Fuel retailers allege illegal prices at pump

Posted April 30, 2010, at 8:27 p.m.
Some small stores that also sell gas have asked Maine's attorney general to investigate illegal pricing of gasoline by Sam's Club.  BANGOR DAILY NEWS PHOTO BY GABOR DEGRE
BDN
Some small stores that also sell gas have asked Maine's attorney general to investigate illegal pricing of gasoline by Sam's Club. BANGOR DAILY NEWS PHOTO BY GABOR DEGRE
The breakdown of costs for gasoline at the Broadway Citgo in Bangor are seen behind owner Rob Baker on Tuesday, March 9, 2010. &quotI wish it was an even playing field," said Baker who has recently seen larger chains undercutting prices more than usual. &quotI've been doing it a long time and have never seen anything like this," Baker said of the full service station, which he has owned since 2001.  BANGOR DAILY NEWS PHOTO BY BRIDGET BROWN
BDN
The breakdown of costs for gasoline at the Broadway Citgo in Bangor are seen behind owner Rob Baker on Tuesday, March 9, 2010. "I wish it was an even playing field," said Baker who has recently seen larger chains undercutting prices more than usual. "I've been doing it a long time and have never seen anything like this," Baker said of the full service station, which he has owned since 2001. BANGOR DAILY NEWS PHOTO BY BRIDGET BROWN

Just about any local corner store owner with pumps out front will tell you the same thing: They’re not getting rich selling gas.

Now, a group of independent gasoline retailers has petitioned Maine’s attorney general to investigate what they claim is unfair gasoline pricing in the Bangor area.

The petition circulated by James Swett, owner of Swett’s Tire and Auto on Hogan Road in Bangor, was sent last week to the attorney general’s office in Augusta. It specifically cites Sam’s Club in Bangor for consistently selling gasoline below cost.

“Sam’s Club … is selling gasoline below cost for intent to control the market by pricing out the independent fuel dealer,” the petition reads.

Kate Simmons, spokeswoman for the attorney general’s office, confirmed Friday that her office has received the petition but said it is their policy not to comment on whether or not an investigation is under way.

Maine does not regulate gasoline prices, but state law prohibits anyone from selling merchandise at less than their cost with the intent to injure competitors or destroy competition.

The law is specific and sets a very high standard, requiring proof not only that fuel is being sold below cost, but also that there is an intention to harm competitors, Assistant Attorney General Christina Moylan said in a recent interview.

“Competitors don’t know what the cost is,” she said. “They may be selling below your price, but that doesn’t mean they’re selling below their cost.”

Representatives from Sam’s Club in Bangor said inquiries about gasoline purchases and pricing were handled at the home office. Phone messages left at Wal-Mart headquarters had not been returned Friday afternoon.

The petition bears 64 signatures, some from area retail gasoline dealers who indicated they collectively employ more than 100 people.

Swett’s cover letter to the attorney general noted that “the gasoline pricing directly impacts the ability of Maine small businesses to continue operating and employing numerous people.”

The petition seeking an investigation brings to boil an issue that has been simmering all spring. Earlier this year, independent dealers raised concerns about a “price war,” claiming that several of the larger dealers were selling gasoline at or below cost in an effort to put them out of business.

In March, Rob Baker, owner of Broadway Citgo, said he watched as two competing stations dropped their prices one below the other until they were selling gas at the pump for less than he was paying to have it delivered.

He began posting his invoices in his shop and put up a sign at his gas-service station to show customers exactly what he’s paying for gasoline and to prove he is not overcharging them.

“At these prices, they don’t believe that I’m not making a lot of money on gas,” he said.

Baker said Friday that he has continued to post the price he pays.

“I’ve still got the sign up and I’m still getting positive response from it,” he said. “I know I’m the highest price in town, but I don’t care. I’ve got to make my 5 cents on credit card sales, and 5 cents plus on cash sales.”

The cost of gasoline at the pump reflects several main price components: crude oil, refining and distribution costs, and taxes. Those account for the rack price — the price retail dealers pay at the terminal. Some purchase gasoline through a wholesaler, which adds to the rack price along with local transportation costs.

Retail dealers say they also have to cover a charge from credit card companies for credit card sales which can run as high as 7 cents per gallon. Credit card sales account for about 65 percent of their sales, leaving little room for profit, which often can be as little as pennies on the gallon, dealers have said.

Earlier this spring, the independent retailers complained that one group of dealers was selling gasoline well below the rack price, putting many of them at a competitive disadvantage.

“We know that somebody is selling gas at prices that don’t make sense,” said one dealer, who did not want to be identified. “There is a very aggressive player in New England.”

Most of the complaints earlier this year focused on area Circle K stations, the Canadian-owned chain that in 2008 leased the Irving-owned Blue Canoe, Maineway and Big Stop stores in Maine and Canada’s Maritime Provinces. Circle K continues to sell Irving gasoline under the Irving brand name.

While some chain stations joined that “gas war” and dropped their prices in an effort to match the lower price, many of the independent mom and pop operators said they could not keep prices down for very long.

“It’s good to have competition,” Swett said. “But this is not competition. This is putting people out of business. I can’t sell for less than I pay for it.”

Repeated calls this month to the Circle K regional offices in Michigan had not been returned Friday afternoon.

Representatives from Irving Oil said the company was aware of the issue. According to Liza Dube, spokeswoman for Irving Oil Marketing — one of three independently operated companies under the Irving umbrella — Irving does not control the street price of the gasoline it supplies.

“Irving Oil supplies the motor fuel for Circle K locations and other independent Irving-branded dealer locations in Maine,” Dube wrote recently in a prepared statement. “Retail pricing is independently determined by Circle K and our independent dealers, as required by Maine law.”

According to some state estimates, Irving Oil supplies between 50 and 60 percent of the New England market, including supplies to some of the name-brand distributors in the state. According to Swett, Irving also supplies an unbranded gasoline which the company sells to independent stations that do not sell under a brand name.

Swett claimed Friday that Sam’s Club is buying the same rack gasoline as he is, but is regularly selling gasoline at or below the rack price.

“My price today to put it in the ground is $2.82 [including taxes],” he said. “They’re selling it today at $2.79.”

The petition noted that at times, the Sam’s Club pump price was as much as 6 cents below the rack price.

The petition, Swett said, is an effort to level the playing field before this kind of pricing puts independent dealers out of business.

“I’m just trying to get a fair price in the marketplace, not just for me but for all the small independent dealers,” he said. “This kind of pricing not only affects the gasoline business, but it affects the other business and the store. It also affects the way customers look at you. They think you’re lying about your prices.”

It is also an attempt to educate those customers, he said.

“They need to know that if they continue to support those stations, pretty soon there won’t be any competition,” he said. “And you know what happens when there’s no competition.”

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