weights and measures. We check them with our own 5 gallon can all the time.

And I hate to be trying to accuse somebody of something, but they operate under a lot different conditions than we do. And I don't really consider them competition. They are able to create conditions.

In northern Kentucky they created a condition, my understanding according to one of the executives of one of the companies, they are two transactions removed from the refinery. And yet they were selling cheaper than the competition they were buying off of. I don't know how that is possible. But this is done. And it creates a condition in the market that takes many months to get over.

I also had it called to my attention that one dealer was containing the condition by-he would not tell me in front of a meeting, he called me in the restroom and told me he was getting 2 cents to contain it in an area. He would not testify to that fact, because he is not going to jeopardize his position. It was a question of keeping that price in that area around that cut-rater.

This, again, I say is a difficult thing to establish, where the line should be drawn. That is why the conditions are like they are. That is why we are here-because

Commissioner MACINTYRE. He figured in that instance he didn't have his own restroom bugged?

Mr. KUNNEN. In that particular instance I guess he didn't have it bugged.

But it happens. I understand that these dealers are getting sharper along those lines every day.

Commissioner REILLY. That was known as a clean restroom.
Mr. KUNNEN. Yes.

Thank you, sir.

Mr. SNOW. Mr. Chairman, I would like to present Mr. James Heizer, from Roanoke, Va., who is the executive secretary of the Virginia Gasoline Retailers Association.

TESTIMONY OF JAMES W. HEIZER, EXECUTIVE SECRETARY, VIRGINIA GASOLINE RETAILERS ASSOCIATION, INC.

Mr. HEIZER. Mr. Chairman, and Commissioners of the Federal Trade Commission, I am James W. Heizer, executive secretary of the Virginia Gasoline Retailers Association, Inc., with general offices in suite 203, Carlton Terrace Building, Roanoke, Va.

Having been a retail gasoline dealer myself for some 6 years; served as executive secretary of the Roanoke Valley Retail Gasoline Dealers Association for 22 years, and for more than 9 years as executive secretary of the Virginia Gasoline Retailers Association, I feel that I am well qualified to testify before this body with respect to competitive problems in the marketing of gasoline.

Unfortunately, Mr. Chairman, and Commissioners, the witnesses. which we had here yesterday were unable to be here today. They could not stay away but the 1 day-with that 5-cent margin they are having to live on back home. So, if I may, and with your permission, I would like to introduce into the record the statement of our State president, Frank A. Palaio, who is from Alexandria, Va., and would like to quote certain portions of his testimony as though he had given it himself, and do the same with some of the other witnesses.

Chairman DIXON. His statement will be included in the record. Mr. HEIZER. This is merely to give you background on this. So often the representatives of the major oil companies will say the people that we have at these hearings are the professional agitators, the professional rabble-rousers, the boys that are being paid to perhaps perpetuate themselves in business.

Well, they must consider me to be just about the king of the rabblerousers in that case, because we have been very active along these lines, we have been very close to these anticompetitive and antimonopolistic practices and have been quite vociferous along this line.

So I simply wanted you to know that we are not new to these problems that we are discussing today, we in the Virginia Gasoline Retailers Association have been in the forefront of the battle against anticompetitive and monopolistic practices engaged in by the major oil suppliers for the past 10 years.

The U.S. Supreme Court decision in the Standard Oil-Detroit case opened a gaping hole in the Clayton Act, as amended by the Robinson-Patman Act. Ever since then we have been plagued by price discrimination-as this agency and the courts have wrestled with the question of "good faith" meeting of competition.

This association originated the case against the Texas Co. in the Norfolk-Portsmouth-Virginia Beach area charging illegal price discrimination and price fixing in December 1956. Following extensive investigation, an FTC complaint was issued on September 27, 1957 (FTC docket No. 6898). There followed long years of hearings, and in 1963, a Federal Trade Commission examiner found Texaco, Inc., guilty of both price discrimination and price fixing, and ordered them to cease such practices.

Examiner Robert L. Piper said the so-called Chicago plan was conceived and adopted by Texaco in the late 1940's and early 1950's and formulated by the "Holuchi Letter" of Texaco on August 22, 1952, under which Texaco granted price assistance to some dealers.

The record clearly establishes that allowances were not given under the Chicago plan if the dealer in any way indicated that he would not post the competitive price selected by Texaco and upon which its allowance was based, that the allowance was canceled or withdrawn if after receipt the dealer did not in fact meet the competitive price upon which it was based * * *.

Piper said.

Those who refused were not given discounts, and in at least one case a dealer who accepted discounts but didn't follow Texaco's prices was required to make a refund to the company, the examiner stated.

At first, in the Virginia cities, the margin used by Texaco under the Chicago plan was 4.5 cents per gallon to the dealer: later it went to 5 cents, Piper said. In May 1957 the dealer's margin was modified, he added, by adoption of the 80-percent plan, which was a different method of computing the allowance to be given, but "which did not modify the Chicago plan in any basic respect."

Piper said there could be no doubt that the differences in the prices Texaco charged "favored and nonfavored competing dealers were substantial"-frequently as much as 7 and 8 cents a gallon.

Texaco argued that by law a company may cut its prices to certain customers to meet the equally low prices of competitors. But Piper rejected this defense, asserting it did not give Texaco the right to fix

retail prices nor to offer discounts only to favored customers in specific markets.

We were shocked when the Federal Trade Commission on December 28, 1964, signed dismissal orders and announced that for administrative reasons it was dismissing this and three other complaints charging four marketers of gasoline with engaging in anticompetitive practices; the Texas Co. (D. 6898); Pure Oil Co. (D. 6640); Standard Oil Co. (Indiana) (D. 7567); and Shell Oil Co. (D. 8537.)

When these practices were first engaged in, we told the dealers of our State that there was a remedy against such illegal practices. Long weeks of arduous labor went into the investigation and the compilation of evidence to file this complaint-then almost 9 long years of waiting while the slow wheels of justice turned and counsel for the defense stalled at every opportunity--and now, when we felt a final decision would soon be rendered to effectively stop such illegal practices in the future, the Federal Trade Commission has dismissed the case.

What are we to tell our members now? What hope is there for us in the future when such practices are engaged in by this or any other company? Do we start again-and wait and hope for another 9 long years or will this Commission write trade rules such as we have requested to give us effective protection against such illegal practices?

Surely the facts in this case bore out the illegality of such discrimination. In reading the dismissal order issued by the Federal Trade Commission on Sun Oil Company (D. 6641), I was interested in reading certain views of Commissioner Reilly, who concurred in the order and filed a separate statement of his views.

Sun could not of course directly set the actual pump price posted by its dealer for fear of being charged with price fixing, and, in granting the concessions, Sun would be relying on its dealer's desire for survival which would prompt the dealer to post a price competitive with his and Sun's competitor's posted pump price—

said Commissioner Reilly.

Moreover, in meeting a wholesaler competitor's price concession to its dealer. Sun cannot attach strings to the price break given its own dealer. It can do no more than grant the concession, trusting that its dealer will meet his competitor by lowering his own pump price. Sun cannot engage in vertical price fixing by conditioning the price concession upon an agreement by its dealer to establish a specific price level

said Commissioner Reilly.

The very facts which were so clearly enunciated by Commissioner Reilly were abundantly evident in the record of the case against the Texas Co.-yet the Federal Trade Commission has dismissed the case and not permitted it to be carried forward to an ultimate decision by the Supreme Court.

The Virginia Gasoline Retailers Association also initiated the original complaint against Sun Oil Co. in December 1956, complaining of illegal price fixing through the use of commission-consignment agreements in the Norfolk-Portsmouth-Virginia Beach area. Following extensive investigation, the Federal Trade Commission issued complaint against Sun Oil Co. on November 8, 1957, charging Sun with illegally fixing the resale price of its Blue Sunoco gasoline, and forcing unwilling, independent service station dealers into unlawful agreements which are unprofitable to them.

FTC Hearing Examiner Robert L. Piper, on May 17, 1962, issued an order requiring Sun Oil Co. to stop illegally fixing the resale price of its Blue Sunoco gasolines, but dismissed complaint that respondent engaged in predatory pricing practices.

The FTC hearing examiner's order was adopted as a final order by the full Commission on December 8, 1963, on an appeal by Sun Oil Co., and found that Sun's commission-consignment agreement with Sun dealers in the Norkolk-Portsmouth-Virginia Beach area in 1956 was unlawful and that the dealers "were economically coerced into accepting" the agreement then.

Specifically, it was ruled that the agency-consignment agreement

was a fiction or subterfuge, not a bona fide agency, and in fact constituted an agreement or conspiracy among Sun and its dealers to fix resale prices, and to give Sun the power to do so, in violation of the [FTC] act.

In its opinion, written by Commissioner Everett MacIntyre and unanimously adopted by the full five-man Commission, the FTC ruled the consignment plan an unlawful "vertical and horizontal price-fixing device.'

You are, of course, familiar with the U.S. Supreme Court ruling in the case of Simpson v. Union Oil Company; in which the Supreme Court in a 5-to-3 decision established the key holding "that resale price. maintenance through the present coercive type of 'consignment' agreement is illegal under the antitrust laws, and that petitioner suffered actionable wrong or damage ***" when Union Oil Co. refused to renew Simpson's lease because he sold gasoline at retail prices different from those sought to be fixed by Union Oil Co.

Yet, despite these recent rulings favorable to us with respect to "commission-consignment" agreements, several major oil suppliers continue to make use of these illegal price-fixing contracts.

Chairman DIXON. We will stand in recess until 2 o'clock. (Whereupon, at 12:20 p.m., the Commission recessed, to reconvene at 2 p.m., the same day.)

AFTERNOON SESSION

Chairman DIXON. Mr. Heizer, you may continue.

Mr. SNOW. To be sure we finish with these witnesses, we ask them to finish in time. Mr. Heizer and the others will try not to take more than 30 minutes.

Chairman DIXON. All right, we appreciate it. Go ahead.

TESTIMONY OF JAMES W. HEIZER-Resumed

Mr. HEIZER. Thank you, Mr. Chairman.

Continuing on with my prepared statement here on page 6, I would like to call upon three witnesses from Virginia who are working dealers themselves, highly respected in their profession.

The first of them, Mr. Whittmore, was able to testify yesterday evening before you adjourned your hearings, at which time he gave the locations of the different commission stations of Humble Oil, Shell Oil, and Sun, in the Norfolk area, illustrated on maps and submitted to the committee.

At that point I then planned to introduce Mr. Shewbridge, who is the president of the Richmond Chapter of the Virginia Gasoline Re

tailers Association and lessee-dealer of a Gulf Oil Corp. station located at 6221 West Broad Street, Richmond, Va.

If I may, sir, I would like to read some portions of his testimony. Chairman Dixon. We will have it copied in the record just like it was read.

(The referred to document marked "Shewbridge Exhibit No. 1" appears in the appendix at p. 895.)

Mr. HEIZER. I will just recap the statement.
Chairman DIXON. All right.

Mr. HEIZER. In the testimony of Mr. Shewbridge, he points out the locations of the 42 Humble Oil Co. commission agent-operated stations in the Metropolitan Richmond area, comprising the city of Richmond, Chesterfield County, and Henrico County.

He also gave a listing of six Shell commission consignment operated service stations in the Metropolitan Richmond area, the location of Sun Oil Co.'s six known commission consignment operated service stations in the Metropolitan Richmond area and at that point he also planned to submit for your perusal maps of the Metropolitan Richmond area indicating these locations so that you can see how they are strategically located covering all the major highways, the major residential areas of the city of Richmond, and the environs of Richmond. Chairman DIXON. We will receive these two maps and make them a part of the record as Shewbridge exhibit A.

(Shewbridge exhibit A, being two maps of the Richmond, Va., area, are retained in Commission files.)

Chairman DIXON. Are they identical?

Mr. HEIZER. They are identical.

Chairman DIXON. Exhibit A of Mr. Shewbridge, then.

Mr. HEIZER. The location of the Esso stations are in red. Those of the Shell in orange, and those of Sun Oil in blue, the same as on the other map.

Then, at that point, sir, I wish to introduce to illustrate the pattern of the use of commission consignment stations by these companies in the third greatest metropolitan area in the State, Roanoke, and to introduce on behalf of Mr. Dallas Shelton, treasurer of the Virginia Gasoline Retailer Association and past president of the Roanoke Valley chapter, a map of Roanoke, Va., and close surrounding areas marked as exhibit C to also show the pattern.

Chairman DIXON. Mr. Shelton's testimony will be put into the record and we will receive this exhibit as exhibit A.

(Statement of Dallas C. Shelton marked "Shelton exhibit A" is retained in Commission files.)

Chairman DIXON. You called it exhibit C. We will call it exhibit A. Just one refers to Mr. Shelton's testimony.

Mr. HEIZER. These maps in the testimony of Mr. Shelton indicate the location of Humble Oil Co.'s 14 commission agents and the two salaried operated service stations in Roanoke City and Roanoke County and also the location of Shell Oil Co.'s six commission consignment operated service stations in Roanoke City and Roanoke County.

The Sun Oil Co.'s service stations are served by a local oil jobber rather than being served directly by Sun Oil Co., as in the case of Norfolk and Richmond areas and therefore are not indicated, the locations of these are not indicated. They are operated through a jobber rather than by the company direct.

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