And that is where this dissatisfaction and conflict may arise. It is all about money and profits.

Mr. PECKHEISER. Well, if dealers think we are trying to keep prices down, then let me please assure you that it is by accident and not by design, because nobody makes money during these price wars. As the tank wagons are depressed, margins are squeezed, and the supplying company gets far less for his goods. So that nobody wins in a price war.

Our action in every instance that I know of is a defensive action. We do not bring prices down.

Now, I cannot talk for all companies. As I said, we don't market through private brands, we don't meet ourselves coming around Robin Hood's barn. But nonetheless, I don't know of anybody who wants to bring prices down.

Commissioner ELMAN. You say you aid your dealers in a price war as a matter of defense, not only of yourselves, but of them.

Mr. PECKHEISER. Yes.

Commissioner ELMAN. You are trying to help them. But these dealers have come in here and told us they don't want any price assistance during a price war. They want to be independent, and they want you to leave them alone. They think that if you give one dealer in a price war a little help, and you don't give a dealer 2 miles down the road the same help, that is discrimination. They want you to stop it. They say if that is help, just don't brother, "We don't want it."

Mr. PECKHEISER. If you have friends who are like that, you don't need any enemies.

Commissioner ELMAN. Yes; but what is your answer to that? You say you are trying to help them. And they say, "Please don't help us." Mr. PECKHEISER. What is their basic premise when they say that? They say everybody in the industry shouldn't do that, and then wholesale prices will prevail.

Commissioner ELMAN. The price wars will stop, they say.
Mr. PECKHEISER. That is right.

Commissioner ELMAN. Do you think they will?

Mr. PECKHEISER. I think they could, sure, if everybody in the industry did this sort of thing. But I don't know of any mechanism, or any rule, any procedure wherein this could be accomplished.

We were pricing tank wagon pricing-I believe it was the entire State of Massachusetts, but let's say two zones in Massachusetts, 3, 4, or 5 years ago. We tried strictly wholesale pricing, no dealer aid, no support whatsoever, regardless of how low the prices got. This was a theory. It didn't work for a damn-excuse me, Miss Jones. But it just didn't work, because other suppliers came in, supported their dealers at these lower levels, and our dealers really complained to us as they lost volume.

Now, it is easy to talk about a theoretical system. But it has never worked in the history of the petroleum industry. No one has found a method of strictly wholesale pricing. We have tried it. We have been an advocate of trying to build up structure prices where you arrive at primary values starting from a primary market, wherein steamer cargo lots are determined by the gulf market or in group 3 large quantity movements, building up a structure. We have always

had a structure, telling us what prices we would like to get. Competition rarely if ever allows you to get those prices.

Somebody asked, "What do you do if you are pricing in a vacuum?" Well, we have a method of arriving at a fair price in a vacuum. We have done that for years. But competition won't allow this sort of thing.

You have got to keep your eye on that retail price. Our salesmen spend 50 percent of their time making surveys such as the man from Sohio just told us about 50 percent of their time in some markets, surveying the market to determine what is the price. There isn't one price. There are 10 or 15 different prices.

Commissioner ELMAN. Suppose you find one of your dealers who is charging more than what you think is a competitive price-he is charging a higher price, and getting a larger margin of profit, and he is not getting the gallonage that you want to get out of that station. Do you think it is legitimate and proper for you to suggest to him that he lower his price?

Mr. PECKHEISER. Yes, I do-yes, I do-because eventually he will go broke if he is losing you know the story about--

Commissioner JONES. That is his business, if he goes broke. That is what troubles me.

You have a very firm idea of what is good for him. I have no doubt at all that it is firm and sensible and reasonable. But hasn't he got the right, as long as you call him an independent businessman, to make his own mistakes and lose his shirt, if he is guessing wrong? Mr. PECKHEISER. Right; I could not agree with you more. Commissioner JONES. But you won't let him do it. Mr. PECKHEISER. Yes, we do.

Commissioner JONES. Everything we have heard for a week now suggests that you in fact will not-the man who wants to sell higher is told you want more gallonage. The man who wants to sell lower is told that will make price disturbances. The man who doesn't want to run his station 24 hours, he wants to run it 8 or 10 or 12 hours, he is not permitted to do that.

Mr. PECKHEISER. But that doesn't square with the facts. When you give

Commissioner JONES. I wish you had leaped up when you said you had in mind to, because we have been listening to this now for a week. I have no reason to doubt the veracity of the testimony that we have had. Maybe it is way out of perspective, maybe there are special factors. But I don't think we can sit here and say that that testimony was false.

Mr. PECKHEISER. No-I would say it is a matter of interpretation. If a man counsels a dealer and suggests that he lower his price, and has the facts to justify that recommendation

Commissioner JONES. And the man knows that his lease will be canceled if he doesn't?

Mr. PECKHEISER. Let's get to leases.

I can recall sitting on a dealer relations committee back in about 15 years ago this little document was put into effect some 12 or 15 years ago, in the early fifties.

We give dealers 3-year leases, and have some 35 or 40 percent, something in that range of our dealers, with a 3-year lease; if we counsel a

dealer with a 3-year lease, and he just signed the lease the day before yesterday, he is going to be in that section no matter what action he takes. There is no legal recourse to you once you sign the lease with him. So that counseling is purely accepted by the dealer on the basis of his best judgment.

If a good salesman makes a survey of the market and proves to that particular dealer that his competition is selling at a price lower than he is selling, if he causes the dealer to give consideration to the volume that the dealer is getting at that price level, and the dealer sees that he is losing volume, then the dealer will react in his own interest. If the dealer is maintaining or increasing his volume, more power to him, let him overcharge the market 9 cents, not 2 cents.

Commissioner JONES. But aren't you assuming here that it is a good thing to sell the maximum volume? Now, there are some dealers who don't necessarily see their business success based on that premise.

One dealer we had thought it would be nice to give the consumer some services. I frankly would love to have a service station that would charge me a cent extra and perform those kind of services. But the consumer doesn't get that choice.

Now, there are some dealers who see that is the way they want to run their business. But, as I understand the majors or the suppliers don't see the dealers self-interest is that, and, therefore discourage him or suggest that it is not a good policy.

Mr. PECKHEISER. I guess there is a difference of opinion in the interpretation of this matter of volume.

I think most companies would subscribe to the theory that gasoline gallonage builds traffic, and that a successful business must have traffic if it is to continue to grow. Business either grows or it dies. They don't stand still for any long period of time.

Therefore, it is necessary for a dealer to maintain his forward improvement of gasoline gallonage in order to continue to grow for all services are related to gasoline. If the customers don't come in at the pump, he cannot sell them lubrication, tires, or all the other things he has to offer.

Now, it is a matter of degree. Maybe one company might be satisfied with a growth factor of 2 or 3 or 5 percent, whereas other companies may be demanding a greater factor from their dealers. I don't know. But I can tell you this-as a district manager, if a dealer was increasing his volume 4, 5, or 6 percent, some reasonable amount, as his opportunities-it depends upon his opportunities in his market. If he had all new homes come into his market, I would expect a higher increase. But as long as he was showing some progress, I never talked with him about volume-because this would not be in his best interests. If he wanted to overcharge the market and was maintaining his gallonage, or showed a slight improvement, no problem.

I wouldn't even recommend to him, necessarily, that he lower his price.

But this is a voluntary thing. This is

Commissioner JONES. It is too bad you got promoted up as high as you did. Maybe the problem comes from your subordinates. Mr. PECKHEISER. This is where we are having our greatest problem, is trying to interpret what is counseling and what is dictation. And there is a great difference between the two.

But when you have a firm lease with a man, whether it be for a year or 3 years, you don't dictate to him. And the facts are that every company I know of in the marketplace is so anxious to get good dealers that they don't dictate to a good dealer. There are too many closed stations in the industry to allow another station to close because they dictated to a good dealer. It is the dealers who are not being successful, I honestly believe, that register the greatest complaints. And it is just as children-they resent what their parents do for them, even though their parents in their own interest oftenwell, all the time, would do

Commissioner JONES. This is exactly what went through my head as you describe what you were doing for them. I am not sure that it is a consistent premise with the concept of the independent businessman as they are trying to portray themselves. Maybe this is inevi table in the gasoline business.

Mr. PECK HEISER. Maybe I used a bad example.

Commissioner JONES. No; I think it is probably a good one.

Mr. PECKHEISER. The facts are that we sometimes resent those that try to help us the most. That is the only thing that I was trying to indicate.

Commissioner ELMAN. Is it your point that if a dealer goes broke, it is not only his business, it is your business, too?

Mr. PECKHEISER. I think it is a catastrophe when a dealer goes broke.

Commissioner ELMAN. But it means something to you in dollars and cents, also. We are not talking about altruism or philanthropy. We are interested in business here, and that is a matter of money. And from a money standpoint it makes a difference to you whether one of your dealers does do well or goes broke?

Mr. PECKHEISER. It certainly does.

Commissioner ELMAN. You mentioned a figure of $130,000 a while

ago.

Mr. PECKHEISER. Yes. That is what the average service station cost us last year to build.

Commissioner ELMAN. Of that amount, how much do you have at

stake?

Mr. PECK HEISER. $130,000. It is our money.

Commissioner ELMAN. What does the dealer have at stake?

Mr. PECKHEISER. Oh, anywhere from $5,000 to $9,000, $10,000, for inventory, and very often we will make a loan of all of that, sometimes. But most of the

Commissioner ELMAN. When you find it necessary to cancel a lease and look around for another lessee, does it cost you money?

Mr. PECKHEISER. Sure, it costs us a couple of thousand dollars to put in a new lessee.

Commissioner ELMAN. From an economic standpoint, there is a restraint on you in canceling leases?

Mr. PECK HEISER. Well, we have a lot of restraints. We have to live up to our written contracts, for one thing. And that is a great restraint. But there is the restraint-whenever you can make a successful businessman out of any dealer, even though he might be going downhill for one reason or another, you get much more satisfaction. All the sale representatives that I have worked with get a lot more

satisfaction out of making a success of a dealer rather than see him either be canceled out or sign a mutual cancellation, or leave for whatever reason he might leave. Our great desire is to cause them to make money and be successful. Selfish. This is a selfish interest.

Commissioner ELMAN. That is the whole premise of our economic

system.

Chairman DIXON. I am just going to ask you one question and we are going to have a recess. I am going to get you a good dealer. His name is Kenneth Moore. He lives in Dallas, Tex. He has been told by all the majors that he is too good for them, they don't want him. Now, you said that you didn't care whether a man charged high or not. So I want you to look him up.

We will come back in 5 minutes.

(Brief recess.)

Chairman DIXON. Do you have any questions?

Commissioner MACINTYRE. No; I don't have any questions. But I would like to say to the gentleman that I, for one, appreciate your appearance here. I think that you have added to the articulation of the various points of view, and, of course, that is the purpose of our sitting to get the different points of view.

Mr. PECKHEISER. Really, this has been quite an interesting experience for me. I had no idea what I would face coming down here. And, really, the warmth of this Commission is amazing-it is amazing how you have treated the witnesses in a friendly, open atmosphere, and you are to be congratulated. I felt completely at ease in talking to you, and I suspect that most other people that appeared here today, while I listened, also felt that way.

Mr. Chairman, we will talk with Mr. Moore within a week, and if he has any business skill at all, we will see to it that he is given the opportunity to have a Mobil station.

Chairman DIXON. Well, he impressed me. Maybe if that comes out of these hearings, it will be worthwhile.

Mr. PECKHEISER. Not only that, Mr. Chairman, but I will tell you how it does come out.

Chairman DIXON. Fine. Maybe we ought to quit while we are ahead.

Mr. PECKHEISER. Thank you very much.

Chairman DIXON. Let's turn to the next witness, Mr. Leonard J. Emmerglick, Sun Oil Co.

TESTIMONY OF LEONARD J. EMMERGLICK, SUN OIL CO.

Mr. EMMERGLICK. Mr. Chairman, members of the Commission, my name is Leonard Emmerglick. The principal part of Sun Oil Co.'s statement will be presented by Mr. E. R. Bradley, general sales manager of the company. A concluding section will be summarized by me. It deals with recommendations for Commission action.

One subject of interest to the Commission, and to us, is not covered in our written statement-namely, commission consignment-and we will not discuss it here, for the reason that Sun and the Commission are litigating that issue before a court of appeals.

I would like to introduce Mr. E. R. Bradley.