both small businessmen and consumers.
It is bogus competition because it undermines the true basis of the
American free enterprise system. We cannot get back to our free en-
terprise system of distribution without really and truly preventing
])rice discrimination practices and having law enforcement available
to make sure that the laws are obeyed in this vital respect.
Thank you, gentlemen.
I have one comment : I heard a couple of gentlemen this morning
make a couple of remarks, and I want to just make this comment in
regard to their remarks.
I think the only thing that our forefathers did when these laws were
written was to be a heck of a lot smarter than maybe a lot of us are
today, because all we need to do in this good American country to have
security and honesty and be living in good America and be able to
fight some of the evils that we have is to read our Constitution and go
]3y our laws and get the laws enforced.
' And if we do that, everybody in general, the public in general would
be in a much better position, because I have many, many people call
me at my office and say, "I have got a $4,000 car and some knuckle-
head worked on it over here and ruined it for me," and I don't like
that.
Now, why has that gasoline dealer got that low-paid employee ? Be-
cause he is forced, he is just forced down by discrimination to where
he can't afford to hire qualified mechanics. And we need licensed me-
chanics, and we are going to get them because I am going to try to
pass a bill in Michigan to have licensed mechanics because we need
them to help further the economy and have the public and these ve-
hicles so they will roll and continue rolling, because I am sick — I have
been in this business a long time and I know a little bit about it,
I hope.
Thank you very much.
Mr. DiNGELL. Thank you very much, Mr. Britton.
Mr. Britton. Any questions?
Mr. DiNGELL. Mr. Conte?
Mr. Conte. No questions.
Mr. DiNGELL. Mr. Smith?
Mr. SMrpH. Many years ago, among some other things I was doing,
I operated a garage with a gasoline pump in front. To an operator like
86
that or to one who owns the station and buys the gasoline from a
distributor, is there any ditierence in the price he paj^s and the price
some other operator like him would pay ?
]\Ir. Brittox. That is the part I am complaining about, discrimina-
tion.
I filed a complaint way back — Congressman John Dingell remem-
bers — about the middle of May, or first of May, I guess it was, about
the discrimination in Detroit because we have — I have sent photostatic
copies of invoices to the Federal Trade Commission with the proof,
with the absolute proof there is as much as, I would say, from 2 to
4.1 difference in price in the different areas of the gasoline from the
same supplying company to the same major oil supplying station.
In other words, we will take one individual company, whether it is
Gulf or Sun. You will have a dealer over here a mile away who will
buy it 3 cents less than the dealer over here. It is prett}^ hard to beat