It is a hard question to answer. I don't know the answer to it. Commissioner MACINTYRE. Well, I am not suggesting that the Commission do anything toward finding that anyone is a culprit. I am merely talking now about the practice. If the Commission should at the conclusion of these hearings agree with you that it is an unfair practice, my question to you is this. Do you think it would help you and the other people in the industry for the Commission to put out a report and say just that-that it would believe it to be an unfair practice?

Mr. WRIGHT. I don't think there is any question about it-I think it would help a great deal.

Commissioner MACINTYRE. You do.

Mr. WRIGHT. Yes, sir."

Commissioner MACINTYRE. In that respect, then, you are not completely in accord with Mr. Otis Ellis. He said that he did not think the Commission ought to do that.

Mr. WRIGHT. Well, on that point we disagree.

Chairman DIXON. Mr. Wright, let me ask you this.
Have you discussed the KAYO problem with Conoco?
Mr. WRIGHT. I have discussed it, I would say, extensively.
Chairman DIXON. What answer did you get?

Mr. WRIGHT. Well, they said that-the people I talked to, of course, were the people that I more or less report to, the division personnel and the regional personnel. And they say that they do not have anything to do with it, and they cannot control KAYO's activity.

Chairman DIXON. Even to the tune of you handling oil for free which they sell cheaper than you sell?

Mr. WRIGHT. Well, that's one of those problems that we just got to do, if we are going to be jobbers for Conoco. They said that just has to be done.

Chairman DIXON. Is the number of jobbers in Texas increasing or decreasing?

Mr. WRIGHT. Well, I don't know exactly. I would say that the number of jobbers in Texas is decreasing from one viewpoint. Many are having difficulty in making a profit, and many of them are selling out to their supplier or combining to make operations more successful. At the same time, I think that there are commission agents that are changing to jobbers because of their plight, which is worse than ours. Chairman DIXON. In a price war situation in your area, does Conoco enable you to come to the assistance and help your dealers meet this competition?

Mr. WRIGHT. Yes, sir.

Chairman DIXON. Explain how they do it.

Mr. WRIGHT. Well, usually what happens is that when the price drops, some other marketer in the area drops their price, a price survey is taken by a Conoco employee that lives in Abilene, or assigned to that territory. This survey is transmitted to the division office, and when in their judgment the situation is such that it dictates price allowance to help our dealers remain competitive, it is given us.

Chairman DIXON. They will give you-how do they give it to you? Mr. WRIGHT. Well, they give it to us in the form of an allowance which is a rebate against our cost-we pay for the product at regular jobber prices and then it is

Chairman DIXON. What condition is it given you on?

Mr. WRIGHT. It is given to us on the condition that-well, there is no really conditions about it. The dealers did not have to price any certain way. I mean we have had some dealers that refused to lower their price.

Chairman DIXON. How about you?

Mr. WRIGHT. And they have not said anything.
Chairman DIXON. How about you?

Mr. WRIGHT. It is given to us; yes, sir.
Chairman DIXON. Do you keep it?

Is it given to you?

Mr. WRIGHT. No. We of course pass it on to our dealers.
Chairman DIXON. Are you free to keep it?

Mr. WRIGHT. I have never tried it.

Chairman DIXON. Do you have any such understanding that you could keep it?

Mr. WRIGHT. Well, it would be difficult for us to keep it, because it is only given us on the basis of the gallonage that goes through dealer stations as substantiated by the meter readings.

Chairman DIXON. You read the meters?

Mr. WRIGHT. Yes, sir.

Chairman DIXON. And report to who?

Mr. WRIGHT. We report the volume at a certain time, at a certain price allowance, back to Conoco, and we are allowed price support on that basis.

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Chairman DIXON. On page 4 of your statement here, your filed statement, you state that when a major fully integrated company can control the gasoline pricing structure being pitted against an independent involved in only one function of the industry, then the resulting price wars or other business disruptions are felt throughout the industry from refiner to purchaser.

Now, when you mention their control, what kind of control do you have in mind?

Mr. WRIGHT. Well, first, the major companies set the framework in which the jobber operates. In that respect they control the gasoline pricing structure as far as it relates to us.

Chairman DIXON. Thank you, sir.

Will you introduce the next witness?

Mr. WRIGHT. Yes. I would like to introduce Mr. Harvey Smith, Jr., who is president of the Texas Oil Jobbers Association and who will also be available for questions should the Commission choose. Also I would like to introduce Mr. Charles Forbes, the Humble commission agent from Georgetown, Tex., who will have some comments regarding commission agent activities.

Mr. Forbes is a past president of the Petroleum Marketing Association of Texas, which is now a part of the Texas Oil Jobbers Association. He has been a commission agent for 18 years and is a longtime community leader in Georgetown, Tex. He will make his comment now. Thank you.

TESTIMONY OF CHARLES FORBES, HUMBLE COMMISSION AGENT, GEORGETOWN, TEX.

Mr. FORBES. Gentlemen, and lady, I am a petroleum marketer, a wholesale commission distributor, or agent. I live and have my

business in a community with a population of approximately 6,000. There are a total of six such representatives of major oil companies in this community.

There are approximately 1,500 similar wholesale commission agents in the State of Texas. The following statements are made in the interest of these representatives.

We recognize a commission wholesale distributor as one who represents one company in a given area. He receives the petroleum products of his supplier into storage usually owned by the company. Through his efforts he handles the sale for these respective customers, collects for the sale and transmits these collections to his company, for which he is totally responsible. Normally his remuneration comes once a month and is based on a commission on the products sold, and delivered. There are some supplying companies whose wholesale commission agents do not receive a full commission check each month because the company withholds an amount equal to 10 percent of the supplying companies' outstanding accounts receivable in the respective agencies.

These commissions collected are based on normal wholesale prices. Any deviation from these so-called posted prices establishes a varying schedule of payments, usually downward.

This business is represented as an independent business and as opposed to the jobber, title to the products does not pass from the supplying company until it is sold.

We are wholesale commission agents, as opposed to commission service station agents.

In Texas approximately one-third of the volume of gasoline is handled in this manner. The average wholesale commission agent in the United States moves approximately 914,000 gallons of gasoline per year, which is an average of 77,000 gallons per month. This is comparable to the figures in the State of Texas.

These people usually, as you can see, make the smaller, more expensive deliveries.

During the last decade the new service stations are being delivered direct even though in the agent's territory. This "bypass" business at reduced commissions is now draining some volume from existing stations through which full commissions have always been paid to the distributor.

Some of these wholesale commission agents have built service stations of their own and taken leases in their own names for the mutual benefit of the company as well as themselves. Of late, some of these people are being presented with new conditions of agreement which include a first option to purchase these improvements, should a sale become desirable.

The wholesale commission agent owns all of his trucks and other delivery equipment. He hires, and pays the salaries of his employees and all other operational expenses.

On consumer accounts that are taken on a bid basis resulting in a price at variance with the normal posted schedule, the return to the agent is being adversely affected, even to rates that are totally unprofitable even to as low as 1 cent per gallon. It might also be noted that consumer accounts are being induced to install large storage tanks in order to receive their products in transport quantities.

We have tried to operate as reputable independent businessmen. We have always been led to believe by our supplying companies that we are independent business people. We look forward to the time when we can know our competition as those of equal forces with us in the particular marketplace where we have our respective operations, interests, and investments.

Your attitude prompting such independence is of indelible importance to the continuation of the business in a healthy state. Thank you.

Chairman DIXON. Any questions? No questions. That is the last witness. We will stand adjourned until tomorrow morning at 10 o'clock.

(Whereupon, at 4:15 p.m., May 11, 1965, the hearing in the aboveentitled matter was recessed, to reconvene at 10 o'clock tomorrow, Wednesday, May 12, 1965.)

FTC INDUSTRY CONFERENCE ON MARKETING OF

AUTOMOTIVE GASOLINE

WEDNESDAY, MAY 12, 1965

FEDERAL TRADE COMMISSION,
Washington, D.C.

The Commission met in public hearing pursuant to recess, at 10 a.m., in room 532, Federal Trade Commission Building, Hon. Paul Rand Dixon, chairman, presiding.

Present: Paul Rand Dixon, Chairman; Philip Elman, Commissioner; A. Everette MacIntyre, Commissioner; John R. Reilly, Commissioner; and Mary Gardiner Jones, Commissioner.

The CLERK. The Honorable, the Commissioners of the Federal Trade Commission. The Commission is now in session.

Chairman DIXON. We will hear first from the Humble Oil & Refining, Mr. Carl Illig.

Mr. ILLIG. Mr. Chairman, Mr. W. W. Bryan, our director in charge of marketing operations, will make our statement.

Chairman Dixon. I understand that.

TESTIMONY OF W. W. BRYAN, HUMBLE OIL & REFINING CO.

Mr. BRYAN. I am William W. Bryan. I am a member of the board of directors of Humble Oil & Refining Co., and I am chiefly concerned with its marketing activities. I have been with Humble and its predecessors for over 42 years, and during that time I have held positions in all phases of marketing.

In the statement which we have filed with the Commission, we have discussed the way in which Humble markets motor gasoline and have expressed our views concerning some of the issues now facing the industry. I do not propose to duplicate that testimony in my oral statement. Instead, I will devote my time chiefly to commenting upon the problems and issues which have arisen in connection with the statements of others.

Humble is an integrated company engaged in the production, transportation, refining, and marketing of petroleum. In 23 Eastern States and the District of Columbia we market under the Esso brand name which enjoys a high degree of acceptance. In 22 other States, we utilize the Enco brand name whose acceptance with the consuming public varies from very good in the Southwest to that of being a newcomer on the west coast.

Humble's marketing objective is to sell quality products at reasonable prices through a distribution system which best serves the needs of the consumers. Humble expects its marketing function to operate at a profit, and our marketing activities have been consistently profitable in their own right.

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