In the Kansas City area we have the Standard Oil Co., which is a subsidiary of American Oil Co.

Standard Oil Co., not long ago, effected two plans, I feel, to control the price and control their dealers in the Kansas City area.

Mr. Wessel, a Standard Oil dealer, will explain to you the difference in those two plans. One was shown as the meter-marketing plan, and the other was meter-reporting plan.

Now, they had a lot of dealers who were buying gasoline and paying the tank-wagon price. But to get themselves in a better position, no doubt, they had to devise something so they come up with this metermarketing plan and the meter-reporting plan. They went to their dealers, and there are always two of them when they go-and they would tell him, "You look these over, and we will be back. You choose one or the other. We do not care which plan you choose, but you are going to take one or the other."

They ran into one dealer, Bob Van Meter, Ruskin Heights Standard, who called me on the phone and said, "I don't want either one of these plans. I want to buy my gasoline."

I said, "If that is the way you feel about it, you tell him so." So this man was contacted again later on in the week to find out how he felt. I believe there was a salesman by the name of Tom Sawyer, and Tom told these two boys at the service station, "Let me be first to tell you that from here on you will pay 15.7 for gasoline; you will have no price protection, if you did not accept one of these plans." Obviously, it did not leave this man much of a choice. And this is the way they move their meter-marketing and meter-reporting plan.

The other dealers in the area who wanted not to go on the plan had to go on it, and what really emphasized it for them was this. The price of gas went up, or went down, I beg your pardon-went down, and if they had just gotten a delivery of 8,000 gallons of gasoline, and they had to dig up 8 cents a gallon difference, even though the other dealers may be buying at another price, they soon learned to cooperate.

I relate here another instance related to the gasoline business. Frank Rossi, who operates the Gladstone Standard, in Gladstone, Mo., had his lease canceled. Frank had his lease canceled because he refused to buy 125 tires.

He agreed to buy 45 tires. That is what he was going to sell. But he got the lease cancellation. He called the city manager, Mr. Ray Heintz, who said, "I don't talk business over the phone, you come into my office." He hung up the phone. And I happened to be in Frank's station, because he had called me, and within 2 or 3 minutes after he hung up the phone, the salesman called him, his representative with the company, and says, "I understand you had your lease canceled; are you ready to talk tires now?" And Frank told him no, he was not going to buy any more tires. I understand that Frank has got it straightened out, or maybe Standard had gotten straightened out, I don't know. But this is part of the gasoline business.

Now, I have a note here with the Rutledge Oil Co., which is a jobber in the Kansas City area, and this disturbs me. I know of no other case like this.

They are also a Phillips-they are a Phillips jobber, and they are also an American Petrofina jobber, and they operate out of the same plant.

One of our board members happens to be a man by the name of Donald Gheens. And at one time he was operating a Phillips station for them at 4810 State Avenue, Kansas City, Kans. And at the same time he was operating a Fina station for this jobber at 4746 Parallel, Kansas City, Kans. Actually, they are 10 or 12 blocks apart. Don tells me he used to get a load of gas from Rutledge, the truck would drop part of it there, this was the Phillips station, and then they would drive to the Fina station and drop the rest of it. And I asked him one day was it Phillips or Fina. He said, "I don't know."

Well, here is what concerns me about this, when we have price wars in Kansas City. A tool like this in the hands of one who may not have too high ethical standards would be a very effective tool in arranging any price drop that we might want. They would certainly have advantages by it. I do not think it is the answer to good business as far as the oil industry is concerned.

Now, you may very well ask me why would a company want to deal like that. There is only one answer for it. They want volume, and they do not care how they get it.

Now, Sinclair is another company in my area. They sell a lot of gasoline to independent dealers. They have a jobber in Lenexa, Kans., by the name of McAnany, and McAnany is a branded Sinclair jobber, and he also has an unbranded station he sells to. And he was approached by what some people in the industry call a third-grader and asked if he would like to sell him some gasoline. They worked out an arrangement, which he did. When Sinclair found out he was selling third-grader, they cut McAnany off. "You will sell this man no more gasoline, because we have some loyalty to our branded dealers." And he went along with the deal.

And then the man needed some gasoline. He talked with Mac both times. And Mac told him of a Sinclair dealer, McCarty, who would sell him gasoline through his pumps at a price just above whatever his rent and his tank wagon price was. So this man started selling gasoline. He was selling sometimes 2,500 gallons a day.

I said to McCarty, "I don't think you are doing the right thing for the industry. But you do what you want."

He had a very high rent.

Finally, Sinclair cut him off.

And this enabled him to reach his rent.

If he ordered 8,000 gallons of gas, they would send him a thousand. And they would be slow getting it there. If he didn't have any gas to sell to the third grader, he could not sell it because he didn't have it.

After they got this dealer straightened out, they had a man that contacted the Poor Boy Oil Co. and says "We want to sell you gasoline." Now, this is Sinclair. So what they did, they took the business away from the jobber, who was entitled to it, the third grader is entitled to be in business the same as anyone else. So today, as far as I know, they were, a couple of weeks ago, they were selling this man direct, and they had taken him away from a jobber and also taken him away from one of their dealers, which I don't argue about too much.

Now, another company in our area is the Mobil Oil Co.

They are pretty vicious. And they are pretty vicious in many ways. For instance, if they put in a dealer today, one of the things they tell him, "You got to take stamps." If the guy rebels on stamps, he doesn't become a dealer, right then and there. And I think that is a rather vicious thing. It gets a guy in the hole. Stamps are costly. I wish the FTC would do something about stamps. Maybe one of these days we will get something done about it.

They have had from time to time prices for different dealers in the Kansas City area. They have gone out and done such things as this. One man by the name of Herb Millington had his price 2 cents higher than a dealer down the street. Herb Millington hadn't even been told that the price had dropped, and the reason is that the salesman was a little disgusted with him, and being disgusted with him, he just didn't tell him about it.

When Herb called him and asked him about it, he said, "You got to get in line before I can do anything for you."

In 1962, I believe it was, I had a list of the service stations that Mobil was serving in the Kansas City area. And their prices would range anywhere from 9.9 cents a gallon up-some of them were 11.9, some of them 14.9-to a very small group of dealers who were not very cooperative, and they were listed, and, incidentally, the FTC has this list, because I turned it over to the Kansas City office. These people were listed what they would pay. And then they got down to one of the dealers who was uncooperative-all others pay 15.7. They have been pretty rough there.

Mobil has been rough there for another reason, and I don't know whether the Commission will be interested or not, but I will tell you about it anyway.

They are very cooperative and have the fine cooperation of a bookkeeper in the Kansas City area, known as the C. S. Burgner Co. To me he is too cooperative. Quite often I have had dealers tell me that the company knows just what his business is, how much money he is making, and so forth. I am not suggesting this man is giving them the copies of the financial statement, but I will bet that he is.

In addition to that, the C. S. Burgner Co. is selling dealers insurance, and he is loaning money. And if a dealer wants some money, loan him a thousand dollars, part of the ticket is the fact that you have got to take my insurance. And some of these dealers are doing that, because they are in bad shape.

Now, another outfit we have in the Kansas City area is the Heathwood Oil Co., Kansas City, Kans. They are a Cities Service distributor. They sell a lot of independent gasoline. At what price, I don't know. But they devised a method of competing with the independents whereby they put another pump in the service station that is hooked to the regular tank, so the man sits there with three pumps. He has the premium gas, he has the regular gas, they paint this other pump blue, and they put on there like Potter's economy grade.

I talked to some of the dealers who are members of the association. They are guaranteed 4 cents on this gasoline. A number of them told. me it is the same gas as coming out of the other pump, but to compete with the independent as one of the means they are using, this is what they are doing.

Now, I have attached a letter, a copy of a letter

Commissioner MACINTYRE. Does that mean both of those pumps are hooked to the same tank at the same time?

Mr. COSTELLO. No; I didn't mean to give that impression. Another tank is put in. But the regular gas is dropped in that tank, and is pumped out through the "economy." There is a different tank-not the same pump; no, sir. They put another tank in.

Thank you for asking me that.

Chairman DIXON. When you say "regular gas," you have proof of that fact that it comes out of the same tank that went into this one over here, or was there a separation on the tank truck or what?

Mr. COSTELLO. I cannot answer about the physical arrangement of the tank truck. All I know is these dealers have told me they have taken me into their confidence that it is the same gasoline, and they are told that apparently by the jobber. I don't know how it is loaded, Mr. Chairman.

Chairman DIXON. OK.

Mr. COSTELLO. Now, I have attached a copy of a letter that I wrote to a distributor in Topeka, Kans., and I think you might be interested in the results of this letter.

We had this Super Oil Co. has one station in Kansas City, Kans., and their base of operations in Topeka. And this station is a Bay station. Bay is an affiliate, as you know, of Tenneco. And on Friday afternoon, after we got our prices going up on March 18, the prices went up, this man would drop his price down to 2 cents below the price, and then on Monday morning he would bring it up. And I happen to know him because at one time he was a Skelly dealer, and a member of my association.

I took another dealer and we went down to talk to him. He said, "John, I don't know. The distributor over in Topeka is doing it. I am getting protection."

So I went back to my office and I wrote the letter. And I sent a copy of it to the vice president of Tenneco, a man by the name of G. H. Meason, Jr. Within a few days I got a long-distance telephone call from a man by the name of Dick Watts. I don't know what his capacity is in Tenneco, but I appreciate the man calling me. He told me this is not the doing of Tenneco or Bay, this is the doing of the jobber in Topeka, Kans., and he assured me this would not go on again. Now, this is the only station they have there. But I was very grateful that the man took the time to call me and let me know something about it.

Now, I would like to make a few remarks, if I may, that are not encompassed in my testimony. I want you to know personally how I feel, and how it cut me and hurt me to realize that after all the work had been done on various cases before the Federal Trade Commission, that they have been dismissed. I think it is a catastrophe.

Now, what makes me think it is a catastrophe is this. The oil industry is laughing at the FTC, and, believe me, this is true. These have been long fights. I think the Federal Trade Commission was right-those people who worked so hard at it. And I think it is a shame that these cases have been dismissed. And I want to express my feeling to you on that thing.

The other thing is this. I have had people ask me how come the price could raise in Kansas City after so long a time?

Well, as Mr. Chairman knows, and I happened to write a letter to President Johnson, and Mr. Wessell and myself, at the invitation of Mr. Chairman, came in, we had a very nice conference, we felt like we had accomplished something. We went back to Kansas City. In 2 weeks time the price went up. I think that had something to do with it.

I also think that the industry-they were trying to get in a position where they were coming in with a halo on how good they were, because this move went clear across the country. Texas led it.

I have been told-I cannot prove it, I have reported it to the Commission that a meeting was held in New York City, prior to this price going up. I believe this meeting was held, because I don't think there was any accident that this price went up across the country. I cannot prove a thing. But I think this meeting was held, and I think it was held for the very reason they want to get the halo straight. But I think the halo is a little cockeyed at this time.

That seems to be the word going around Kansas City, that such a meeting was held. I believe they are held, because I know these people talk to each other. And the reason I know they talk to each other-I want to relate something to you that happened about 3 years ago. And the young man is sitting in the room with me.

When I was a dealer here in Washington I was very active in the API, the American Petroleum Institute. Charley Binstead, who some of you know, went over to Atlantic City with me for a meeting. He went along for the social hour and I went along to work. We were on one of these social hours, in a very dark cocktail room-the vice presidents of three oil companies came in. And it was kind of dark in there. It was so dark in there you could kiss your wife by mistake.

And these three gentlemen were discussing a price situation in North and South Carolina. And when their eyes became adjusted and saw me sitting there they got up and left. And they left in such a hurry, they didn't tip the bartender.

I feel this. They do meet. I feel that the people who were in these ivory towers, it is now the time they took a good soul-searching on all this business. We are the people that made the oil business, the independent service station operator.

I want to express my appreciation to appear before you.

Before I leave I want to say this. We feel, in the Kansas City area, that the third-grader, the independent, is a legitimate businessman. He belongs in this business.

We also feel that this 1-cent differential fight is not between the independent and the major. We feel this 1-cent differential fight is between the majors. If you will check to see how many companies have merged, acquisitions and such things as that, I think this will pretty well confirm it.

There is a real fight to knock these guys off before some other major oil company gets them.

I have a feeling that the industry will do some soul-searching. I think these hearings are wonderful, it gives us an opporunity to get in and talk to some people who are not in the business, and who in my