Editorials
Wednesday, November 24, 1999

Lawsuit settlement
bolsters state case

The issue: Two gasoline companies have agreed to an out-of-court settlement with the state in its antitrust lawsuit against the industry.
Our view: While the major defendants haven't capitulated, the settlement is an encouraging indication of the lawsuit's merits.

AGREEMENT by two oil companies to pay the state $15 million in exchange for being dismissed as defendants in an antitrust case fairly shatters the notion that the lawsuit was nothing more than political grandstanding. While BHP Hawaii Inc. and Tesoro Petroleum Corp. deny any wrongdoing or liability, their settlement lends credibility to allegations in the lawsuit.

The suit alleges that Hawaii's gasoline wholesalers and two refiners fixed gasoline prices at an artificially high level and agreed to allocate market shares among themselves in violation of state and federal antitrust laws. The suit, seeking $2 billion in compensation from the industry, was filed in October 1998, a month before Governor Cayetano stood for re-election, prompting accusations that it was politically motivated.

Filing of the suit followed a series of reports by the Star-Bulletin's Rob Perez that gasoline prices in Hawaii had been substantially higher than on the mainland for years, without sufficient cost differentials to explain the gap.

"Somebody doesn't give you $15 million...to settle a political shibai case," says Robert F. Miller, a private-practice attorney who headed the state attorney general's antitrust division from 1979 to 1981. Miller, who initially expressed doubts about the strength of the state's case against the oil companies, calls the settlement "very significant."

That does not mean that the remaining defendants -- Shell Oil Co., Tosco Corp., Unocal Corp., Chevron USA and Texaco Inc. -- are necessarily culpable. BHP Hawaii and Tesoro took the position that the legal costs in going to trial could exceed the settlement amount.

Tesoro President Faye Kurren called it "a sound business decision" to pay the state "what amounts to less than three years of legal fees" rather than continue involvement in litigation that could last even longer. While that may adequately summarize Tesoro's cost analysis -- it's settlement amount is $3 million -- it hardly explains BHP's decision to pay the state $12 million to be cut loose.

BHP Hawaii and Tesoro, which acquired BHP Hawaii last year, were relatively minor players in the lawsuit, accounting for less than 12 percent of Hawaii's gasoline market. The settlement also requires their cooperation with the state in supplying documents that could bolster the lawsuit's allegation, another boon to the attorney general's effort.

The key defendants are Chevron -- accounting for 30 percent of the market -- Shell, Tosco and Unocal. Trial is scheduled for February 2001. In that trial, the state must prove that the defendants conspired to fix gasoline prices in violation of the antitrust laws.

Internet shopping
risks are typical

The issue: Consumer advocacy groups warn about the risks of shopping on the Internet.
Our view: As Internet shopping has grown, complaints have risen at a rate suggesting that alarm may be unwarranted.

WARNINGS about the risk of making credit-card purchases over the Internet should cause users to exercise caution. However, when the growth of consumer complaints is considered in the context of Internet usage itself, the risk to consumers is not extreme.

The National Association of Consumer Agency Administrators and the Consumer Federation of America jointly released a survey indicating that Internet complaints of all types show an average increase of 39 percent in the past year, after a 23 percent increase during the previous year.

That could seem frightening to consumers except for the fact that e-commerce sales are expected to double this year from 1998, to $9 billion. That means consumer complaints are rising at a lower rate than Internet sales. In other words, according to the survey, shopping on the Internet is less risky than it was a year ago.

The survey is helpful in focusing on certain areas of Internet sales that warrant extra caution. It shows that "cramming," the practice of padding telephone or credit-card bills with unauthorized charges, typically for third parties, has risen 1,037 percent. Also, consumer complaints have risen 72 percent in the area of auto sales, 70 percent in auto repair and 68 percent in home improvement.

The most common types of complaints concerned Internet service providers, according to the survey. That is understandable, since payments to service providers are by far the most common purchases made by Internet users. Everybody on the Internet has a service provider and so is involved in such purchases, usually monthly.

In releasing the survey, Jean Ann Fox of the Consumer Federation says fraud "costs consumers tens of billions of dollars a year."

Wendy Weinberg of the agency administrators' group adds, "It's very important to check out the companies before you do business with them."

Those precautions are wise both online and off, especially where credit cards are used. Internet users may be more on guard while making purchases online than in a store or even over the phone, and such wariness is healthy. But consumer advocates should not exaggerate the risk of shopping on the Web.

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Published by Liberty Newspapers Limited Partnership

Rupert E. Phillips, CEO

John M. Flanagan, Editor & Publisher

David Shapiro, Managing Editor

Diane Yukihiro Chang, Senior Editor & Editorial Page Editor

Frank Bridgewater & Michael Rovner, Assistant Managing Editors

A.A. Smyser, Contributing Editor