Soundmaster In a matter of minutes, your N-A P.A jobber salesman or counterman can SHIPLEY EXHIBIT No. 1 STATEMENT OF CHARLES E. SHIPLEY, SERVICE STATION OPERATOR, DETROIT, MICH. My name is Charles E. Shipley and I have been a service station operator in the city of Detroit since June 1, 1949. I have been in business at 16343 Schoolcraft, Detroit, Mich., since July 1, 1951, and, in partnership with my brother. have owned that location since October 1961. Previous to that I leased the property from the American Oil Co., who, in turn, leased from a third party. I would like to bring before this hearing the subject of area or zone pricing as it has been practiced in the State of Michigan. First, on a State level where prices vary by as much as 12.3 cents on a given date. Secondly, how even the city of Detroit was divided into small areas and dealers only a few blocks apart had a different wholesale price. Attached to this statement is a copy of a survey made by the Retail Gasoline Dealers Association of Michigan, Inc., on December 12, 1961. It shows the wholesale prices charged to dealers by most major brand oil companies in the larger cities in Michigan as of that date. It shows a tankwagon price of 5.8 cents per gallon in Detroit and 18.1 cents per gallon in Traverse City. This spread was greater than usual I admit, but 4-cent and 5-cent spread have been almost constant for most of the past 4 years. The service station operator in northern Michigan is quick to point out that the vacationing or traveling motorist is well aware of this price differential and buys only enough to get himself back into the low-price areas. The dealer in Bad Axe, in the central part of the thumb area, sells a small amount to anyone heading toward Port Huron, Bay City, or Detroit. The motorist today thinks nothing of driving 20 miles to work or even more to do the weekend shopping. A weekend trip can be 500 or 600 miles with no strain. So the dealer today in a high priced area has for competition not only the station down the street but the low priced area many miles away. I am sure that many jobbers and distributors in these high-price areas can expand on this topic and its effect on them and the outlets they service. Secondly, I would like to point out the final refinement of the area pricing policy of some major oil companies. To do so, I will use myself and my supplier, the American Oil Co., as an example. All of my business is drawn off of Schoolcraft Avenue which is a major eastwest artery that runs from Livernois Avenue west to the area of Plymouth, Mich., about 15 miles altogether. I service mainly the residents who live north and south of this street. In the summer months it also carries a heavy flow of motorists going to and from the racetrack, located at Schoolcraft and Middlebelt Road, about 6 miles west. Most of the traffic that goes by my place of business is going toward Greenfield and thus to a major shopping area or to Grand River which will take them into the heart of the city, or they are returning from these areas toward home. In the past, on many occasions, I have been faced with a form of competition that has been impossible to cope with. This situation has been brought on by the so-called area pricing that my supplier, the American Oil Co., has seen fit to put into effect at various times. My business is located one-half of a mile east of Southfield and Southfield is a dividing line that is used for one of the areas. So when the area pricing policy is in effect my customers coming east on Schoolcraft pass many stations of my own brand offering for sale the same thing I sell for 1 and 2 cents less than I can sell it for. One station is only two short blocks (about one-tenth of a mile) west of Southfield and he can at these times buy at the lower price while I-only sixtenths of a mile from him-cannot. This, despite the fact that we are competing for the same customers, selling the same products and services. Dates and actual pricing differentials are very difficult to obtain as no posted or announced changes are made. Only when you notice that a lower figure is posted at the curb and you question competing dealers, do you find that his price is different than yours. During any price war large signs, posting the selling price, appear in front of most gasoline stations. The motorist becomes an expert on price and tends to buy where the best price is available. So as a businessman you must know what your competition is doing and compete or close your door. I do not want any special deal from my supplier nor do I expect any. I only want to be allowed to compete on an equal basis. This ability to compete is not only made difficult it is made impossible when the so-called area pricing policy is in effect. There is no possible way in which I can make cost adjustments to offset this difference in the purchase price. No efficiencies that I could put into effect would be able to offset this discrimination. My supplier may argue that no longer does he use this type of pricing in the Detroit area, and of late this has been true, but the past has proven that this type of operation is one that may disappear for awhile from the marketplace and then with startling suddenness reappear. I would like to know that in the future I will not have to face this type of unfair and discriminating type of price structure. If the free enterprise system holds any future it must always offer the opportunity for an individual to have an equal opportunity to compete in the marketplace. I, and thousands like me in the retail segment of a great industry, ask for no guarantee of success. If we fail through lack of effort, lack of training, or lack of ability then we become casualties of competition. This is proper in our free enterprise system that offers success only to those who provide the most for the customers dollar. But, if we fail because of hidden deals, unfair competition or unrealistic pricing, such as the area pricing policy that I have attempted to describe, then our failure is the failure of our system and our system cannot hope to offer any future for the aggressive, the ambitious, or the hopefuls of the coming generations. SURVEY TAKEN BY THE RETAIL GASOLINE DEALERS ASSOCIATION OF MICHIGAN Comparison of wholesale (tankwagon) prices for major brand regular grade gasoline in various Michigan market areas on Dec. 12, 1961 NOTE.-Above prices are exclusive of State and Federal taxes. 12. 4 17.4 12. 4 17.5 9.7 17.7 SHEW BRIDGE EXHIBIT No. 1 STATEMENT OF CHARLES W. SHEWBRIDGE, RICHMOND, Va. Mr. Chairman, and Commissioners of the Federal Trade Commission. I am Charles W. Shewbridge, president of the Richmond Chapter of the Virginia Gasoline Retailers Association, and lessee dealer of a Gulf Oil Corp. station located at 6221 West Broad Street, Richmond, Va. I have been a retail dealer in my present location for the past 13 years. The metropolitan Richmond area has, for the past few years, been subjected to continuous and expanded efforts on the part of several major oil companies to dominate and control the retail price structure of gasoline marketing. The efforts were first confined primarily to Sun Oil Co. and Shell Oil Co., through the use of commission-consignment contracts, which gave the supplying company the contractual right to retail title to the gasoline until after its sale and to control the retail prices charged for same. They were so successful in controlling the retail prices of their dealers that they were followed in this venture by Esso Standard Oil Co. (now Humble Oil & Refining Co.), with a new commission-agent plan of consignment which exercised even more stringent controls over the station operator's freedom of actions. This problem has now reached such proportions that about 15 percent of the branded gasoline outlets in the Richmond area now have their retail prices controlled by one of these three companies. I would like to enter as exhibit B a map of the Metropolitan Richmond area on which I have encircled the location of each of these controlled outlets. The locations of Humble Oil Co.'s 42 commission-agent operated service stations in the Metropolitan Richmond area, comprising the city of Richmond, Chesterfield and Henrico Counties, are indicated on the attached map of Richmond and environs, insofar as it was possible to locate them on the map. Exact location of each station is as follows: 400 West Brookland Park Boulevard, Richmond, Va. 2425 Chamberlayne Avenue, Richmond, Va. 7100 Patterson Avenue, Richmond, Va. 4112 West Broad Street, Richmond, Va. Broad Street and Hamilton Street, Richmond, Va. 4400 Grove Avenue, Richmond, Va. 1601 Commerce Road, Richmond, Va. Hull Street Road and Brice Lane, Richmond, Va. 6798 Forest Hill Avenue, Richmond, Va. Belt Boulevard and Brandon Road, Richmond, Va. Willys Road and Interchange 6A, Richmond, Va. Hungry Road and Howbart Road, Richmond, Va. Skipwith Road and Broad Street, Richmond, Va. West Broad Street and Libbie Avenue, Richmond, Va. Staples Mill Road and Dumbarton Road, Richmond, Va. Route 95 and Route 301, Richmond, Va. River Road and Route 147, Richmond, Va. 5244 Brook Road, Richmond, Va. 8919 Patterson Avenue, Richmond, Va. 5312 West Broad Street, Richmond, Va. Quioccasin Road and Pemberton Road, Richmond, Va. 5526 Lakeside Avenue, Richmond, Va. 6920 Lakeside Avenue, Richmond, Va. Route 60 and Route 147, Midlothian, Va. 200 Nine Mile Road, Highland Springs, Va. Route 5, Box 385, Glen Allen, Va. The locations of Shell Oil Co.'s seven "commission-consignment" operated service stations in the Metropolitan Richmond area, comprising the city of Richmond, Chesterfield, and Henrico Counties, are indicated on the attached map of Richmond and environs. Exact location of each station is as follows: 2931 Chamberlayne Avenue, Richmond, Va. 5711 Patterson Avenue, Richmond, Va. The locations of Sun Oil Co.'s six known "commission-consignment" operated service stations in the Metropolitan Richmond area, comprising the city of Richmon, Chesterfield and Henrico Counties, are indicated on the atached map of Richmond and environs. Exact location of each station is as follows: 700 Cowardin Avenue, Richmond, Va. 117 East Belt Boulevard, Richmond, Va. This probably does not represent a completely true picture with respect to Sun Oil Co., however, for it is known to us that quite a large additional number of Sun Oil Co. stations were operated on a "commission-consignment" basis in 1964, and the retail merchants license for these stations were issued in the name of Sun Oil Co. for gasoline sales. In this year of 1965, however, we are advised that the retail merchants license for each of these other stations have been transferred to the station operators' names. Whether Sun Oil Co. has actually relinquished its control over retail gasoline prices and taken these operators off "consignment," or whether Sun Oil Co. has now found some means of forcing these operators to assume the added expense of paying the retail merchants' license on the consigned gasoline, over which they have no control of the retail price, we have been unable to determine. It is our belief, however, that these stations are still on consignment, and that Sun Oil Co. is still controlling the retail price. A study of the map marked "exhibit B" should clearly illustrate to you the pattern followed by these three companies, particularly Humble Oil & Refining Co., for they cover the main streets of traffic and the residential areas as well as the major highways entering and leaving the metropolitan area. When deployed in such a strategic manner as this, a relatively small percentage of the total number of service stations in a given area can completely dominate the retail price structure. This they have done successfully in the Richmond area for the past few years. Gentlemen, the problem is most serious. How long can we continue to sell gasoline at a gross profit of some 16 percent when our operational costs of doing business average around 20 percent of our gross sales? Our only hope is for this body to adopt trade rules which, among other things, will prohibit any company from employing any contractual device which allows the supplying company any control whatsoever over the retail price at which the gasoline is sold. This is our most pressing problem today, and speaking for the some 450 gasoline retailers of my area, I sincerely hope that you will adopt the trade rules proposed by our State and national associations. Thank you for the opportunity of appearing before you today. |