Saturday, March 13, 1999

Gasoline-Paying the Price

State’s antitrust
case gets judge’s

The state is alleging that
oil companies agreed to divvy up
the gas market and not
compete on price

By Rob Perez


A federal judge has rejected motions by Hawaii's major oil companies to dismiss the state's antitrust lawsuit against them.

Saying the state alleged sufficient details of a conspiracy for the case to proceed, Judge Samuel P. King yesterday kept alive six of seven counts in the lawsuit. He dismissed a count related to price gouging.

The state has accused the companies of conspiring to keep Hawaii gas prices artificially high.

Attorney General Margery Bronster said she was pleased with the judge's decision.

"Basically, the ruling keeps all of the essential causes of action intact," Bronster said. "It makes it clear we can proceed to discovery and trial."

A trial has been set for February 2001.

A spokesman for Chevron Corp., Hawaii's gasoline market leader and a defendant in the lawsuit, said the company wants the case to proceed quickly so Chevron can prove its innocence.

"Having to go to court and deal with very serious allegations such as these is time-consuming and, we feel, unnecessary because we haven't done anything wrong," said Chevron spokesman Albert Chee Jr.

King disagreed with the defendants' contention that the state failed to provide sufficient detail about their alleged antitrust behavior.

For an antitrust lawsuit to proceed, the plaintiff need only produce circumstantial evidence that tends to exclude the possibility the companies acted independently of each other, King ruled. "Proving the claims, of course, is another matter," he wrote.

The state is alleging that the oil companies agreed to divvy up the gas market and not to compete on price. It said Hawaii gas prices averaged 30 cents per gallon higher than on the mainland and that wholesale profit margins were more than 20 cents higher, even though the cost of producing gas in Hawaii is about the same as on the West Coast.

In the only victory for the oil companies, King agreed with their argument that price gouging is "not illegal per se and not an unfair and deceptive trade practice" under Hawaii law. He said a "high" price must be measured against a fair price, and the court is not the forum to determine what is fair.

The six counts that King kept alive relate mostly to alleged violations of state and federal antitrust law and accusations of price discrimination.

The state is seeking more than $670 million in damages and other costs.

The lawsuit was filed in October after a series of Star-Bulletin reports showed that the oil companies were making huge profits off Hawaii's highest-in-the-nation gas prices, even as crude oil costs -- the major expense in making gasoline -- were plummeting.

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