HOUSE BILL REPORT
HB 437
BYRepresentatives Belcher, B. Williams, Winsley, Crane, Allen, Patrick, K. Wilson, Braddock, Rayburn, Leonard, Dellwo and Cole
Prohibiting motor fuel producers or refiners from operating a retail outlet and allowing retail dealers to sell more than one brand of fuel.
House Committe on Trade & Economic Development
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. (10)
Signed by Representatives Vekich, Chair; Wineberry, Vice Chair; Belcher, Braddock, Cantwell, Doty, Grant, Holm, Rasmussen and B. Williams.
Minority Report: Do not pass. (8)
Signed by Representatives Amondson, Beck, Hargrove, Kremen, McMullen, Moyer, Schoon and J. Williams.
House Staff:Stephen Hodes (786-7092)
AS REPORTED BY COMMITTEE ON TRADE & ECONOMIC DEVELOPMENT
MARCH 2, 1987
BACKGROUND:
The bulk of the motor fuel retailers in the state are managed by lessee-dealers. Such dealers lease their stations from their refiner-suppliers, but operate their stations independently, retaining the profits from the station. Most of these dealers purchase the motor fuel they retail directly from the same refiner-supplier from whom the station is leased. The supplier may require that the dealer adhere to contracturally established prerogatives in managing the business.
The state's Gasoline Dealer Bill of Rights Act (RCW 19.120), passed by the Legislature in 1986, provided dealers and refiners with a set of ground-rules to govern their relationships. The most important provision of the legislation was the definition it contains of unfair business practices in this field. These included:
o requirements for dealers to purchase or lease refiner-supplier goods or service unless such requirements are shown to be reasonably necessary on business grounds, other than in the case of initial inventories;
o discrimination by refiners between retailers in charges offered for goods and services, equipment, or other business dealing, unless the refiner-supplier proves that such discrimination is reasonable, is based on on franchises granted at different times, and is not arbitrary;
o charges by refiners of more than a fair and reasonable price for products or services; or
o requiring retailers to agree to leases or waivers which would relieve any party for liability under the legislation.
The legislation also permits retailers to take legal action against refiner-suppliers selling a franchise in violation of the provisions of the act.
The legislation also directed the Office of the Attorney General to conduct a study to determine whether motor fuel refiner-suppliers are injuring competition from motor fuel retailers by charging franchise dealers higher prices for fuel than company-owned or operated retailers. The Attorney General's office has not yet completed that report, primarily as a result of difficulties in obtaining reliable and comparable data while ensuring the confidentiality of privileged business information.
A preliminary report will be available shortly, which describes the basis and structure of the study, and, in general terms, describes the results of the first phase of the study. The report is intended to answer two questions. They are: whether major oil companies injured competition from lessee-dealers by charging dealers higher prices for gasoline than the retail gasoline prices at the major firms' company-operated stations; and, whether major oil companies injured competition from lessee-dealers by establishing a pricing structure between retail and wholesale prices such that the dealers margins on gasoline sales have been insufficient to cover their costs of doing business.
SUMMARY:
SUBSTITUTE BILL: Large integrated refiners are prohibited from operating motor fuel service stations in the state except under specified circumstances. Large integrated refiners are permitted to continue to operate service stations they were operating as of the effective date of the legislation. Integrated refiners are permitted to own all or part of the assets of a service station if they do not engage in the business of selling fuel at the station through employees, commissioned agents, persons acting on behalf of the refiner or under their supervision, or under a contract which provides substantial or effective control to the refiner. Large integrated refiners are defined as individuals, partnerships, or corporations who in the most recent calendar year produced more than 30 percent of the crude oil supplied to their refinery and whose total refinery capacity exceeds 175,000 barrels a day.
The attorney general is permitted to undertake civil action for relief if the provisions of the legislation are violated. Such actions are to take place in the superior court of the county in which the defendant is located, resides or is doing business. The court is given jurisdiction to restrain the violation, to require compliance, and to impose penalties. Affected parties are provided with the option of undertaking civil action. If the plaintiff prevails in such cases, the plaintiff shall be awarded attorney and expert witness fees, except in cases of nominal damage awards.
The attorney general is directed to prescribe regulations for the collection of information necessary to determine compliance within 180 days of the effective date of the legislation.
SUBSTITUTE BILL COMPARED TO ORIGINAL: Provisions prohibiting motor fuel producers or refiners from requiring retail dealers to purchase more than seventy percent of monthly retail sales of fuel from them have been removed as have prohibitions of producers or refiners from contracting or agreeing with other producers or refiners to violate that prohibition. Requirements of dealers to provide notice when fuel at a dispenser is not refined by the producer or dealer whose trademark or trade name is displayed by the dealer have also been removed.
Fiscal Note: Not Requested.
House Committee ‑ Testified For: Tim Hamilton, AUTO; James Hiibel, Green River Chevron.
House Committee - Testified Against: J.N. Kowal, ARCO.
House Committee - Testimony For: Relationship between major refiners and lessee-operators is out of balance. There is a need for legislation to assist help create a more equal relationship between them.
House Committee - Testimony Against: The marketplace is the cause of the changes in the retail motor fuel distribution industry. Changes in law of the type proposed are likely to have a negative impact on oil company investment decisions.