dealers and the stations were not living up to the potential which the manager in that division felt was inherent in the particular stations.

Now, they had a policy that they would not force any dealer to convert to a commission plan. They did, however, set out to try to persuade certain dealers to accept the commission plan, and their policy also was that if any dealer converted to a commission plan and thereafter decided that he did not like it they would, on request, transfer him back to a dealer status.

This is what was attempted in these particular situations.

Now, I think you will probably say, Mr. Chairman, that some of the activities with respect to these particular stations were pretty hard selling; they were. I think they were allowed perhaps to go beyond the point where they should have gone. However, the management did catch up with the situation, did stop at the policy that had been established; namely, of not forcing any dealer to change to a commission plan.

How did management catch up with that situation? They only caught up with it when we filed a complaint with the Department of Justice. I came up here with two lawyers from Richmond, our National Attorney Bill Snow and three dealers and filed a complaint against them, we then widely publicized the fact that we had filed a complaint because we would rather have a living dealer than a corpse to bring in and we couldn't wait 9 or 10 years for them to move forward on the thing, so we widely publicized that we had filed the complaint.

Then, and only then, did management catch up with the situation. But we can't depend just upon publicity to save our members year after year and month after month. You need some rules and you need some laws and you need some law enforcement.

Chairman DIXON. That's right.

Mr. HEIZER. Thank you very much.

Mr. SNOW. Mr. Chairman, just to make the record entirely clear, this is prompted by Miss Jones' question.

Nowhere in our petition do we ask the Federal Trade Commission to promulgate margins or improve margins. All we ask our plea is for hard competition, that real competition be allowed to go to work in the industry and that the practices which have inhibited competition at the one level where it exists, between independent brand stations and major companies, that these practices be stopped in accordance with the congressional directive to you that you give protection against unfair methods of competition. Our next witness is Phillip D. Walter.

TESTIMONY OF PHILLIP D. WALTER, OWNER, GULF SERVICE

STATION, BATTLE CREEK, MICH.

Mr. WALTER. My name is Phillip D. Walter. I own and operate a Gulf service station at 915 Capital Avenue NE., Battle Creek, Mich. I am the landlord of the real estate in my operation so the Commission might believe that I would not be subject to some of the controls that you are hearing about at this time which places so many hardships on leasee dealers and often is indirectly unfair to the motoring public.

This is what I thought too 8 years ago when I started to look around for a service station that I could purchase. I had been leasing from the Sun Oil Co. for nearly 6 years. Among various people I contacted was the local Gulf distributor, Mr. E. B. Lincoln. He

informed me that Gulf was developing a piece of property near me and that there was a good possibility that Gulf would sell it to me in order to obtain a dealer.

A meeting was arranged between myself, Mr. Lincoln and a Mr. Dilworth from Gulf who was handling the real esate his company was developing in our area.

Mr. Dilworth outlined the mechanics of purchasing the location to me and on a later date came to my home and discussed these things with my wife and me.

We questioned Mr. Dilworth about the possibility of being able to sell the property after a few years because we had entertained the possibility of moving to another State some time in the future. Mr. Dilworth assured us that this was no problem because we could sell this location to any purchaser after 3 years and put Gulf right out of the picture, or Gulf would lease it and make my payments and I would retain ownership.

A price of $50,000 was established by Gulf for this location and I was to pay $5,000 down and a mortgage was applied for by Gulf from the Toledo Trust Co.

A short time later Mr. Dilworth contacted me and set a time for my wife and myself to meet him at the office of Mr. Sullivan who is the attorney that does legal work for Gulf in the Battle Creek area. This date was March 26, 1958.

I told Mr. Dilworth I wanted an attorney to advise me and he said that this was all right, and that I could have the title and abstract checked. But he led my wife and me to believe that the instruments which we were to sign on March 26, 1958, were just routine formalities. Two of these papers were the note and mortgage for $45,000 to the Toledo Trust Co. Three other papers which I appeared to have signed at the time, as they have this date on them, though I have no specific recollection of signing these papers at any time were, one, the Gulf Oil Corp. sales agreement, two, "First Refusal Purchase Option," signed by my wife and myself, and, third, an instrument headed "Lease Option Agreement" also signed by my wife and myself.

I was advised at that time by Mr. Dilworth that they would have the abstract of title brought down to date so it could be examined by my attorney.

My attorney, Mr. Roger Nielson, did not receive anything from Gulf until May 9, 1958, and then the only thing he received was the abstract of title.

On May 21, 1958, Mr. Nielson wrote me a letter approving the title. I later received a letter from Gulf dated June 18, 1958, stating that I had acquired title to the property on June 13, 1958, and enclosed copies of the three papers which my wife and I had signed on March 26, 1958, and also enclosed the deed which was dated March 12, 1958, and notarized March 13, 1958.

As time progressed, various conditions both in retailing and my personal life came about to the extent that my wife and I discussed the possibilities of selling the station. This was late in 1960 and nearing the 3 years after which Mr. Dilworth had led me to believe that I could do whatever I wanted to with the station.

During this 3-year period I joined the Retail Gasoline Dealer's Association of Michigan, so I sought advice from Mr. Cash B. Hawley

from the Detroit office. Mr. Hawley advised me to contact Mr. William Snow, the association attorney.

In October 1961, Mr. Snow gave my wife and me quite a shock by telling us what these "formalities" that we signed in March 1958 really

meant.

I will read from his letter to me dated October 25, 1961-I would like to offer for the Commission files a copy of the lease option agreement.

The lease option agreement which you gave Gulf (allowing Gulf to lease the station from you for $400 a month at any time during the 15-year period and $375 a month during the next 5-year extension) can be exercised by Gulf on the happening of any of the following:

(a) If you cease to personally operate the business.

(b) If you breach any of the conditions of the sales agreement dated March 26, 1958.

(c) If this sales agreement is terminated by operation of law or other causes not attributable to an act of Gulf.

As the least which Gulf would have the option to enter into on the happening of any of those conditions is unfavorable to you according to my understanding of the value of the property, you have strong reasons of self-interest to prevent the happening of any of those listed conditions.

This means, in effect, that you must do nothing to jeopardize the sales agreement-unless you are willing for Gulf to exercise their option to lease your property on the terms provided. You state you were informed that the agree ment could be canceled with a written notice after a period of 60 days. Is this correct? If so, could I sell the property to another company if Gulf didn't exercise their first purchase option, and sell another brand of gas and oil?

There is no such 60-day cancellation provision as you refer to in the sales agreement covering sale of Gulf motor fuels dated March 26, 1958. Paragraph 7 states that this contract shall continue in force for 15 years and from year to year thereafter, with your having the right to terminate this agreement at the end of 15 years or 60 days before any succeeding anniversary date. Thus, the earliest you could secure termination of this basic agreement would be in 1973. Your third question: "At the end of 15 years when I pay off my mortgage, is the sales agreement ended and the property mine with no options of any kind that can be exercised by Gulf?"

The sales agreement on motor fuels continues to June 16, 1973, and from year to year thereafter unless notice of termination is given (earliest date for such notice to be effective would be June 16, 1973). The first refusal purchase option and the agreement giving option to lease, both continue until July 31, 1973.

If Gulf exercises the option to lease prior to July 31, 1973, there is a further option to extend the lease for a 5-year period beyond that date.

Your fourth question: "Do you find anything detrimental to me in this transaction with Gulf?"

I discussed the answer to this question with you on the telephone. Obviously, the entire transaction and all of the instruments involved were drawn by Gulf so as to give them control of your business so far as possible over the 15-year period, or to give them the right to lease your property and operate it for the balance of the 15-year period plus an additional 5-year period.

I also discovered about this time that Gulf, in addition to placing me in a straitjacket which forced me to continue to handle their products at the prices they charged, was discriminating against me by giving a secret rebate to other Gulf dealers in my area who owned their own property.

One of these dealers confirmed this to me on November 9, 1964, when I went to his station to discuss the situation with him. This dealer's name is Mr. Carl Hoff, operator of his business place at 1397 East Michigan Ave., Battle Creek, Mich.

Mr. Hoff informed me that he received a rebate of 112 cents per gallon from Gulf and in addition to this he had received among other

benefits about $2,000 worth of property improvements such as wiring and lighting at his station.

Several times I met with people from Gulf and asked for the same treatment they were extending to other dealers, but each time they denied that they were discriminating against me.

Because I had relied on Gulf's integrity and signed the "routine" papers which gave them control of my business for 15 years plus the possibility of an additional 5 years, they refuse to grant me the same lower price that they are granting through a rebate to Mr. Hoff and other dealers in my area who own their own stations.

Since it is not profitable for me to try to compete with other dealers who receive a 12-cent lower purchasing price, I approached Gulf with another possibility.

I asked the sales representative, Mr. William McCullef, if Gulf would permit me to put a second brand of gasoline into my station along with the Gulf brand using separate facilities to dispense the other product. I explained to him that I could purchase this gasoline at a lower price and this, in turn, would give me a more realistic return on my property investment. I also explained that I would honor my sales agreement with Gulf by purchasing at least 144,000 gallons of gasoline annually.

Mr. McCullef couldn't give me an answer at the time but about a week later brought me a verbal answer from higher authority. It was a definite "No."

In closing I remind this Commission again that in spite of the dealer's desire to own his own station as a means of being independent, as you can see in my case, this desire can be frustrated by the major companies retention of control for 15 or 20 years and in many cases longer, during which the dealer-owner experiences the brunt of price discrimination and other forms of control which is just as oppressive as if he were a lessee.

I believe that I speak for most other dealers in asking this Commission to take action which will stop discriminatory practices which penalize both leasees and dealer-owned stations.

Thank you.

(The information marked "Phillip D. Walters, exhibit No. 1" appears in the appendix, at p. 902.)

Mr. SNOW. Mr. Chairman, the next witness is Mr. Walter Faxlanger, who has had long experience in representing dealer groups in western New York State. He is the executive secretary of the Buffalo & Suburban Gasoline Dealers Association.

TESTIMONY OF WALTER F. FAXLANGER, EXECUTIVE SECRETARY, BUFFALO & SUBURBAN GASOLINE RETAILERS ASSOCIATION Mr. FAXLANGER. Mr. Chairman, gentlemen, my name is Walter Faxlanger. I am executive secretary of the Buffalo & Suburban Gasoline Retailers Association, 86 Saratoga Road, Amherst, N.Y.

As a student studying civics back in 1914 I learned that my country was about to experience a great thrust forward toward something termed by our President as "The New Freedom." The great ogre of the time, Standard Oil Co. had been ordered to segmentize by Judge Landis after a trial which exposed ruthless destruction of its competi

tors. The Federal Trade Commission was then created by Congress to assure that such economic brutality and murder could not happen again. My disillusionment from that inspiring study in comparison to the raw facts of life which I learned soon after, affected me with a burning desire to make idealism real. That is why I am in this room today.

I became executive secretary of this association in October of 1950 while still actively engaged in the retail gasoline business. With the exception of 3 years as an expediter for Curtiss-Wright, during wartime, I had been a gasoline retailer since 1929. I will give you a bit more of my background and at the same time proceed into the substance of my statement by quoting from a letter which I sent to U.S. Senator James M. Mead, of Buffalo, who was later appointed to the Federal Trade Commisison. The date of the letter is February 7, 1939, which is more than 26 years ago. Its content is still pertinent today.

MY DEAR SENATOR MEAD: I write to inquire whether the words used in the Robinson-Patman Act mean what they say according to our common understanding of words, or, whether some legalistic interpretation makes "reversed English" of the following:

It shall be unlawful for any person engaged in commerce *** to discriminate in price between different purchasers of commodities of like grade and quality * * *, etc.

If I am correct in assuming that the above words mean what they say and, that the Federal Trade Commission is the agency designated by the Congress to enforce this act, I inquire, how long must a citizen wait for action after filing specific complaints of clear cut, willful violations of that law, with that Commission?

This seemed an awful long time to me--but now it seems very shortbecause I said:

More than two and a half months ago (November 17, 1938), I filed such charges (copy enclosed). I urged prompt action to save hundreds of independent gasoline retailers from being squeezed out of business. To date, the Commission has not ordered the accused firms to "cease" and "desist" from any of those unfair practices. My letter was acknowledged by Mr. James A. Horton, chief examiner, who stated that it would be filed with other material, for a general investigation of the industry.

Senator Mead, I am glad to know that such an investigation is contemplated. However, small businessmen who have been strangling for more than 4 months from the garrots of price discrimination; who exist, even in normal times, on a hand-to-mouth basis; who have only a few dollars of "capital" and operate mostly on credit, cannot await the results of endless "investigation." Why should that be necessary? The law is there. Its language is clear. Much investigation preceded its enactment. The charges are filed. The violations are clear cut. Why cannot such charges get action-now? Why must action against clear violations await the accumulation and investigation of evidence concerning borderline cases and shyster evasions? Such cases would serve only to confuse and befuddle issues which are (by themselves) clearly defined.

It may be pertinent, in the interest of a better understanding of my own plight to reveal my ranking and background in the gasoline business.

On June 7, 1929, I started selling gasoline from two secondhand pumps located in a semiswamp 2 feet below road grade. I had no building whatever. Each morning I brought my stock of oil and accessories from my home in Buffalo to my swampy corner near Williamsville, in an old model T touring car. My capital was only $12 (except for that land) and I had liabilities of $500 accumulated during 10 months of involuntary idleness.

Previous to the gasoline venture, I had built a wholesale candy business also from scratch-starting with about $20, a bicycle, a few cardboard sample trays, and a scratch pad order book. In 3 years I had developed that business to include a modest store, a truck, a Ford sedan, several thousand dollars worth of stock, and several em