Below-cost gasoline pricing fought

Independent dealers say big retail chains imperil their survival

March 14, 2001|By Michael Dresser | Michael Dresser,SUN STAFF

Telling lawmakers that they are in a struggle for survival, independent service station owners from around Maryland packed an Annapolis hearing room yesterday and pleaded for protection against what they called "predatory pricing" by large retail chains.

The dealers urged a House committee to approve legislation that would ban their rivals from pricing gasoline below cost - a tactic they say is being used to drive them out of business.

"We are not dinosaurs and we do not expect to become extinct," station owner Melvin Sherbert told the Economic Matters Committee, which fell one vote short of approving similar legislation last year. "Don't do us any big favors. Just make the marketplace fair."

This year's version of the legislation, retooled to meet objections that sank it last year, has set off a clash between many of the best-known lobbyists in Annapolis and a well-orchestrated grass-roots campaign by the service station owners.

The legislation is being fought by retail chains, including the two that dealers accuse of being the most voracious price predators - Wa-Wa and Sheetz Inc.

"It is not sinister to sell at a low cost. It is only wrong when you have a sinister intent as well," said Mike Cortez, general counsel with Altoona, Pa.-based Sheetz.

The legislation does away with the need to prove an intent to harm a competitor - a standard the dealers have found hard to meet under the state's current law governing below-cost sales.

Each side attempted to portray its position as being favorable to the consumer. Proponents said it would not raise the cost of gasoline; opponents said it would add 1.25 to 4 cents a gallon.

The dealers told lawmakers that they are being run out of business by convenience store chains - and soon, perhaps, by retailers such as Wal-Mart and Safeway - that are using gasoline as a loss leader to sell soft drinks and snacks.

The independent operators, most of whom lease their stations from major oil companies, said the vendors of unbranded gasoline will often come into a new market with prices 10 cents to 20 cents below their market rates in order to drive competitors out of business. When their older rivals are boarded up, the chains typically raise their prices back to market levels, dealers said.

Frank Eberle, owner of a Citgo station in Severn, said he is facing the threat of new Wa-Wa and Enroy stores popping up along Veterans Highway. He said that although they might be able to sell gas at a loss, they won't provide services that consumers have come to expect.

"They don't service cars. They don't fix tires, They don't give you air. They sell it to you," he said.

Bruce Bereano, lobbyist for the service station dealers, said the legislation is consistent with the General Assembly's 30-year commitment to preserving independent dealerships.

"This is a very important bill for the consumer," Bereano said. "Once these service stations are gone, where is the consumer?"

But American Joe Miedusiewski, a lobbyist for Wa-Wa, said the shift away from service stations to low-priced gas sales at convenience stores is part of the evolution of consumer preferences.

Last year, the dealers fell just short of victory.

Over the summer, the dealers have agreed to changes in the bill - eliminating proposals for a minimum markup from the wholesale price and the right of dealers to bring a private enforcement action under the bill.

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