Page 6


CIRCUMSTANTIAL EVIDENCE NOT ENOUGH Companies Crushing Texas Independents? smother competition pretty much to prove price-fixing collusion be punch,” not only tolerating price wars by so-called independents but actually becoming parties to the price wars to drive out the little operators. By some strange turn of fate, El Paso, a great crossroads of national and international traffic, never experienced a gasoline price war until a little more than three years ago. The easy going condition of the gasoline market in that area permitted the major oil companies to turn that market area into one of the most profitable existing in the nation. At the beginning of 1958 and for a long period before that time, the major oil company stations sold regular grade gasoline for 33 to 34 cents and premium grade at 36 cents a gallon. What little independent competition existed sold regular at 31 cents and premium at 33 and 34 cents. The retail stations supplied by the majors were selling at prices higher than any other point in Texas, and higher than any other point in the Southwest except in remote areas along such highways U.S. 68, U.S. 60, U.S. ’70 and U.S. 80. The El Paso Herald-Post moved into that situation in the summer of 1957 after the newspaper disovered that gasoline refined in El Paso by Standard Oil Co. of Texas and Texaco was being piped to Phoenix and sold there for less than it was being sold in El Paso. The newspaper hammered at the subject on through the fall of 1957, but apparently was ignored by the oil companies. Attorney General Will Wilson went to El Paso in December, 1957, looked the situation over, and announced he would order a public hearing. . The two-day public hearing was conducted at El Paso in January, 1958, by the late Assistant Attornew General Joe Wheeler, head of the Attorney General’s antitrust division. Top-ranking officials of the oil companies operating in El Paso were called for questioning, along with numerous small fry of the oil industry, and representatives of the public. While the attorney general’s office was studying the evidence obtained at the hearing, the first price wars in El Paso’s history began breaking out among the independents, prices dropping to 25 cents and even 20 cents in some instances for short periods. The stations supplied by the majors ignored these price flurries. Down, Then Up Then, on Sept. 22, 1958, the attorney general filed an anti-trust suit in 41st District Court at El Paso against Standard of Texas, Texaco, and El Paso Natural Gas Products Co., charging collusion to fix tank wagon gasoline prices in the El Paso market area, asking an injunction to prohibit the alleged practices, and asking penalties totaling more than $4 million against the three defendant companies. The Herald-Post pressed its campaign against the big oil companies in trip-hammer fashion. The small independent oil operators took advantage of the priceconscious condition of the public to conduct a series of price wars, sometimes dropping the price down to the 15 and 17-cent range. This kept o.. through the fall of 1958 and the spring of 1959, until Standard Oil of Texas cut gasoline prices on March 31 at its company-owned stations to 25.9 cents for regular and 30.9 cents for ethyl. The lowest price at any independent station on that date was 25.9 cents, the mark to which Standard cut. the independents, and Standard and its contract stations and other majors met the cuts, down to a point at which the independents could not take it. Then prices went up, of course. The price wars continued intermittently on into 1961. But things were happening. For one thing, the attorney general’s anti-trust suit was ruled out of court on special pleadings and motions that were granted. The oil company lawyers used as their main defense the opinion rendered by Attorney General Wilson himself when he was a member of the Texas Supreme Court and wrote the opinion in the noted anti-trust suit known as the Arkansas Fuel Case, involving 10 or more major oil companies. The attorney general filed an amended suit in the El Paso case, but that, too, went out on the same grounds as the original. Something besides the suit went out. It was the little independent oil distributor that was selling gasoline at 25.9 when Standard first recognized the price war by cutting to 25.9. This independent simply folded on financial trouble. Rope Tightened One of the remaining independent price battlers soon had to get a new buying connection, or pay increased prices to the major company that had been supplying. The big oil companies continued to join the price wars, with prices kept two cents above the general level of the independent price cutters. All the time the price rope was being tightened on the necks of the independents. Today, there is only one independent left, that is, a retailer whose supply does not come directly or indirectly from a major oil company. And the lone independent is compelled to depend in part on gasoline trucked to El Paso from the Hobbs area of New Mexico. Until recently prices steadied off at 30.9 cents for regular and 34.9 cents for premium at stations supplied by major oil companies. The so-called independents, most of them supplied by the big oil companies, were selling at 28.9 for regular and 30.9 for premium. Of late there has been some price warring, but market-wise forecasters predict the majors will soon be back where they were four years ago, 34 and 36 cents, on the next upward move, or maybe the second from now. Major control is coming full circle. Too Circumstantial? Will Wilson’s efforts to curb the major gas companies was truly ironic in that here for the first time he came face to face with the legal monster of his own making: the ruling in the Arkansas Fuel case. In that caseas in the later El Paso casethe state proved that the major oil company defendants met together to discuss industry problems, charged the same tank wagon prices for gasoline, increased their prices at precisely the same time and in the same amount, maintained identical crude oil prices, adopted a stndardization of gasoline quality rating so that they could exchange supplies and indeed did exchange supplies. Furthermore, the state pointed out that the ten major oil companies controlled 90 percent of the retail outlets and controlled 80 percent of the business of marketing gasoline, and controlled 64 percent of the refining business at will and set prices anywhere they chose. Further, the state showed that the 10 defendant companies charged the same prices regardless of their refinery locations, refusing “to exploit the natural competitive advantage resulting from the geographical location of their particular refineries.” The state suggested in its pleadings that putting all the circumstantial evidence together, it was only reasonable to suppose that there had in fact been collusion, in violation of the state anti-trust law. Not so, ruled then Supreme Court Justice Will Wilson \(the added up in fact to just “good business” in harmony with “the main current of our business system.” Anyway, he said, the evidence was all circumstantial. In this one ruling, Wilson was to destroy most of the trust-busting power of the attorney general’s anti-trust division as he learned to his sorrow when he took over the attorney general’s office. It is now virtually impossible leum engineer in Midland, Texas, is now selling fluorescent light bulbs. These people realize how bad it is. They’ve been through it the last eight years.” Complex Issues It is difficult, he says, to get the complex issues of oil and gas across to the average voter. “First of all, the story has never been told why we’re allowing only eight days production a month. The average person must understand that the independent producers in Texas own about half the oil, the majors the other half. “What happens is thisin other oil-producing states, the major companies own almost all the oil. What they’re doing is simple economics. They’re paying themselves $3 a barrel for their own oil and cutting us down here. What we shouldn’t forget is that the companies importing oil into Texas and other ports are the same companies that buy oil from independent oil producers in Texas. “But imported oil is only half our problem. The other half is the Railroad Commission. The only way we can accomplish anything in the way of change is to get to the core of it, and the core of it is the Railroad Commission. “The only reason we got a general sales tax, I believe, is because we couldn’t sell our oil, because of the loss of revenue from our oil taxes.” If he is elected, he says, “the first thing I’d do would be to enlist the aid of the legislature and the governor to provide the legal machinery for a complete and full-scale investigation of these Eastern major oil companies. “That,” he adds, “plus raising hell everyday of the month is the only way we’ll raise the allowables. “Do you know the Railroad tween the major oil companies in the price wars, as members of the anti-trust division admit. Writing in the Southwestern Law Journal in 1957 their judgment of the anti-trust law in Texas, former Governor Dan Moody and Charles B. Wallace, general counsel for Magnolia Petroleum Co., said: “The biggest Texas anti-trust case of all \(the judgment, not including costs or inwas to some extent based on circumstantial evidence. Federal anti-trust cases have also been predicated on circumstantial evidence. There does not appear to be any reason why circumstantial evidence should not suffice. Other cases, civil and criminal, can be proved by circumstances. But the circumstances should amount to greatly more than similar action or conscious parallelism.” The same year, writing in the Texas Law Review, Ford Hall and Alfred L. Seelye said the Arkansas Fuel Oil decision did not mean to imply that guilt could not be established by “circumstances surrounding the activities of the defendents. The case does emphasize the proposition that an illegal combination must be established as a matter of fact.” This tentative support of the pov.’t-a. of circumstantial evidence by these learned’ attorneys notwithstanding, the men in the antitrust division, having been burned once, take the position that only Commission hearings every month only last 13 minutes on an average? It’s all arranged in advance. The monthly meetings are only held to comply with state law. The real decisions are made behind closed doors.” ‘Business Concentration’ As for Ramsey, “from his record as state senator and lieutenant governor, I can’t remember one time he ever represented the people of this state. He’s always been tied to the specir 1 interests. The only way a man can win a campaign without actually campaigning is to have this specialinterest money behind him. Paid supporters is what I call ’em. That’s what they are.” Ramsey hasn’t begun his campaign, Wheatley notes, “but I think if he wants to win he’ll have to. “I can’t remember when the major oil companies didn’t get what they wanted in the state Senate, do you? And Ramsey was the father of our sales tax.” The oil lobby “is definitely the number one branch of the Third House, that’s for sure.” “I’m not against the major oil companies because they exist. I’m against them because of the steps they’ve taken in the last six’ or eight years that haven’t done anything to help Texas or the people of Texas. I’m talking about the taxpayer, the landowner, and the independent anything or anybody. “When business concentration becomes so consolidated in the hands of a few economic giants. then it’s time for a change. “I personally don’t consider this a liberal or a conservative issue. It hits everybody, liberals and conservatives. Because I’m against the Eastern majors I’ve been branded as a liberaland if you have to be that to get the oil allowables raised, I’m for it a hundred percent. At the same time, if I had to be a conservative to get documented, concrete, factual evidence of collusion will do the trick. Said Price: “These big companies are slick. We have visitorial powers by which we can inspect the books of any corporation, but unless we find a note saying, ‘I agreed today with Joe to cut the prices,’ well . . . and you don’t find that kind of note in the big companies’ files.” Said Trimble: “The visitorial powers apply only to corporations. Ninety percent of the service stations are ‘sole proprietor’ outfits. We come in and ask to see their books and they tell us to go to hell. We have never established a combination in a gas war, never.” He added, “We’ve got rid of some price wars by pinking them to death, by harrassing them.” But they have never got as far as a trial. There are, Trimble Said, 15 to 20 investigators from the attorney general’s office in the field now trying to rack up evidence that would help put out the price war conflagration. He said on a recent trip to Washington he learned that the U.S. Justice Department has several hundred men out in the field working on the same problem. But there is no indication that the major oil companies are frightened. In fact, they are perfecting new ways to keep chopping at the independents. B.S. \( Next week : Gulftane, Philtane, those allowables raised, I’d be a conservativeexcept it just don’t work out that way.” ‘Daddy Warbucks Wheatley’s campaign has taken some broad swathes \(one capitol newsman suggested that he come out next in favor of flu shots and the candidate himself is the first to admit he is trying to get an unknown name across. In press releases he has called General Edwin Walker “Daddy Warbucks” and complained that he could not work with Walker as governor, endorsed Red Berry’s referendum plan for horse-racing, \(he says he is neither for nor