By Camilo Smith
By Craig Malisow
By Jeff Balke
By Angelica Leicht
By Jeff Balke
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
For the dealers, such laws represent their only chance for survival beyond the courts. But the public also benefits, they argue: With the dealers gone, no marketplace barriers exist to keep the companies from charging what they want at the pump. "The dealers are competitors on the street," says a Shell marketing manager who asked to remain anonymous. "Get rid of the competition, and basic economics tells you the price goes up."
The oil companies offer consistent explanations for why they oppose divorcement, though only Equiva, one of the Shell-Texaco joint venture companies, would respond to questions from the Press. According to its prepared statement, divorcement represents "government intrusion into the marketplace." Moreover, it reduces competition by restricting a class of trade -- company operations -- from operating freely, to the detriment of the public.
It's not clear how replacing dozens of independent dealers with a single entity enhances competition. Regardless, the industry has produced plenty of studies to show divorcement is anti-consumer. An industry-funded study in Maryland, where a divorcement law has been in place since 1973, found that prices went up in that state after the law was passed. The state Department of Fiscal Services made the same finding in a 1988 report.
However, a 1987 study commissioned by the Maryland comptroller's office found just the opposite. Over a seven-year period, the study concluded, "the total savings enjoyed by Maryland motorists relative to motorists in non-divorcement cities was over $102 million."
Tim Hamilton has argued the benefits of divorcement just about everywhere the issue has been raised. He has facts and figures to counter every oil company argument about divorcement and other dealer protection laws, and he's faced off many times with industry experts in public debates. Misinformation, he says, is their stock-in-trade. "If Walt Disney was still alive, their noses would bust a hole in the wall."
Data may be conflicting, but one fact is undeniable: When faced with a divorcement initiative, the industry will do whatever it takes to defeat it. Despite the usual industry lobbying barrage, the San Diego County Board of Supervisors passed a local divorcement ordinance in 1998 in response to perceived gas price gouging. The Western States Petroleum Association, an industry trade group, sued the board for $50 million. The ordinance was withdrawn.
Everyone has a breaking point, and Mike Fiori had reached his. The Cleveland Shell dealer had seen his profits nose-dive after months of high wholesale gas prices and a huge rent increase. Though his dealer rep had promised Fiori that Shell would keep him competitive, the stations around him were selling at a price that left him no margin to work with. One of his service bays had a broken lift, but no repair was forthcoming. A dealer for 35 years, he saw his life's work going down the tubes.
Last November, Fiori called his rep for the umpteenth time and complained about a station up the street underpricing his cost. "He told me that they're making money, and that's the way it is, and if you don't like it, too bad," Fiori says. "He talked to me like I was some kind of garbage."
Fiori slammed down the phone, but seconds later called back. No one picked up. Enraged, he left a message on the answering machine. "I said that "The next time I see you, I'll slap the shit out of you,' " he recalls.
That afternoon he got a phone call from Shell security in Houston asking about his "threat." The rep later filed charges against him, and in March, Fiori heeded the advice of his lawyer, pleaded no contest to a minor charge and paid a $200 fine.
Two days later Shell terminated his lease, citing a clause that prohibits criminal activity. Fiori is fighting the eviction in court.
Shell would not comment on pending litigation, nor would other oil companies contacted by the Press, but dealers who allegedly violate the terms of their leases can expect hard times from their suppliers. Especially, it seems, if they make noise. Los Angeles-area Shell dealer Keith Fullington set up a makeshift prison cell last May to protest the company's pricing practices. After he invited local television stations to film him behind bars, Shell sued. Fullington had to dismantle the cell, and last month he got official word that his lease won't be renewed after it expires next year.
Even if the squeaky wheels win lawsuits, they have no guarantees of cooperation. As part of his 1993 settlement, Houston Exxon dealer David Vawter was required to make a "good faith effort" to sell his station. Seven years and ten good faith efforts later, Vawter is still in business thanks to Exxon's rejection of every potential buyer. Recently, like Fullington, he was notified that his station is no longer in the company's long-range plan.
Chevron has been particularly aggressive with agitators. Hawaii Chevron dealer Frank Young, who often has accused oil companies of colluding to inflate wholesale prices, is fighting an eviction notice for not keeping his station open the required number of hours. Alan Bowdish, an Oregon Chevron dealer and head of the state's dealer organization, repeatedly has found himself in the highest-priced zone in his area. In Arizona, Jesse Lugo sued Chevron and later settled after the company evicted him in 1997. Lugo, perhaps not coincidentally, had been legislative director for the state's dealer group.