Thursday, October 13, 2005

Gas price fixing suit filed

BY ANNE KRISHNAN : The Herald-Sun
akrishnan@heraldsun.com
Oct 10, 2005 : 10:02 pm ET

DURHAM -- When Mebane-based McLeod Oil Co. ordered Steven Grover to boost gasoline prices last month at his Durham station, Grover put his foot down -- and stepped right into the state's first gas price fixing lawsuit in the wake of Hurricanes Katrina and Rita.

Attorney General Roy Cooper has filed suit against McLeod, a subsidiary and a manager for allegedly conspiring to fix prices and trying to force at least one gas station -- Grover's A&P Mini Mart at 1709 Glenn School Road -- to raise its prices by 40 cents a gallon.

McLeod referred calls to its spokesman, who is out of town on vacation. An employee said the company's Mebane office had no comment.

Cooper said the suit is the first in a number of investigations his office is conducting into gas price fixing across the state. Price fixing, or collusion, is when businesses work together to artificially inflate prices.

"Gas prices are already high enough without suppliers trying to fix prices to make a fast buck," he said. "It's clear that at least some of the price increase has to do with market forces, but we're going to take action if people are raising prices illegally."

There's still a lot of work required for the McLeod case, which will go before a judge in a preliminary hearing this week, a Cooper spokesman said. As the trial proceeds, the Attorney General's Office must determine how much of the 40-cent price increase was based on market factors, whether other businesses influenced McLeod's desired retail price and how widespread the collusion was, Cooper said.

"We will be doing investigation during this case to determine whether this is business as usual," Cooper said. "If it is, that's no way to do business."

In the A&P Mini Mart's case, McLeod, the supplier, allegedly first padlocked the pumps to the tanks and later removed gas from the tanks when Grover, the station's owner, wouldn't comply with the demanded price increases.

McLeod owns A&P's pumps and tanks. But Grover says that until about two weeks ago, the distributor allowed him to set his retail price based on choices it supplied.

To let customers know he wasn't gouging them when prices rose after Katrina, the Granville County resident began posting the "margin sheet" he received from McLeod on his cash register so drivers could see how much he paid for the gas they were putting in their tanks.

But on Sept. 28, a McLeod representative told Grover the company no longer would supply him with documentation and removed his ability to set his own price. According to an affidavit Grover filed, the McLeod employee told him the distributor's competing gas stations were angry with A&P's low prices and said Grover needed to be "in the ballpark of the other prices."

"They said they'd give me verbal orders as to what I would be charged for gas and what I was going to raise the price to and I said, 'No, that's not going to happen,' " Grover said in an interview Monday.

He refused the distributor's demand to increase the price of a gallon of regular gas from $2.86 to $3.26. Nearby gas stations were selling regular gas for $3.09 or $3.19, Grover said.

That night, while he and his wife, Denise, were at church, McLeod padlocked his pumps to the tanks, making them unusable. Then last week, the company asked if the couple was ready to "get with the program and raise your prices," according to Grover's affidavit. When Denise Grover refused, McLeod returned and removed the gas from the tanks.

The request to "get with the program" and the McLeod employee's statement that other station owners were angry point to price fixing, Cooper said.

"I am going to find out what the program is and take action against anyone who's cheating consumers," he said.

In response to Cooper's suit, McLeod unlocked and refilled Grover's tanks on Saturday. He's selling regular gas for $2.81 a gallon -- two cents above the price he paid.

As word has spread about Grover's battle with the gas distributor, people have written letters and driven from across the state to congratulate him. Now posted on the cash register is a letter from a woman who wrote: "I greatly appreciate your moral stand against the greed of the oil companies," and enclosed a check for $25.

Grover says he just couldn't understand how the distributor could demand that he increase the retail price of gas he already had purchased. Cooper said he is investigating the legality of that practice.

McLeod also never had indicated that the margin sheet was confidential, Grover said.

"Business should be enacted aboveboard," he said. "Has nobody learned their lesson from Enron and the other big guys who have fallen? Let's do business but be honest businesspeople."

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