SAN FRANCISCO -- Nearly two dozen gas station owners in California sued Shell Oil Co., Chevron Corp. and Saudi Refining Inc. on Tuesday, claiming the companies conspired to fix prices for 23,000 franchise owners nationwide, reported the Associated Press.
The case filed in U.S. District Court in San Francisco seeks class-action status for the plaintiffs. It is similar to another lawsuit filed in 2004 by other California gas station owners that was thrown out by the U.S. Supreme Court last year. The new group of plaintiffs hopes the court will consider [image-nocss] a slightly different argument.
Like the previous case, the plaintiffs in this case say chairmen of the three oil companies met privately nearly every month starting in March 1996 for the purpose of forming and organizing a combination. The lawsuit alleges executives destroyed documents from the meetings, and a now-defunct joint venture violated U.S. antitrust laws and caused artificially high wholesale gasoline prices in nearly every state from 1999 to 2001.
In a new twist, the plaintiffs now say the venture violates a rule of reason governing antitrust matters.
According to Wikipedia, the concept goes back to a 1911 Supreme Court ruling in the case of Standard Oil Co. of New Jersey v. United States, saying the only combinations and contracts unreasonably restraining trade are subject to actions under the anti-trust laws and that size and possession of monopoly power were not illegal. The rule was narrowed in later cases that held that certain kinds of restraints, such as price fixing agreements, group boycotts and geographical market divisions, were illegal per se. (Click here for Wikipedia's full entry on rule of reason.)
Chevron spokesperson Stephanie Price told AP that the San Ramon, Calif.-based company has not seen the lawsuit and she could not discuss specifics. She did say Chevron, which acquired Texaco Inc. in 2001, was vindicated last year when Chief Justice John Roberts blasted the previous case for its very artificial hook.
The lawsuit hinges on a marketing deal that, plaintiffs say, allowed former rivals to collude on prices starting in 1998, when Shell and Texaco Inc. formed Equilon Enterprises LLC to market gasoline in western states. They formed Motiva Enterprises LLC later that year for the eastern half of the country. Houston-based Saudi Refining also joined Motiva.
Equilon and Motiva began operating when inflation-adjusted crude oil prices hit their lowest levels since the Great Depression, according to San Francisco-based lawyer Joseph M. Alioto, who represented plaintiffs in both the old and new cases. Yet gas prices soared for franchise owners, forcing them to pass on the cost to consumers or cut profit margins.
These executives get together and say, 'OK, we're going to raise Texaco's price to Shell's price, then we're going to raise both of them 50% to 75%, and we're going to do it after we've already had all these cost savings', Alioto said.
The lawsuit doesn't seek a specific financial award. Alioto argues wholesale prices were higher by at least 20 cents a gallon and possibly as much as 40 cents per gallon from 1999 to 2001.
Since an average gas station in the United States pumps about 100,000 gallons per month, Alioto says the energy companies owe each of the 23,000 station owners at least $240,000.
Station owners had little choice but to pay higher prices. Franchises typically sign long-term contracts with oil suppliers, making it tough to switch to another brand or an independent supplier.
A spokesperson for the state-owned oil company of Saudi Arabia, of which Saudi Refining is a subsidiary, said they had received no official notification of a lawsuit. Representatives did not return phone calls and e-mails to Houston-based Shell, a subsidiary of the Royal Dutch/Shell Group.
The case is Madani v. Shell, C07-4296-MEJ.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.