Friday, January 8, 1999

Gasoline-Paying the Price

Gasoline suppliers
contest state’s
$500 million
antitrust suit

The firms say a pricing
conspiracy isn't proved

By Rod Ohira


Hawaii's major gasoline wholesalers have moved to dismiss a $500 million antitrust lawsuit, claiming the state fails to prove what it charges is a conspiracy to keep gas prices artificially high.

Shell Oil, Texaco, Union Oil and Tesoro Hawaii Corp. have filed motions to dismiss, with two others -- Chevron Corp. and BHP Hawaii -- expected to join shortly, if they have not already.

In a motion filed Monday, Tesoro's attorneys presented the basic argument against the suit, noting "the complaint not only fails to allege a conspiracy by Tesoro Hawaii; it fails to suggest a conspiracy by anyone."

The filing argues that to defend the complaint, Tesoro Hawaii would have to prove a negative:

"That it did not attend any price-fixing meetings, did not correspond with others on proposed prices, did not have any such telephone conversations, and did not otherwise engage in any acts that might constitute a conspiracy. Tesoro Hawaii would have to prove all of these negatives without even knowing when or where or through whom it supposedly conspired."

Spencer Hosie, the state's lead counsel who specializes in antitrust cases against oil companies, said there is nothing surprising about the arguments to dismiss.

"We knew (the motions) were coming," the San Francisco-based attorney said in a telephone interview yesterday with the Star-Bulletin.

"The tone, which is always a little snippy, is what we typically see in antitrust cases, and the companies' reason for it is they want to smoke out our plan.

"The case is going well, so far there's nothing unexpected."

In its lawsuit, the state accuses Hawaii's two refiners and several major wholesalers of overcharging dealers and consumers as much as 40 cents a gallon for years, contributing to highest-in-the-nation gasoline prices here.

The state, in its price-fixing allegations, claims that refining costs here are about the same as on the West Coast, where gas prices are much lower.

Attorneys representing Shell Oil Co., Shell Oil Products Co., Texaco Inc., Texaco Refining and Marketing Inc., Union Oil Co. of California and Unocal Corp. yesterday filed their joint motion to dismiss the state's antitrust lawsuit.

The word "agreement" figures prominently in the complaint, yet the state fails to connect the word to specific actions by any particular defendant, or even to a particular time period, the motion says.

"The only place in which the complaint ties any alleged agreement to a particular defendant . . . is discussing the 'gasoline (or product) exchange agreements' through which a refiner in Hawaii would trade its Hawaii gasoline for similar gasoline of a wholesale defendant who refined gasoline elsewhere in the United States.

"These agreements have been common in the oil industry for many years and have been endorsed by the courts as pro-competitive."

State allegations that "gasoline exchange agreements" in which Hawaii refiners would deliver gasoline to local competitors and receive an equal amount of gasoline on the mainland as a means of "policing and enforcing" the conspiracy are unfounded, the motion says.

"The complaint provides no clues as to when, how and by whom exchange agreements were allegedly transformed from methods of facilitating competition into a sinister 'means of policing and enforcing' a conspiracy," the motion contends.

A hearing on the motions to dismiss will be held March 1 before U.S. District Judge Samuel King.

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