11

(2) outside the scope and purpose, or not in compli

ance with, the terms of this Act; or

(3) subsequent to the repeal of this Act.

SEPARABILITY

5 SEC. 8. If any provision of this Act, or the application 6 of such a provision to any person or circumstance, shall be 7 held invalid, the remainder of this Act, or the application of 8 such a provision to any other person or circumstance, shall 9 not be affected thereby.

Passed the Senate June 20 (legislative day, June 6),

1975.

Attest:

FRANCIS R. VALEO,

Secretary.

Mr. DINGELL. We are particularly pleased to have before us a distinguished friend and colleague, Senator Moss, who is the author and manager of similar legislation also pending before this committee on the same subject, S. 323.

Senator, we are delighted you are with us. If you will simply identify yourself for the purposes of the record and call any associates to sit with you at the witness table, we will be delighted to receive your testimony.

STATEMENT OF HON. FRANK E. MOSS, A U.S. SENATOR FROM THE STATE OF UTAH, ACCOMPANIED BY EDWARD A. MERLIS

Senator Moss. Thank you, Mr. Chairman.

I am Frank E. Moss, United States Senator from Utah.

I would like to have Mr. Ed Merlis who serves on the Commerce Committee staff join me at the table.

Mr. DINGELL. We are most pleased you are with us.

Senator Moss. Mr. Chairman, before I proceed with my prepared statement I want to express my thanks to you for your consideration of this legislation. I would like to point out that my testimony will not recite the chapter and verse horror stories of offenses which have been perpetrated on lessee dealers or franchisees as they would be known under the legislation before you.

For 13 years numerous hearings have been held before the many committees of Congress or the plight of these small businessmen. The Senate has acted on four occasions and the House has passed such a bill once. I do not think we need to go over the need for the legislation but I do think we should concern ourselves with the form and substance of it.

It is a pleasure to appear before you today to testify on H.R. 13000, legislation which you and other Members of the House of Representatives have introduced to (1) prevent against the pernicious and anticompetitive practices of franchise intimidation in the retail petroleum marketing industry, (2) prevent against continued vertical integration by overreaching petroleum refiners and (3) provide for disclosure of octane in order that the consuming public might better make use of fuels available on the market.

Before I discuss the bill, Mr. Chairman, I would like to pay some tribute to your leadership of this subcommittee and the leadership which you have shown in the area of energy, small business and consumer affairs. Interestingly, H.R. 13000 combines each of those areas in a sound program to foster the public interest, preserve the viability of small business and assist consumers in the purchase of gasoline and related products.

Having sponsored and shepherded through the Senate on four previous occasions similar legislation, I am indeed gratified to see the positive steps forward which are being taken here in your subcommittee.

As you are aware, the Senate has passed in this Congress S. 323, legislation which parallels titles I and II of H.R. 13000. Additionally, the Committee on Commerce has conducted hearings on S. 1508, legislation which parallels title III of the H.R. 13000.

I think I could say with some confidence that were H.R. 13000 to have been introduced in the Senate, and considered by the Committee. on Commerce, I am sure it would have been reported virtually intact. The bill is well organized, well designed, and well put together. My heartiest congratulations to you, Mr. Chairman, and your colleagues for development of this bill.

There are several issues which I would like to bring to your attention which raise concerns with relation to this bill and S. 323. I would assume that if this legislation is successfully developed it would be amenable to the Senate without much change, and so it might be best for us to concentrate on those areas which do present discrepancies from the Senate proposal.

The need for the legislation is evident. The elimination of thousands of service stations and the wholesale conversion of service stations to company operated gas and go facilities may have a shortterm benefit for the consumer, but I hate to think of the result a few years down the road when there are no independent service station operators and the public is forced to go to retail establishments which operate in a monopoly environment, free from the perfecting fires of true competition. The service station franchisees need and the public needs the kind of aggressive competition which would ensue from enactment of this legislation without the uncertainty which exists. due to the whims of franchisors.

My first concern is that title I only aplies to "motor fuels." These are defined as gasoline and diesel fuel. S. 323, on the other hand, applies to motor fuels and distillates used as heating fuel and kerosene. I am concerned that by eliminating the heating fuel component of this legislation a severe hardship may be worked on the public. Let us look at this situation which covered in S. 323 but would not be covered in H.R. 13000.

A jobber or "distributor" as that term is defined in S. 323 supplies gasoline and diesel fuel to retail establishments and retails and wholesales home heating fuels to both ultimate consumers and other commercial establishments. Under S. 323 the jobber would have a measure of protection from arbitrary termination and cancellation and failure to renew his "franchise" but under H.R. 13000 he could be terminated from his franchise on heating oil and kerosene. I strongly doubt the ability of a distributor to continue in business if he is terminated from such a substantial portion of his business.

I have been told that jobbers don't see a need for the protection which this legislation affords them. Well, they may not see it but I do not think Congress should be in the position of solving half of the problem. There is no harm done to a jobber by incorporating within this bill provisions from which benefits would flow if the need arises.

Sections 102, 103, 104 and 105 specify the rights and privileges, and notifications required in instances of termination, cancellation or failure to renew. These are well drafted and fulfill the expectations which we had in section 4 of S. 323. By being more explicit, some of the controversies which have surrounded S. 323 do not exist with the language which you have put in sections 102, 103, 104 and 105.

My next concern, however, has to do with section 107 concerning the relationship of this act to existing franchises in existence on the date of enactment. I have great concern about this provision. Doesn't this provision serve as a license to engage in wholesale slaughter of any franchise in existence on the date of enactment? And what about the open-ended franchise, those which do not have a set termination date? Any franchise agreement which might have been in effect. or started even 5 to 10 years ago and provide for a 90-day notice prior to termination could be terminated under the language of Section 107.

If I were a franchisor and wanted to avoid the responsibilities which this act puts on me, I would, at the next renewal, convert all of my franchises to open-ended franchises with a 90-day notice provision. There would then be no impediment to my terminating franchises at any time after the date of enactment. I believe that this is a serious concern which the committee should address.

My next concern is in title II which I find to be more extensive than section 5 of S. 323. The ratio which we developed in S. 323 for limiting increased refiner operated retail establishments has been transferred into a limitation on volume of product rather than on numbers of stations. I completely support this concept and think it is worthwhile but I am concerned how it could be monitored. My basic concern with the section, however, is that the limitation is only for 2 years. S. 323 did not have any time limitation, the Senate being cognizant that at any time that available information developed or other legislation passed, an amendment to the act would be in order and appropriate changes could be made.

While the provision is often called a moratorium I do not believe that a moratorium need necessarily have a time limitation built in. So I would recommend to this committee that the 2-year period in section 202 be eliminated and that the provisions of title II be in effect until Congress acts affirmatively to change them.

As a minimum, the committee might consider the moratorium to run until the Federal Trade Commission has issued rules under section 5 of that act as a result of the study which it conducts under section 204 of H.R. 13000. This study, which will be very important for our future analysis of the petroleum industry, may lead to the promulgation of trade regulation rules which will take several years to complete beyond the 2-year period envisioned in section 202. As a result, I would suggest that as a minimum the committee amend section 202 either by deleting in its entirety the reference to 2 years or alternatively by having the provisions of section 202 expire upon the conclusion of all judicial review which arises out of any trade regulation rule promulgated as a result of the study conducted under section 204.

I have one further comment about this section which I would like to pose. The definition of "refiner" in section 201 for purposes of title II applies to "any person distributing gasoline in the United States who (other than by means of a franchise) controls, is controlled by, or is under common control with, a refiner." This would seem to present a great problem to the small refiner such as Clark, Little America, Total Leonard or any of the many small refiners

in the United States. The provision is drawn so broadly that all refiners are limited in their direct sales after enactment. I would think that the objective of this provision, as was the case in the Senate, is to limit the increased market share for the larger members of the petroleum industry.

Thus, I would suggest that the committee make the limitation applicable to a refiner who is not a small refiner or independent refiner as those terms are defined in the Emergency Petroleum Allocation Act. In S. 323 we used a similar definition and we called such an individual a "major market shareholder." I think that is the objective of the legislation and would regret to see this sound principle extended so broadly that a relatively minor refinery which did increase its capacity was precluded from company operated distribution because of the provisions of title II of this bill.

Let me conclude by saying that you, Mr. Chairman, have put together a sound bill, one which I support. I hope to meet with you at the conference table. Please do not interpret my comments as any fault finding—they are merely designed to make this fine bill even better in view of the bill that has already been passed.

I will be pleased to answer any questions which you may have. I would point out though that it is almost 1 year since we considered S. 323 over on the Senate side and I might be a bit rusty on it. Thank you.

Mr. SHARP [presiding]. The Chair recognizes the gentleman from New York, Mr. Murphy.

Mr. MURPHY. Thank you, Mr. Chairman.

Senator, it is a pleasure to have you here, and as in the past we have always been able to work with you very cooperatively. We thank you for the understanding that you have had toward New York on many of the other issues, energy not excluded, in the past. Thank you very much.

Senator Moss. Thank you, Congressman Murphy.

Mr. SHARP. Senator, we appreciate your testimony on this issue and we hope to be learning all about it ourselves here in the next few days.

Thank you very much for being a witness.

Senator Moss. Thank you. I appreciate the opportunity.

Mr. SHARP. At this point without objection, we will insert in the record as though read, a statement from a colleague, Congressman John J. Rhodes of Arizona.

STATEMENT OF HON. JOHN J. RHODES, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARIZONA

Mr. RHODES. On November 19, 1975, I introduced the Gasoline Dealers Protection Act, H.R. 10840, and urged that hearings be scheduled on this needed legislation as soon as possible. Since hearings are in process on similar legislation, H.R. 13000, I now restate my interest in this subject.

My bill, which is one of several bills popularly designated as "dealers' day in court" legislation, is aimed at clarifying relationships between franchised fuel dealers and the major oil companies.

79-674 O-77-6