[The balance of Mr. Martin's prepared statement and the appendix thereto, follow:]
TITLE III-OCTANE DISCLOSURE
Shell has long opposed the concept of octane posting in the belief that the use of octane numbers alone or some other method of identifying antiknock quality is misleading to the consumer because of the inference that octane numbers by themselves represent product quality and value. In fact many other gasoline characteristics influence car performance and maintenance needs, for example, cold starting, warm-up, stall-out, carburetor icing, vapor lock, fuel economy, fuel system cleanliness, emission control, corrosion, etc. Hence, the posting of any single measure of performance to the exclusion of all others would have some rather obvious disadvantages.
Another weakness in the use of octane as the sole measure of gasoline quality results from the fact that engines of the same make and model differ substantially in their octane requirements. Car octane requirements are also affected by other variables such as temperature, altitude, humidity, spark timing, carburetor setting and method of driving.
In light of these facts it is difficult to perceive a way for octane disclosure to prevent octane overbuying if indeed overbuying is a significant factor in today's gasoline marketing climate, and we doubt that it is. Shell agrees, however, that the consumer does have a right to be informed about the gasoline purchase decision he must often make, and we have taken steps through publication of consumer information articles to educate consumers in this regard. To the extent that octane disclosure will enhance that education process, we do not oppose Title III in principle. We would recommend that in chartering the Federal Trade Commission to prescribe rules for octane disclosure, the language be modified to stipulate that consumer information and education be the primary consideration rather than octane overbuying. The problem of overbuying, if it exists, is the result of an uninformed buying public and would logically be eliminated through the process of consumer education.
Shell 011 Company's Proposed Changes in Title I
of H.R. 13000 ("Petroleum Marketing Practices Act")
Attached are selected changes and additions which Shell Oil Company proposes be made in the following sections of Title I of H.R. 13000:
The above changes and additions are considered desirable to achieve (a) clarity, (b) better protection of consumer interests, and (c) a more balanced solution to the relative interests of both the franchisor and franchisee.
Shell 011 Company's Proposed Changes in Title I
of H.R. 13000 ("Petroleum Marketing Practices Act")
language is lined through.) (Modified or added language is underscored; deleted
the requirements of section 105 are met; and
(A) the franchisee failed to comply (other
than for a cause beyond the franchisee's reasonable
control) with any term of the franchise, which term
is both reasonable and of material significance to
the franchise relationship, and, with respect to
such failure, the franchisor first acquired actual
or constructive knowledge not more than one hundred
and eighty days prior to the date notice is given
of such termination or cancellation;
(B) the franchisee failed to act in good
faith in carrying out the terms of the franchise,
which failure continued for a period ending not
ore than one hundred and eighty days prior to
cancellation; or
the date notice is given of such termination or
(1) (A) the suggested parenthetical clause is con-
sidered more appropriate than the phrase "without
reasonable excuse or justification" because the latter
phrase could be construed as going beyond causes
normally embraced within the term "force majeure" or
the principles of impossibility or impracticability
of performance, which presumably are the intended test
from performance.
for determining whether a franchisee should be excused
The insertion of the phrase "notice is given" in
the last clause is to assure uniformity as to the
length of the period preceding the date of the notice,
days' notice is authorized.
including those situations where less than ninety
- (1) (B) - This is a proposed new provision. The
"failure to act in good faith" cause for termination
is recognized by a number of state franchise laws and
has been included in many prior federal bills. It is
needed to cover the situations where the franchisee
has engaged in a course of conduct over a period of
time which clearly reflects that he does not intend to
perform his part of the bargair in good faith. Such
course of conduct would normally involve a situation
where the franchisee's past breaches of the franchise,
although individually perhaps not sufficient to justify
a termination, cumulatively reflect an unwillingness or
inability on the franchisee's part to acceptably per-
form his contract obligations as a whole.
(C) an event occurs which is relevant to
the operation of the franchise relationship, as a
result of which, termination or cancellation of
the franchise is reasonable, and, with respect to
such event, the franchisor first acquired actual
or constructive knowledge not more than one hundred
and eighty days prior to the date notice is given
of such termination or cancellation; including,
without limitation, any event involving: criminal
misconduct or fraud relevant to the operation of
the franchise; bankruptcy; insolvency; incapacity
or death of the franchisee; loss of right to grant
possession of the premises or to use a trademark,
trade name service mark, or other identifying symbol
or name covered by the franchise; or expropriation,
appropriation, condemnation, or other taking of the
premises, in whole or in part, pursuant to the power
of eminent domain; or loss of the premises covered by
franchise; or the franchisee fails to make any pay-
ment due the franchisor as provided in the franchise;
or a retailer abandons or fails to operate the retail
outlet leased from a franchisor; or adulteration,
mingling, mislabeling or misbranding of motor fuels by a
franchisee; trademark violations; or the franchisee
fails to comply with Federal, state or local laws or
regulations relevant to the operation of the franchise;
(2) not more than one hundred and eighty days
prior to the date of such termination or cancellation,
the franchisor and the franchisee agree in writing to
terminate or cancel the franchise, the franchisee is
promptly provided with a copy of such agreement,
together with a summary statement of the provisions
of this title, and, within seven days after the date
on which the franchisee is provided a copy of such
agreement, the franchisee has not posted by certified
mail a written notice to the franchisor repudiating
such agreement.
(1) (C) This subparagraph represents a redraft of
subsection 102(2)(B) of the bill. It includes the
same clarification with respect to the calculation
of the 180-day period as suggested for subpara-
graph (1)(A) above and additionally includes a
nonexclusive enumeration of some events which would
be recognized as being relevant to the operation of
the franchise relationship and could comprise a
reasonable basis for termination. In the absence of
such an enumeration, both the franchisor and franchisee
will be placed in the difficult position of having to
speculate as to the nature of specific events which
will qualify as bases for termination, and disputes
and litigation will be fostered.
· (2) Subsection 102 (2) (C) of the bill has been
redesignated as paragraph (2) because there is no
need for an advance notice requirement to apply
to a mutual termination situation. Also, the final
clause has been changed to express the method by
which a franchisee might repudiate a franchise
agreement. Since the franchisee will be advised of
his rights to repudiate in the summary statement to
be provided to him along with a copy of the termi-
nation agreement, no need exists for any separate
confirmation of the agreement in the event the
franchisee does not elect to repudiate.
103 (2) (C) (i) of the bill.
(1) (B) This provision is the same as subsection
The franchisor should be able to tailor his
marketing operations to respond to particular consumer
demands and, if necessary, be able to withdraw from
unprofitable markets or uneconomic operations in order
to improve his overall efficiency from time to time, as
has always been the practice in the past. To force a
franchisor to conduct uneconomic operations works to the
detriment not only of the franchisor but also the con-
sumer who is forced to bear the ultimate cost of the
franchisor's lack of efficiency. This provision would
allow a franchisor to nonrenew franchises (but not
terminate any such agreements during their term) when
incidental to a market withdrawal.
(1) (D) through (F) Subsection 103 (2) (C) (iii) of the
bill, relating to the expiration of the franchisor's
interest in premises included in a franchise, is too
narrow and does not recognize various circumstances
under which a franchisor should legitimately be able
to make a disposition or conversion of premises included
in a franchise, or materially modify such premises, when
changing economic conditions require the franchisor to
do so as a matter of sound business judgment.
subparagraphs (D) through (F) are proposed in substitution
restrictive.
for said subsection 103 (2) (C) (iii) which is unrealistically
The proviso at the end of subparagraph (F) will prevent a franchisor from failing to renew under such subparagraph for the sole purpose of operating franchise
premises for his own account.
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