CONCLUSION Pricing the products of the highly competitive oil industry is a day-to-day task. In my judgment it can only be handled by active managements who are interested and constantly alert to the shifting competitive realities of the markets in which they operate. With that type of responsible corporate stewardship I believe all segments of our industry will continue to prosper to the benefit of the stockholders and of the consuming public. I feel quite strongly that pricing decisions are too viable to lend themselves to intelligent resolution by legal rules or administrative regulations. In my opinion this Commission would be ill advised to interfere with the normal functioning of our competitive system and to assume any significant responsibility for the pricing of petroleum products. CHAMPLIN EXHIBIT NO. 1-A SUPPLEMENTARY Remarks of EARL BALDRIDGE Mr. Chairman, members of the Commission, I am Earl Baldridge, with Champlin Petroleum Co. of Fort Worth, Tex. Several weeks ago I filed a statement with the Commission which it would perhaps be appropriate to include in the daily transcript just preceding these brief supplemental remarks. It would serve no useful purpose for me to read or even summarize in detail the prepared statement which is already before you. If you have any questions about the content of my statement, I, of course, will do my best to answer them. In it I explained our opposition to any Commission order which would fix gasoline prices or gasoline price differentials. I pointed out how Champlin's experience demonstrates that an independent can be financially successful in the manufacturing and marketing of gasoline. I undertook to state the pricing philosophy of our company which has as its goal the sale of gasoline at the best price competitively obtainable in each market area rather than an attempt to sell at artificial differentials below our competition. Finally, I enumerated some of the marketing practices which in our opinion are major causes of price wars in this industry. Since the start of these hearings we have followed, at least in general, the positions taken by spokesmen for different segments of the industry. From the various conflicting viewpoints expressed, we have had two impressions which prompt these supplemental comments. First, we believe that all of the testimony reinforces our prior conviction that the causes of undesirable price disturbances, as well as the elements of day-to-day pricing decisions, are highly complex. Second, we feel more strongly than ever that the principal market ills of the petroleum industry can only be solved by interested and actively participating top managements. (It would go without saying that I am not suggesting any improper collective action, but only the need for alert and informed managerial talent interested in the optimum marketing profits within their own company.) It would be a real mistake for the Commission to intrude into the basic area of price determination. If any action is to be taken by this Commission, the subject should be approached cautiously and Commission effort should be directed against specific marketing practices which are either ethically or economically wrong. Pricing errors by individual companies even in limited markets can have serious adverse consequences for other companies as well. But industrywide mistakes from illadvised Government directives would be infinitely more aggravated. If Government takes action, it must be the right action. The wrong move with the weight of the Federal Government behind it would surely be much worse than no move at all. I have asked myself this question: "Assuming the Commission thinks some action by it is appropriate, what constructive order could it issue?" I believe there are two problem areas that might lend themselves to Commission action with possibly beneficial effects on the entire industry. In the first place the Commission could declare it to be an unfair method of competition to sell gasoline under a false brand. A branded reseller would be prohibited from buying unbranded products to be sold through branded facilities. Similarly, sales to branded sellers, when there is reason to know that brand misrepresentation will result, would also be forbidden. Although the Commission's policing job under such a regulation would be terrific, the market effect could be could be highly therapeutic. Such action would prevent the "dumping" by independent refiners of excess gasoline through branded facilities of others, a major cause of price wars in many market areas. In the second place the Commission could declare it to be an unlawful price discrimination for any supplier to sell unbranded gasoline at prices substantially below its branded prices. This action would prevent "dumping" of excess gasoline by major refiners through private brand marketing facilities, another significant cause of price wars, and would also discourage supplying of large private branders on a basis which gives them unfair competitive advantages. It seems to me that the economic impact of those dual regulatory prohibitions might be a very constructive contribution toward the reduction of price wars. All refiners would have more of an incentive to limit their runs to the legitimate market demands on their refinery. The major refiners could no longer expect to "dump" their excess production at reduced unbranded prices to private brand resellers. At the same time independent refiners without their own marketing outlets would have a better opoprtunity to supply the private brand resellers which are their legitimate market potential, but the independent refiner could not "dump" its excess production through branded outlets of another company. Even in the face of regulations of that type there could still be major price disturbances from improvident produce exchanges such as I have described in my prepared statement. I can envision no Government action, however, which would obviate that problem. Managerial wisdom is the only solution. Certainly I do not think there is any panacea for the problem of the recurring price wars which are the major affliction of this industry. It does seem to me, however, that limited directives against essentially unsound marketing practices such as I have suggested might be a constructive supplement to the management effort which must be the primary source of corrective action. But even if the Commission decides there is no action it may appropriately take, I think these hearings have served the very desirable function of affording an opportunity for an open exchange of ideas on the principal marketing problems of our industry. Thank you for your attention. Hon. PAUL RAND DIXON, Chairman, LEARNED EXHIBIT NO. 1 MID-AMERICA GASOLINE DEALERS ASSOCIATION, HONORABLE MEMBERS OF THE FEDERAL TRADE COMMISSION, DEAR MR. CHAIRMAN AND MEMBERS: The Standard Oil Co. dropped the price of regular gasoline today-May 18, 1965-in the Kansas City, Mo., area to the following prices and fixed the dealer margin as indicated: It is respectfully requested that the hearings in Washington, D.C., be moved to Kansas City, Mo., and get right down to the grassroots of the problem. The hearings to date have established there is something radically wrong with the business and the place to start is at the bottom, with the man who is being hurt the most, namely the dealer. Certainly your Kansas City office has enough evidence to more than justify open hearings here and to bring cases which would put an end to the problem. Sincerely yours, JOHN S. COSTELLO, Executive Secretary, MAGDA. MARSDEN EXHIBIT NO. 1 POST BULLETIN ROCHESTER, MINN, Friday, April 30, 19 Page 25 GAS WAR DECLARED 26; 299 ETHYL Rochester's North Star STATIONS, OPERATING AS SCOTT'S WEST SIDE 66 AND BROADWAY NORTH STAR In fact, while you are reading this ad, we could be dropping prices to 25c, Think About This! We State Facts! YOU SAVE AT BOTH NORTH STAR STATIONS SCOTT'S N |