DEALERS' SUIT SAYS OIL FIRMS FIXED GAS PRICES.

Byline: Michael Coit Staff Writer

Gasoline dealers from across Los Angeles and Ventura counties filed an antitrust lawsuit in federal court Tuesday, claiming Shell and Texaco have fixed high prices despite a glut of cheap crude oil.

Blaming steep prices on the two major oil companies, which denied wrongdoing, the 40 dealers contend Shell and Texaco have used joint marketing agreements to fix wholesale prices and to raise rents to dealers.

Some dealers said they have been told to expect a new price hike within the week. They fear that could further cut into sales volume, which some dealers said is down 60 percent or more.

``If you're not on the other side of the fence, you tend to think the middleman is making all the money. It's been very, very tough,'' said Mahmoud Busaidy, whose family runs Jerry's Shell Service Center in Sherman Oaks. ``They are squeezing you in every aspect and then they raise the rent.''

Busaidy's family has operated the station with five pump islands and four service bays for 24 years. Their rent was tripled after Shell and Texaco merged all U.S. distribution and marketing operations last year. The gas price hikes have left a profit margin of less than 3 cents a gallon.

The purpose of the merger was to eliminate competition in the refining and marketing of gasoline and to fix the price at which gas is sold to independent Shell and Texaco branded dealers, the suit claims.

Shell Oil Company and Texaco Inc. combined distribution and sales forces in January 1998, creating Equilon Enterprises to fix prices in 32 Western and Midwestern states, including California, where it is number two in market share, the suit claims.

In a similar move in July, the companies and Saudi Refinery Inc. created Motiva Enterprises to fix prices in the remaining 18 states, the suit says.

Shell and Texaco contested the suit's claims Tuesday, stating that the Federal Trade Commission approved the joint ventures after investigating the potential impacts on wholesale and retail gasoline markets. The attorneys general of California, Hawaii, Oregon and Washington also conducted investigations.

``The bottom line is that we feel their allegations of joint ventures as illegal conspiracies are preposterous. Competitiveness had to be preserved,'' said Myra Jolivet, spokeswoman for Equilon, which, like Shell, is based in Houston.

But the joint venture raised concerns in Congress, and the FTC is investigating anti-competitive oil industry practices in California, U.S. Sen. Barbara Boxer, D-California, said Monday.

Boxer held a news conference to release an analysis based on data from the California Energy Commission that showed Californians would have saved $544 million if retail prices had fallen as fast as wholesale prices during the past two months.

``Without question the bad guys here are the big oil companies that set the prices. The dealers also often are victims in this,'' said Matthew Kagan, Boxer's director for Southern California. ``All they do is buy the gas, mark it up a nickel or so and sell it.''

The dealers filed suit to recover losses of sales, profits and business goodwill. The undetermined losses also come from increased rent, increased prices for gasoline and other petroleum products, the value of their businesses as going concerns and increased business costs including any debts incurred.

The suit was filed in U.S. District Court for the Central District of California, in Los Angeles, because the named dealers are from the area, said Joseph M. Alioto, the San Francisco attorney representing them.

``These are people who are courageous enough to finally figure that nobody was going to do anything and they had to do it on their own,'' said Alioto.

Alioto blamed the FTC for not doing enough to protect both dealers and consumers.

``Anyone in grammar school would know enough about civics that if this does not violate the anti-merger laws, then nothing does,'' he said.``It's two competitors who are agreeing on their marketing. It's a blatant violation of the law and the chairmen of these companies simply must think they can get away with it.''

Nozar Sheibani said the dealers want the court to hold the companies accountable.

For many of the 20 years he has owned Camarillo Texaco, Sheibani could claim the lowest gas prices in town and count on good business. Continuing price hikes, however, have cut his sales volume from $180,000 a month to less than $70,000, which also cost him a rent rebate based on volume.

``When Texaco and Shell got together, they changed everything,'' he said. ``Then my customers blamed me for the higher prices. We explain to them this is about Texaco and Shell. Some of them believe and some of them don't, of course.''

The companies' joint statement contended the allegations are without merit and said the lawsuit should be dismissed.

``As part of the FTC's review of the proposed joint ventures, the public was offered the opportunity to comment on the remedies proposed by the FTC. The plaintiffs, who are complaining about the same issues investigated by the FTC, had an opportunity to participate in that process,'' the statement read.

CAPTION(S):

2 charts

Chart: (1) Gas survey

(2) Paying at the pump