Mr. BLUM. Mr. Chairman, if I might, there is one sentence in my statement which is a quote from a Standard Oil case, which reinforces what Mr. Columbus said. The opinion was trying to reconcile Robinson-Patman with antitrust philosophy and says at page 250:

There is nothing to show a congressional purpose in such a situation. To compel a seller to choose only between ruinously cutting its prices to all customers to meet the price offered to one, or refusing to meet the competition and ruinously raising its prices to all its remaining customers to cover increased unit cost.

And that is exactly the problem posed by trying to legislate price rigidity in wholesale gasoline markets. It is a terribly complex, difficult problem.

Mr. BEDELL. Mr. Hiler?

Mr. HILER. Mr. Columbus, in your prepared statement you have some charts that have to do with Maryland, Atlanta, cost compari

sons.

Mr. COLUMBUS. Yes, sir.

Mr. HILER. Could you explain those?

Mr. COLUMBUS. I will sure try and my ability will be limited, but to the extent it is inadequate I will certainly do what I can to provide this committee with a complete explanation, for the record, as I can. It is my understanding that those surveys were prepared by the Cities Service Co., Citco. I do not know the precise methodology employed. It is my understanding that Citco did its own survey of outlets in the areas in which it competes and in which it used to compete, and established that information on that basis. I would certainly be happy-the reason we attached this testimony is that we really did try to give you something substantial that we thought was more definitive than just mom and apple pie. I will be very happy to request from Cities an explanation of that, and see if I can't get somebody from Cities who is involved in the preparation to come in and talk to you all about how that is done.

I have been in the room this afternoon and I understand that there is a significant dispute about what the numbers show. Obviously, I was not aware of that before we attached it to this testimony.

Mr. HILER. I would appreciate that. You know, there is the old saying, something about "figures don't lie but liars figure." This is now about the third or fourth different set of figures we have for supposedly the same marketplace and that is why I was curious. Mr. COLUMBUS. Congressman, my bet is that if you had 12 more sets of figures they would be 12 different sets.

Mr. HILER. I am sure they would be. I have no further questions. Mr. BEDELL. Mr. Bereuter?

Mr. BEREUTER. Thank you, Mr. Chairman. Mr. Columbus, is it true that some of your larger members are owned by refiners themselves?

Mr. COLUMBUS. Out of the 265 members of SIGMA my understanding is that under 25 have any affiliation with a refiner. And Congressman, let me point out to you what I understand the affiliation consist of. It is my understanding that some members of SIGMA are in fact subsidiaries, private brand subsidiaries and an example of that is Speedway Petroleum which is, I believe, a wholly owned subsidiary. I do not want to say the wrong thing here, but a subsidiary of Marathon Corp. There are probably three

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or four members of SIGMA in which a refiner owns some equity interest of up to 50 percent. In that instance those companies are not controlled by the refiners but by stock agreement and management contracts are in fact controlled by the private guys.

There are some members of SIGMA who in fact have obtained refining capacity, for example, USA petroleum off the west coast is one of the largest independent marketers of petroleum in the United States. They have a small refinery in California. To the best of my knowledge all SIGMA members who have refineries purchase and sell much more gasoline than they are capable of producing. It is simply a supply option.

Mr. BEREUTER. Mr. Blum, according to information I have, you told this committee in its consideration of similar legislation last Congress, that the smallest member of the group that you represent operated more than 100 gasoline stations, is that correct?

Mr. BLUM. That is changed a bit. I believe we have a member now that operates 60; but by and large these are larger chain brand operators.

Mr. BEREUTER. How big would the largest be?

Mr. BLUM. The largest number is, I believe, Thrifty Oil in Downey, Calif., and that one sells in excess of 1 billion gallons a year. Thrifty, I should add, is a company which is privately owned and not affiliated with any refiner or major oil company. It was built by a man who immigrated to the United States in 1962 and started with nothing as a branded dealer.

Mr. BEREUTER. Are some of the organizations that you represent related to refineries by ownership?

Mr. BLUM. There are two companies which have small refineries neither of which supply more than 5 percent of their retail oper

ation.

Mr. BEREUTER. Mr. Blum, according to your testimony you have got certain substantial concerns about the provisions of the proposed act which relate to the right of first refusal.

Mr. BLUM. That is correct.

Mr. BEREUTER. Could you give me a few more details about your rationale?

Mr. BLUM. The central issue is this. As long as the dealer has an interest in continuing in business on the property, the right of first refusal makes sense. The problem comes when the dealer really isn't able or interested in continuing his private entity and a deal is worked out. For example, a major company decides to withdraw from a market and they decide to put on the block 50, 100-in fact Texaco is doing it in the Midwest-and a number of other entities come in and says, well we want to look at those properties? There may be a block of 5, 10, 15, or 20 stations. A deal is then negotiated. Another entity, another competing private brander or somone else in the market goes to one of the 20 dealers or 2 of them and says, here is $500, exercise your option. We will front you the money to close. And then they take that piece out of the deal, breaking it.

Now, we do not think that that is your intention. We think your interest, if you have one in this, is probably protecting the dealers right to continue in business. What's happened here is that you suddenly created an extra party to a negotiation for sale of the

station who may or may not have an on-going interest in the entity. And if you add SBA financing so that he can close with the SBA financing, and then walk out, you have created a business negotiation situation which is just a very, very messy tangle. And what isn't clear is whether or not you give him the right of first refusal at a price, whether you negotiate a price with him, whether you negotiate a package price with some other guy and then he rides in on the price that was negotiated, it is a horribly complicated mess. It is not as simple as it appears.

We have had now three different members who frankly seeing majors saying we are not interested in marketing, we want to withdraw from this or that area, go in to start the bidding process only to discover themselves in this hopeless tangle of right of first refusal, and just what are they bidding for?

And in two cases real estate speculators and competitors have moved in on the deal they were trying to make.

Mr. BEREUTER. Are there any other very different troublesome scenarios that affect that?

Mr. BLUM. That is the principal trouble we see. We have even seen a possibility that a major company could come in if they owned the property the jobber was then trying to buy out and come back and take that property back but basically the deal that you try to create now for selling a station suddenly involves another party, and it is all right to involve that party if he intends to be part of that station and he wants to stay in business. But please do not involve him if the only interest is some total outsider who is offering him a few bucks.

Mr. BEREUTER. All right. Thank you for your views on that. I think that is important.

Mr. BEDELL. I think that is a good contribution. I hope the committee understands that no company is required to sell its station. It is only if they do decide to sell it that then they would have the right of refusal and

Mr. BLUM. Of course, the bill will require

Mr. BEDELL. Yes, in your point if he has a sincere interest in operating the station then it makes sense but we ought to protect ourselves on that.

Mr. BLUM. Be very careful not to add another party to the transaction.

Mr. BEDELL. I think that is a legitimate suggestion and I think it makes good sense and I think it is very helpful, frankly.

Are there any further questions?

[No response.]

Mr. BEDELL. If not, the committee adjourns at 6:30.

[Whereupon at 6:30 p.m. the subcommittee adjourned, to reconvene subject to call of the Chair.]