Two weeks later Bruce Bergey, American representative, came to the station and took inventory. This was the inventory on tires, bat. teries, tubes, and oil.

The reason for the inventory was to get a figure of what we would have to pay in order to get on a lease operation. At the time we spent several hours on taking this inventory, and when we reached a final decision as to where everything was, he then pulls out the new commission operator plan form, and we told him again we didn't want any part of it. Bruce said that if we went on a regular lease basis, instead of COP we could forget about the third bay and all other cooperation wanted from the company. We then told him that we would not accept the plan and that we would close first. He said he was sorry we felt that way.

A notice of cancellation was written to American as provided by the terms of our agreement with them. Upon receipt of our letter company representatives came back to our station and wanted to know if we would stay on under the new commission-operated plan. While we were waiting to see what action our letter might bring, Bob and I decided maybe we acted too hastily. We asked ourselves, "Why throw away 3 years of hard work and start all over again to develop patronage at the Gulf station or somewhere else?" Later, Tom Bower, district sales manager, called me on the phone and wanted Bob and myself to come to the American Oil Co. office for the purpose of letting Mr. Snyder, regional accounting manager, explain the COP program to us. Gentlemen, I could keep on and on with these details, but guess that what you are interested in is our final decision. We still have the American station on the COP plan and we do have the Gulf on the regular lease plan.

In saying all that I have said I was leading to these basic freedoms which I believe this Commission should consider:

(a) The freedom from domination by a supplier whether the station is operated on a regular lease or on consignment or on a commission. Complete domination must be limited to the full and complete employer-employee relationship.

(b) Service station operators under a consignment or commission agreement must recover and maintain the basic control over the elements of their operation which are relative to the end results of the functions of a free enterprise system.

I came here today to tell you that the commission operator of a service station is forced to accept further encroachments upon his business rights, if he wishes to remain in business, that the commission operator cannot control his margin and that he must follow the dictates of his supplier or get out and let someone who will. My company fixes the retail prices, it fixes my commission rates, it fixes my hours of operation, it fixes my take-home pay in return for a 12- to 14-hour-aday workload-yet I am not a company employee nor do I enjoy the benefits of a guarantee that I will make anything from my station operation after I have carried out the demands of my supplier.

I have suffered a loss during my operation because American Oil refused to permit me to increase my gasoline prices and my motor oil prices. The prices dictated to me by American have consistently been lower than some of the other dealers with whom I compete for the same customers and I firmly believe that I could have sold my products at the same higher price as my fellow dealers sold theirs.

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Had I been in position to post the same price my competitors post as retail price on gasoline and motor oil I would have realized several dollars more profit-profit which we badly need.

Control by American Oil Co. of the service station I operate under a "commission operator plan" and formerly under a "commission operated service station" uses me as a tool and in so doing takes away my rights to be free as an independent businessman. Whether a person works on regular lease basis, a consignment, or on a commission basis in any industry, he is, I believe, entitled to the right to operate to his best profitable advantage. This a commission operator as I am cannot do.

You said in your statement that the company threatened to take away the third bay and all other cooperation wanted from the company. Now, what would be the cooperation you would want from the company?

Mr. ROWLAND. The cooperation we wanted from the company was to the effect that our business had grown, it had reached its potential. We had run out of room to work. We had been trying to get this third bay. And the cooperation that we wanted was that they would put it in and let us go on a lease basis.

Commissioner JONES. I assumed here in the context of your statement that this was a threat to you in effect. They were saying if you went on a regular lease basis you would not get the cooperation you wanted.

Mr. ROWLAND. That is what he said.

Commissioner JONES. Are you talking about cooperation in putting in a third bay, or were there other things?

Mr. ROWLAND. When he said cooperation, we more or less thought what he meant was the third bay, which he did say, third bay. I suppose cooperation from the company could cover a wide margin. Commissioner JONES. Well, I assumed that this was a meaningful

threat.

Mr. ROWLAND. Yes, ma'am.

Commissioner REILLY. Does American know you are operating a Gulf station and vice versa?

Mr. ROWLAND. Yes, sir; they do.

Commissioner REILLY. Has anything ever been said to you about

that?

Mr. ROWLAND. Not any threats. As a matter of fact, when we told them that we were getting out, and told them that we had leased the Gulf station across the street, when we got this station from the Gulf Oil Corp., it was company operated. And we told them we had already leased that station, due to the fact that we did not think we could work under this new COP plan-things just seemed to change. Commissioner REILLY. For the better?

Mr. ROWLAND. A little better; yes, sir. And at the same time, like I said here before, after 3 years of 16, 18 hours a day, you just don't throw it away right away.

Commissioner JONES. Do you keep a spread on the gasoline prices between the Gulf and the American?

Mr. ROWLAND. Of course, Gulf has Gulftane, which sells for a penny less than your major brands.

Commissioner JONES. How about the premium?

Mr. ROWLAND. Premium sells for a penny less. We keep the same prices that they suggest.

Commissioner JONES. Gulf and American.

Mr. ROWLAND. Yes. This is another thing that we think that we should be able to do, is post the prices as we see fit.

Commissioner MACINTYRE. You couldn't have the Gulf station after May 1, last Friday?

Mr. ROWLAND. Yes, sir; still got it. I would like to sell it to

someone.

Chairman DIXON. You consider yourself an employee of American

Oil?

Mr. ROWLAND. No; I do not. They say in certain terms that I am an employee, but yet, on the other hand, I'm not-I cannot participate in any of the benefits that they have.

Chairman DIXON. What benefits-like hospitalization and retirement?

Mr. ROWLAND. Hospitalization, retirement.

Commissioner MACINTYRE. You pay social security?
Mr. ROWLAND. Yes, sir.

Commissioner MACINTYRE. You pay it directly?

Mr. ROWLAND. Yes, sir.

Commissioner MACINTYRE. It is not deducted?

Mr. ROWLAND. With this new COP program, the social security, and so forth, is deducted from my commissions.

Commissioner MACINTYRE. That is under the American?
Mr. ROWLAND. Right.

Commissioner MACINTYRE. But not Gulf?

Mr. ROWLAND. No. This is an entirely different operation.
Commissioner JONES. Are there price wars in your territory?

Mr. ROWLAND. We do have them. It has been a while since we have had one.

Commissioner JONES. Did you receive price supports from American during that period?

Mr. ROWLAND. Not on this commission operated plan.

Commissioner JONES. I see, you don't need it.

Mr. ROWLAND. No. The lowest my percentage rate can go is 212 cents a gallon profit.

Commissioner REILLY. Does Gulf influence your retail prices at your other station?

Mr. ROWLAND. No, sir.

Chairman DIXON. How many commission operated stations are there down there in that area that you know about?

Mr. ROWLAND. In the Atlanta district?

Chairman DIXON. Yes.

Mr. ROWLAND. I would say roughly 20, 25.

Chairman DIXON. I was trying to find that out awhile ago, and I ran-I think I got a percentage answer.

In Atlanta, how many of them are not on this consignment?

Mr. ROWLAND. I cannot answer that.

I don't know for sure there is 25, but I would say possibly that.

Chairman DIXON. You being a longtime dealer-suppose you were not on a consignment basis, but you were the next station down the road from the station that was on a consignment basis. The company would fix the price there, would it not?

Mr. ROWLAND. Right.

Chairman DIXON. What would happen to you down there if you tried to get more for it?

Mr. ROWLAND. Well, I can quote you an example maybe a little

better.

There is an American station a block from me that is lease operated. And I know for a fact that he is a penny higher than I am.

Chairman DIXON. He is a penny higher?

Mr. ROWLAND. But I don't think that he will go any higher for fear he will lose some of his customers to me.

Chairman DIXON. Can he be a penny higher than you? How is he doing at a penny higher than you are? Does he give better service than you give?

Mr. ROWLAND. I would like to think that he doesn't.

Chairman DIXON. I have no more questions.

Thank you, sir.

Mr. ROWLAND. Thank you, sir.

Mr. Snow. Mr. Chairman, we have a witness, Mr. James V. Cresente, from Cleveland, who unfortunately will not be able to wait over and has an airplane reservation. He wishes to say a couple of words and put his statement in the record.

Chairman DIXON. I am sorry we are so late. We will receive your statement and put it in the record just like you read it in full, and you can summarize it very quickly, that will be fine.

We will print your statement just as if you read it in full. If you want to save time, just speak extemporaneously to it, you may do that.

TESTIMONY OF JAMES V. CRESENTE, EXECUTIVE DIRECTOR, THE NORTHERN OHIO PETROLEUM RETAILERS ASSOCIATION, CLEVELAND, OHIO

Mr. CRESENTE. I believe trade regulations of some sort are necessary. I think you have heard the testimony from our counsel and our people, and all the regressive practices that have occurred in the last 5 or 10 years in our business. I feel something should be done. This has been the extent of my presentation which I was going to put before you today, and I hope that all of you will keep this in mind at the end of these hearings.

My name is James V. Cresente and I reside in Garfield Heights, Ohio. I have been a service station operator for 21 years of my business life.

I have served as president of the Northern Ohio Petroleum Retailers Association for 8 years and have been executive director for 6 years. I am also a member of the board of directors of both Ohio Gasoline Retailers Association, and the National Congress of Petroleum Retailers representing the service station operators across the Nation.

I believe that this experience should qualify me as a witness before this committee on problems affecting service station operators. Fur

thermore, I have no financial interest in any station, direct or indirect, and can be purely objective in my observations.

This commission has heard much testimony and has investigated many complaints from dealers concerning marketing practices involving supplying companies. You are familiar with their history and the problems they have created for the dealers. I sincerely believe that many of the problems, if not all of them, stem from the oil companies' stubborn insistence in disregarding the simple rules of sensible marketing. As a result, nearly every segment, except that of the integrated giant, is in turmoil.

The retailer, the independent refiner, the independent crude producer, the private brander, and the other segments who have turned to this commission because of the unethical practices affecting their businesses, are doing so because they find themselves in a very unstable position.

Efficiency is what creates and preserves stability in the marketplace. Yet it is strangely absent at those levels from which it should originate. Those who understand economics realize that an imbalance between supply and demand can create havoc in the marketplace. The myriad of gasoline prices all over the Nation within the last several years, many of them below cost of the raw product, attest to only one thing a lack of marketing acumen which is severely hurting other segments of the industry. These below-cost prices certainly do not result from efficient marketing.

Mr. Keith Fanshier, publisher of one of the industry's most important trade papers, and a respected analyst of our industry's marketing philosophies, put it clearly when he stated that the industry was "losing control."

He said:

It is now difficult to make any sense out of much of what goes on in oil markets except to say that unhealthy supply excesses have stimulated similarly unhealthy, and therefore, irresponsible marketing policies. Normal reasonable constructive industry economic patterns are not being maintained in many cases today. It is needful to recognize that destructive conditions are taking over which, if allowed to persist or worsen, would threaten complete collapse. For a long time, there has been considerable violation of sound demand-supply relationships in this industry. The danger from this is that it creates a train of habit which tends to ingrain itself even beyond the time pattern of supply excesses themselves-that is, inflated excesses cause unhealthy policies in the industry to persist well beyond the life of the excesses themselves.

Mr. Fanshier's statement is only one of many uttered by industry leaders over the past few years, and though they have been silent, the dealers of the Nation have decided to speak and request from this commission the help needed to prevent further deterioration of our business.

In June of last year, Mr. William C. Marquis, direct sales manager for the American Oil Co., submitted figures to the House Small Business Committee showing a 7.95-cent-per-gallon-under 8 cents-cost of selling gasoline in Detroit, Mich., a city comparable to Cleveland for labor costs. It was comforting to our people to have a high marketing official of a large oil company confirm what we have always maintained that it costs nearly twice as much as the present dealer margin to service a gasoline sale.