Tuesday, March 2, 1999

Gasoline-Paying the Price

Gas companies
ask court to
kill suit

But the state says it
has plenty of evidence

By Rob Perez


The oil companies said the state didn't provide nearly enough information to back its allegations of price fixing in Hawaii's gasoline market.

The state said it provided more than enough.

Now the court has to decide whether the state's $500 million-plus antitrust case will proceed.

After nearly three hours of legal posturing yesterday by a battery of attorneys for both sides, federal Judge Samuel King said he would rule later on the companies' motion to dismiss the lawsuit. He didn't indicate how long he would take to issue a ruling.

But the lawyers gave him plenty to ponder.

"This complaint, your honor, has a lot of sound and fury, but it doesn't have any substance," said Chevron Corp. attorney Robert Mittelstaedt, touching on a theme the other companies cited.

The defendants -- Hawaii's two refinery operators and three major gas wholesalers, past and present -- said the state jumps to conclusions and makes overly broad allegations that are so lacking in specifics the companies can't figure out what they allegedly did wrong.

"We don't know anything about the who, what, when," Mittelstaedt said.

But Spencer Hosie, lead attorney for the state, said the complaint has plenty of specifics to meet the legal threshold required for such a lawsuit to proceed. "If we allege the fire, we don't have to allege the smoke," Hosie said.

He was referring to information the state used to conclude that the two refineries sold gas to its three major competitors at low wholesale prices available to no one else. Those competitors, the state alleges, got favorable deals in exchange for agreeing not to import gas and not to undercut Hawaii's artificially high wholesale prices.

The state accuses the wholesalers of charging gas-station dealers and others prices with profit margins three times the U.S. average -- and those prices barely budged even when crude oil costs were dropping dramatically. But the companies said high prices by themselves don't prove a conspiracy.

And short of a conspiracy, there is nothing unfair about a company unilaterally setting its prices, no matter how high, said attorney William Tomko, who represents Shell Oil Co., Texaco Inc. and Unocal Corp.

At one point, Gary Galiher, another attorney representing the state, said the oil companies were unfairly using their market power to gouge consumers. He called gasoline an essential commodity.

King questioned how that was different from mochi makers raising prices around New Year's Eve.

"It's not like mochi," Galiher said. "This is something we have to have."

If the case goes to trial, the parties agreed today on a Feb. 1, 2001, trial date. But the oil companies say they don't believe the case will go that far.

Defendants in antitrust lawsuits often seek dismissals at the start of the court process. Hosie said such attempts typically fail.

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