And having been in this business for a great number of years there then occurred a phenomenon that disturbs me. Sinclair, as you know, announced suddenly on March 18 that from this day forward they were not allowing dealer assistance discounts. Now, if this competitive market for gasoline is as much of a jungle as I have heard it described in this hearing, didn't Sinclair at that moment expose every single Sinclair dealer in the United States to annihilation?

Within 48 hours every refiner, with but two exceptions, in the United States announced a similar plan; no dealer assistance.

There, at that point-and I have heard the statement expressed in this hearing by the independent refiners-wasn't every national brand dealer exposed to invasion by the independents at that point? And it has not happened.

The price went from 22 cents for regular on March 19 to 29.9 in Hartford. It is still there today. Occasionally, there are dealers who go down a penny. That is their own penny, not from any dealer assistance. But basically it stayed at 29.9.

And I know a good many of us have to think about that for a while. Now, getting to what we propose as a solution-and very briefly, I am going to present our recommendation, whether you accept it or not I don't know, it is going to be somewhat direct and we think logical. I have heard it said here that Humble Oil-by Mr. Bryan this morning-did not supply anybody in the New England area or the eastern coast except their own stations or their own integrated outlets. One of the chief price cutters in the Hartford area is located in East Hartford.

In 1964, Humble Oil sold in the State of Connecticut 105-plus million gallons of gasoline. They sold, according to the tax receipts, the tax that was paid on gasoline sales, to Woolridge Bros., Inc., 12 million gallons. Woolridge operates a number of stations and when this gasoline is sold to the public from a Woolridge station the sign is carried "Woolridge Brothers, Inc., Esso."

And we don't even have to be concerned about the present status of the Borden case involving private brands and the effect of such brands on like grade and quality here, there is no question about this being the condensed milk of a major brand or not, that all completely disappears when the word "Esso" appears underneath "Woolridge Brothers." The gasoline Woolridge buys from Humble is the same gasoline delivered to every Esso dealer operating under a lease with Humble. And Woolridge has the traditional habit of dropping a penny to compete with the offbrand gasoline. And most of these offbrand gasolines would then go down another penny to maintain the 2 cents traditional difference, and down he would come, and the price decline would begin all over again.

And, again, we have dealers without a cause of action.

Mobil Oil sells to Atlas Oil.

Incidentally, Mr. Chairman, I want to put this in the record. It is the complete gallonage, the sales of every major oil company in the State of Connecticut for the year 1964.

Chairman DIXON. We will receive it.

(The document was marked as "Sills Exhibit No. 1," and appears in the appendix, at p. 986.)

Mr. SILLS. Socony Oil sold, in 1964, 127 million gallons. To Atlas Oil Co. they sold 7 million. This was also sold under the name “Atlas Oil Mobil" in competition with Mobil dealers.

Tidewater sells to Mercury Oil, which is a Tidewater distributor. He, in turn, markets this gasoline through his own 12 outlets.

Cities Service sells to American Coal Co., and they sell to the public under the name of "Cities Service."

California Oil sells to Red Wing, a distributor. And the name "Calco" was carried on Red Wing stations.

Now, the gallonage in Connecticut-I want to get to these figures very quickly-in 1962, there were 834 million gallons of gasoline sold. In 1963, 871 million. And last year it was 915 million. It is expected to hit 1 billion gallons in 1965.

And I want to put this map and chart in the record. This, I think, Mr. MacIntyre has inquired about several times.

All gasoline enters Connecticut through the port of New Haven-78 percent of all cargo entering New Haven is gasoline. And such gasoline is carried to bulk plant supply points located on this map. From these supply points it is carried by tank wagons to the filling station pumps. We believe, and it can be checked by your agency, that an independent distributor, such as Woolridge, is billed 3 cents a gallon less than a filling station operator. The distributor takes his gasoline from the bulk plant and carries it in his own trucks to his own stations. The cost to a distributor, we believe-and this can be checked-is sixtenths of a cent a gallon for freight cost from bulk plant to the station. The distributor then has a 20-cent advantage over a dealer of the refiner in selling the same gasoline.

Chairman DIXON. We will receive this and make it a part of the record.

(The document referred to was marked "Sills Exhibit No. 2," and appears in the appendix, at p. 989.)

Mr. SILLS. Those are all sales at the port in Connecticut, from which all gasoline sold in Connecticut is eventually tank wagoned.

Now, in the Oil and Gas Journal of March 29, 1965, it was reported that inventories of gasoline were 14 million barrels higher than this time last year. The New York Times reported, on April 18, 1965, that aside from this surplus carryover of 14 million barrels, there is an excess crude oil productive capacity in this country of 3 million to 32 a day. The cost of carrying this excess capacity is becoming an increasingly greater burden to the industry, particularly in Texas, where wells are permitted to produce less than 30 percent of their rate of capacity.

This surplus did not affect the net earnings of the refiners. On February 8, 1965, it was reported in the Oil and Gas Journal-and I wish this could be said of the filling stations of Hartford-profit reports of 17 of the 21 major oil companies reporting showed that 13 made more money last year in net earnings than ever before in their history. And the testimony in this hearing emphasizes that this is due to the return on crude oil. But I am appearing for 108 small businessmen in Hartford County whose only business is the retail sale of gasoline and oil to the consuming public.

And now, what do we suggest. When this Commission was 8 years old, which was a long time ago, there was a refiner who was anxious

to protect the name and integrity of his brand, Sinclair. We all remember the Sinclair case. There, the court held that a refiner had the right to insist in a contract that anyone displaying a Sinclair pump must carry Sinclair gasoline in such pump. It was that simple.

But, in commenting, the Supreme Court on page 474 stated:

The lessee is free to buy wherever he chooses. He may freely accept and use as many pumps as he wishes. And he may discontinue any or all of them. He may carry on business as his judgment dictates and his means permit, save only that he cannot use the lessor's equipment for dispensing another's brand. By investing a comparatively small sum he can buy an outfit and use it without hindrance. He can have respondent's gasoline with the pump or without the pump. And many competitors seek to supply his needs.

In drawing an analogy between that situation and the one today, I want to be accurate with this record. In the Sinclair case there was no covenant between the lessor and the lessee requiring him not to purchase equipment or anything else from another party such as there is in the standard filling station lease today. It is our position, however, that the acts of the lessor in marketing gasoline to others than his lessee weaken this covenant to the point that every lessee can return to the freedom of movement announced by the Supreme Court in Sinclair.

Translating that into what I recommend is simply this. If this filling station operator must do business in his market with this risk exposure; that is, he must carry a deductible of a thousand gallons that he may lose when discriminated against and which he must absorb himself, because such a loss is minimal in terms of the RobinsonPatman Act, then I think that that is too much to ask this businessman to assume. When one considers that the other party to his lease has barred him from buying elsewhere by virtue of a restrictive covenant, while at the same time this same lessor sells the selfsame gasoline at lower prices to other lessees competing with this operator or in other channels of distribution that eventually compete with this operator, then I think that the Federal Trade Commission can properly examine such a covenant to determine whether its continuance under such conditions is unfair and illegally restrictive. We think that such an examination is imperative and should be done quickly. The abundance of gasoline hanging over this market will eventually spill over into the chaotic conditions existing prior to March 18.

We recommend that any filling station operator be permitted to purchase and install a third pump to be used during such times as we have just described. This pump to be used by him, not as a sword but as a shield. As a matter of fact, each dealer could advertise the gasoline sold from such pump as "My Shield" and whatever the octane would be. He should be permitted to go in the open market and purchase either from his lessor or elsewhere at whatever price is most advantageous to him. The integrity of the lessor's gasoline would be preserved because only the lessor's gasoline would be sold from pumps bearing the lessor's brand name. The future of the lessee as a unit in this market would be preserved because he would have at least one pump with which he could compete in the inevitable price war that will certainly come.

There is one other comment on this question of octane, and then I am through.

It is an amazing thing, I spent some time trying to discover where this octane factor begins and where it ends. And I have found that

today regular gasoline ranges between 92 and 93 and that premium gasoline is normally from 98 up. In 1953 regular averaged around 83.7 octane and premium was at 91. In 1927 Lindbergh flew over the Atlantic with the highest octane gasoline available at that time. It was 73.

It is interesting to note in this connection that the Continental Oil Co. announced on February 22 of this year "Instead of selling just premium and regular, we are now going to sell a third gasoline"-my suggested third pump-"which will be 92 octane rating, about one RON" and I have yet to understand what one RON is "lower than Conoco regular." The third gasoline was to be called "Conotane" and would be priced competitive with off-brand gasoline.

According to the report of this announcement in the Oil & Gas Journal of February 22, 1965, it was stated that jobbers of independent private brands in Colorado were hurt as well as majors. We mention this because our recommendation of a third pump for all dealers is not inspired by any thought of causing injury but only for the purpose of providing an instrument of defense in a price war. We simply ask as a matter of simple marketing justice that the Federal Trade Commission suspend the restrictive covenant during such times as the covenanting lessor markets gasoline to the injury of his lessee. We believe the Commission has the power to determine such times and conditions when the covenant should be suspended.

Chairman DIXON. Thank you.

TESTIMONY OF HARRY WALLER, PRESIDENT, A. & H.

TRANSPORTATION, INC., BALTIMORE, MD.

Mr. WALLER. I am Harry Waller, president of A. & H. Transportation, Inc., operator of popular-priced stations in the Baltimore area, and two on the outskirts in the Maryland area known as Savon Gas stations.

I would like, Mr. Chairman, at the outset to leave you with a word of caution, because my letters that I am going to read will, at times, sound bitter. But I would like you to accept as an axiom the fact that I have respect for the law and those who dispense it. That is my religious training and my belief.

As an independent marketer not beholden to a major supplier, we found it difficult since 1950 to get a good supply of gasoline. We have had no end of grief in locating a supplier that was consistent in both the price and the quality to permit us to remain in the marketplace. At all times we have tried to maintain a position of 2 cents below the major. In the major in this case would be the Humble group. The conditions in the market were always unsettled insofar as an independent is concerned, because we are merely tenants by sufferance at their will and mercy as to supply and price.

We have tried over the years as part of an independent group known as the National Oil Marketers Association to locate sources of supply and conditions in the industry that would permit us to exist and live, and to earn our place in the marketplace, and in that way serve the public with popularly priced gasoline.

Never have so many suffered at the hands of so few. And on many occasions I have taken my pen in hand and written to the so-called

leaders of our Government, starting with the Congressmen, our Senators, the Department of Justice, and the Federal Trade Commission.

Back in 1961, Christmas of 1961, our troubles began for real. Gulftane was introduced in the Baltimore area. And before it came the other majors knew about it-where it was going to be started and how it was to be marketed. Never by the wildest stretch of the imagination have you ever seen raw, jungle tactics used as the majors, collectively and individually, used them on the independents.

Back in 1950 when I first started with unbranded gasoline I believe we had somewhere between 20 and 25 dealers, independents, who had either chains or 1- or 2-pump units. I tried to find out from the yellow pages at the phone company what they were for 1950, 1955, 1960, and 1965, but I was unsuccessful, I couldn't find it. I do know this, that in Baltimore today you can count all the independents on one hand. And I believe there are only two of us left that have three or more stations. As sources of supply have dried up, our ability to expand has been harmed terribly. We have made no money. And it was most difficult to get good legal representatives. The one agency that should have done a better job than it did and didn't do it was the Department of Justice.

I don't want to belabor the point here, but I did go after Mr. Loevinger for permitting, not in the Baltimore area, but for permitting a condition that extended into the Calso-Kyso Kentucky deal, where the majors went into the South and tied up the market. By harming the independents in another city it comes home to roost in Baltimore. We found that out when we worked with the Hadlick group, the National Oil Marketers Association, the true independents. Bringing it up to date, I tried to get Mr. Órrick to do something about it. And I wrote some letters. I know the hour is late, but I wish you would bear with me, and I will give you some excerpts from the letters.

Chairman DIXON. If you wish to offer them we will receive them in the record, and you can just refer to one or two as an example, if that is the way you wish to do it.

Mr. WALLER. I will do it.

(The information referred to follows:)

Hon. WILLIAM ORRICK,

Department of Justice, Washington, D.C.

AUGUST 11, 1964.

DEAR MR. ORRICK: In your Americana speech you allude to the use by big oil of bogus corporations, similar to the ones that the Continental Oil Co. is now establishing in nearby Salisbury, Md., called Kayo stations. Still further, Continental Oil will soon take over in the Baltimore area those stations which they had leased to both Shell and Cities Service for a period of years. We have reliable information that Kayo will be introduced into the Baltimore region in the very near future to beat and eliminate the unbranded little oil businessman who dares to fly his own flag.

On Monday, November 18, 1963, the Honorable James Roosevelt asked you the following question: "But if you can see that there is a steady trend toward the elimination of competition through the elimination of the retailer through the device of company-owned outlets that undersell the retailer, thereby knocking him out of business, is not this a clean-cut case for which there is no need for additional legislation, but which under existing law, you can go forward today?" and you replied, "Any attempt to monopolize, Mr. Chairman, we can go forward on, and can and would promptly. There is no question about that."

1 Hearings before Subcommittee No. 4, vol. 7, p. 1583.