13 June 2007
By John Donovan
Shell dealers in the USA have found it necessary to set up a gripe website – www.gotshelled.com – to exchange information and promote their fight against the predatory practices of the oil giant Shell.
This is all seems very reminiscent of Shell’s ruthless exploitation of Shell dealers in the UK several years ago. After being embroiled in bouts of litigation with Shell UK Limited, we set up The Shell Corporate Consience Pressure Group.
1400 Shell UK retailers participated in our “business ethic” surveys about Shell. We published the results in successive monthly whole page notices in the forecourt trade press. All responses were opened under the supervision of an independent solicitor who provided an Affidavit verifying the results, which were devastatingly bad for Shell.
Shell never did take up our challenge to commission and publish the results of independent research, using precisely the same questions and offering respondents GUARANTEED anonymity.
We also received many letters from Shell stations complaining bitterly about the business practices of Shell. Here is a selection of quotes from some of the letters: –
“Extremely bad company”
“I believe the current regime is totally immoral”
“We have serious concerns about Shell’s ethical conduct”.
“The fickle nature and lack of honour within our negotiations were a shock to ourselves coming from a large company… We would hope this letter may help you and serve as a warning to others contemplating any form of activity with this company”.
“You are not alone in being steamrollered by this company”.
Shell is up to the same tricks in the USA…
The following letter, which is on a link from the www.gotshelled.com website, also speaks for itself.
California Service Station
& Automotive Repair Association
Letter from CSSARA’s Executive Director
March 29, 2006
Office of the President
Shell Oil Products
P.O. box 674433
Houston, TX 77267
Dear Mr. Hoffmeister:
The California Service Station and Automotive Repair Association is a thirty-three year old trade association representing petroleum retailers throughout the State of California. Shell policy regarding zone pricing and multiple site operations (MSO) is causing the economic extinction of its franchised dealer network. To be perfectly clear, I am talking about those Shell dealers who have a lease under the federal Petroleum Marketing Practices Act (PMPA).
Shell’s marketing practices of controlling both retail prices and wholesale prices at the MSO stations and the PMPA franchise stations has caused the demise of hundreds of California PMPA Shell franchised dealers. This marketing ploy is not only wrong, it is illegal, as California Business and Professions Code 21200 specifically prohibits this type of predatory pricing.
Today, March 29, 2006, Shell’s dealer tank wagon price (DTW) in Fairfield, CA, excluding tax and fees, is $1.9415 for 87 Grade Regular. In San Francisco it is $2.1205. In Menlo Park it is $2.2595. In San Mateo it is $2.0655. From highest to lowest that differential equates to .3180 cents per gallon. This price zone differential, to say the least, is unconscionable to both retailers and to the consumers they serve.
Shell’s MSO operations continue to sell at retail at prices far below what a Shell PMPA franchised dealer needs in order to run a profitable operation.
For example, today in San Francisco 87 Grade Regular DTW Shell price is $2.1205 plus .3799 in taxes and fees, plus sales tax of .212. The MSO station located at 19th Ave and Lincoln in San Francisco is retailing its 87 grade Regular at $2.709 per gallon, which, if matched by a Shell PMPA franchised dealer this would create a loss of < .0034> profit per gallon.. The breakdown is as follows:
Taxes and fees
Sales tax at MSO retail price
Cost per gallon
Less retail sales price at MSO
PMPA franchised Shell dealer, if matching MSO at retail price would show a < .0034> loss per gallon
< .0034> per gallon
Credit card fees on Visa/MasterCard alone are .065 per gallon. This < .0034> margin on 87 Grade Regular gasoline is below-cost selling, which is also illegal in California. Since MSO operators do not pay rent to Shell, as a PMPA franchisee dealer does, this only escalates the below cost issue. Shell is effectively and maliciously promulgating the economic demise of its PMPA franchisees. In today’s market a dealer needs a minimum margin of .15 cents to break even.
I have been asked by your franchisees who are members of the California Service Station and Automotive Repair Association (CSSARA) to request that Shell stop this predatory practice now and not increase the MSO’s pricing, but instead lower zone and DTW pricing so as to allow Shell’s PMPA dealers to be competitive in the marketplace so that they can survive. After all, every business contract has a common thread of implied covenant of good faith and fair dealing.
Your customers and marketers are anxiously awaiting your reply.
cc: Members of the California State Legislature
Bill Lockyer, California Attorney General
Deborah Platt Majoras, Chair FTC
Thomas Barnett, U.S. DOJ – Antitrust Division
David Walker, U.S. GAO
Barbara Boxer, U.S. Senator
Dianne Feinstein, U.S. Senator
Arlen Spector, U.S. Senator
Joseph Alioto, Attorney
Kevin Lally, Attorney
Richard Perez, Attorney
Kurt Melchior, Attorney
Peter Gunst, Attorney
Thomas Bleau, Attorney
Gideon Kracov, Attorney
Chris Walker, Advocate