STATEMENT OF HARRY KOWALSKI, LEASEE DEALER OF MOBIL OIL Co. at Harlem ROAD AND CLEVELAND DRIVE, CHEEKTOwaga (BUFFALO 25), N.Y.

Submitted to Federal Trade Commission December 7, 1964

I have had approximately 25 years experience as an automobile mechanic. During ten of those years I was the proprietor of a repair garage. I then became a leasee Dealer, Texaco and Esso, for fourteen years. On February 1, 1964. I became a leasee Dealer for Mobil at the address above. The elderly owner-operator at this location had died about a year previous. His obsolete building had stood vacant for many months. There was no active business when Mobil acquired the lease, demolished the building, and constructed the new building which they then leased to me.

At the time of signing the lease on January 28, 1964, I agreed to pay a rent of 1.4 cents per gallon and a minimum of $400 per month; also a maximum of $650. At the same time I also signed a supply contract to buy a minimum of 20,000 gallons of gasoline per month from May to October. It should be noted that there was no minimum from February to May. That 20,000 minimum, divided into the $400 basic rent, produces a real rent of 2 cents per gallon. Thus, the 1.4 cents per gallon, stated in the lease, was, in fact, an inducement to aim at a potential of 28,570 gallons. That Mobil did not expect me to actually attain that gallonage is evidenced by the 25,000-gallon minimum which they set for the period-November through April-and, by an automatic renewal clause (unless terminated by either party).

It is evident (by giving a supply contract running through April) that the company had every intention, at that time, not to terminate the lease on January 31, and that it would be satisfied with a 25,000 gallon minimum, not alterable, at least until the following year and questionable even then. However, I have received a Notice of Termination dated October 31, 1964, effective January 31, 1965. Although no reason for the termination was stated in the notice, the Mobil salesman made a verbal statement that Mobil had rated the station to do 40,000 per month. The falsity of that is again shown by their supply contract in which they set 40,000 gallons as the maximum which they agreed to supply.

My actual sales have been: February, 25,985; March, 37,144; April, 40,097. The average for the three months for which no minimum was set, was 34,375 which is 14 times the minimum required up to the date of the notice of termination. It was seven-eighths of the maximum which they had agreed to supply. However, those high figures were the result of a "double stamp" promotion with which other Dealers could not compete and which I could not continue after the free bonus stamps, supplied by the company, were discontinued. I had taken on the costly "gievaway" upon the strong insistance of Mobil Oil Company's salesman. I continued to give the usual ten stamps for each dollar of sales (including the tax of 30 to 40 cents of each dollar) premiums on taxes. I could not continue double stamps when required to buy stamps at full price for the double giveaway. The bonus stamp customers went elsewhere and the station settled down to sound gallonage based on good service. The sales then were May (one-half of which was still with double stamps), 36,280; June, 31,677; July 33,508.

Despite that high gallonage my earnings were not sufficient to hire the help necessary to operate the 6 A.M. to 11 P.M. schedule “suggested" by Mobil's "salesman." I was personally working more than 80 hours per week. When I set a more realistic schedule of 7 A.M. to 10 P.M. the Mobil salesman objected vehemently with repeated and extended argument. To increase my earnings. I decided to increase my markup on gasoline one cent, over the 4-cent "Margin" which the company "suggested" when computing the competitive allowance each Dealer would receive off the posted "tankwagon" price. Again, the Mobil "salesman" objected. He argued that to charge the extra penny would result in loss of gallonage but he made no such argument when a company withdrawal of competitive allowance forced me to raise my price, not by one cent, but jumped it five cents. I was also puzzled by the hint that raising my price was evidence that I no longer needed the competitive allowance and so the zone for such allowance had been changed.

I had figured that the one-cent additional markup would more than offset any loss of gallonage and increase my net profit. I had to meet the costs, pay the bills, and, therefore, the prerogatives of management were mine and not the

Mobil Oil Company Salesman's. Despite the added 1-cent markup and an even larger variation in retail price because of the change of wholesale price Zone, my gallonage for August was 35,625. In September I had a seasonal drop to 30,592. In October there was further evidence of sound business growth with 31,204. Despite that gallonage which was 63 percent above the minimum and more than three-fourths of the maximum which they had agreed to supply, Mobil's salesman justified the lease termination on the basis that the station should sell 40,000 gallons. The obvious falsity of his stated reason creates the need to sift our total business relationhip for other, more plausible, reasons. Just after signing the lease and the supply agreement I was asked to sign another paper which had not been previously discussed. It required me to pay $21 per month rent for Mobil's revolving identification sign. I resented this. Sometimes I omitted throwing the switch which controlled its monotonous revolving. Whenever the salesman noticed that it was not revolving he gave me a lecture on the importance of keeping that sign revolving (although the sign had been leased to me and I paid the electric bill to provide the motive power). I felt that his repeated prodding invaded my right to manage my own business.

My attitude regarding the sign was developed concurrently to a similar argument as to whether I had the right to determine whether, or when the doors of an out-of-doors cabinet which was called a "Tire Merchandizer" should be open to display its contents, not only to prospective purchasers, but to the ravages of dust-bearing winds, rain, and snow. The Mobil salesman had talked me into a "full line stocking" deal which included several types, sizes, and premium price qualities, I doubted that I could sell. He assured me that these could be exchanged if that proved true. From previous experience I feared that such a tradeback would be difficult if the tires became shopworn and weatherbeaten. The salesman argued. I asserted my right to manage my own business. When the deferred payments became due and I needed more of the faster moving sizes and types I asked for an exchange. It was refused. The Company's slow delivery schedule served to buttress the salesman's demand that I carry larger stocks of these fast-moving sizes. An exchange of the slowmoving stock would have accomplished that without tying up additional capital but, because of Mobil's refusal to exchange, I was often forced to buy tires from other Dealers, to get quick delivery on out-of-stock sizes. This reduced my profit.

When I moved from my previous station I brought with me certain non-Mobil items such as Bardahl. These were products which I could recommend to my customers and I displayed them for sale. I also bought more as needed, in accord with the printed policy statement of the Mobil Oil Co. The Mobil salesman objected to the open display of these and advised me to hide such items lest higher officials of the company might see them. Again, I asserted my right to sell whatever I chose to sell, which right must include proper display for sale. Often, after such arguments the "salesman" pointedly criticized my "housekeeping." The new station was easy to clean and I did a thorough job, purposely. He was hard put to find the usual "flaws." He then found the unusual. He demanded that I cut weeds located on a vacant lot between my station and the Fire Department building. This required me to buy a scythe and either assign my employees to do it, or, to do it myself. Other arguments arose over whether I should offer my own car for sale at the edge of the station driveway. It was only one car, my own. I was not dabbling in used car sales. The "salesman" also objected when I installed an ice cube vending machine.

Besides my money, I have also invested a vital year of my life for establishing a business, at this location. It is a question whether I could again_work another-two years in one of eighty hour weeks. I did this because I was led to believe that I could have a business of my own in accord with Mobil's own published "Declaration of Dealer Policy," also, by the feature of the lease which provided automatic renewal unless terminated by either party for a legitimate reason. The only stated reason for the lease termination is proved to be a sham.

It is obvious, therefore, that the real reason for that termination is for refusal to follow "suggestions" of the Mobil "salesman" regarding questions of service station management. Some of these "suggestions" also violate the antitrust laws, as enacted by Congress, and as interpreted by the Supreme Court of the United States. Among these are my right to sell products other than Mobil in a station to which I holda lease. My right to sell products at

prices other than the prices "suggested" by Mobil whether that suggestion be direct or through devises which create the price competition which they then subsidize my own business to "meet" through another company device termed "Competitive Allowance" the name of which includes the word "temporary," subject to their own whim as to when to grant and when to withdraw it. I therefore petition the appropriate branch of Government to investigate the termination of my Lease, by the Mobil Oil Co.

Sworn to 11/30, 1964.

(Signed) HARRY V. KOWALSKI.

Submitted through Buffalo & Suburban Gasoline Retailers Association.
WALTER E. FAXLANDER,

Executing Signature.

STATEMENT OF RAYMOND V. CASTER, FORMERLY A TEXACO GASOLINE RETAILER AT 205 ONTARIO ST., BUFFALO, N.Y. SUBMITTED THROUGH THE BUFFALO & SUBURBAN GASOLINE RETAILERS ASSOCIATION, 86 SARATOGA ROAD, AMHERST, N.Y. On March 18, 1963, I sent a letter to Mr. Foley and Mr. Long of Texaco, Inc., at 120 East 42 St., New York 17, N.Y., a copy of which follows.

"Att. Mr. Foley and Mr. Long:

"For ten years I have operated the same Texaco Station. Prior to that I worked there for the former operator for ten years. After all of these years I have been suddenly notified that my lease is being cancelled because I run a dirty station. An alleged inspection took place a few days before this and in order to make the rating low enough a falsified report was made out.

"The real reason my lease is being cancelled is because of my belief that I have the right to decide at what price I should sell my gas. I have been warned and threatened about this on and off for some time. Once, I was told in front of a good customer that I was robbing the public with the prices that I charged for gas.

"I would like to know if this is the policy of the whole Texaco Corporation or just a few men in your Buffalo office. Expecting to hear from you very soon. "Mr. RAYMOND CASTER."

My background relations with Texaco are described in a letter which I sent to Mr. Foley in 1959; a copy of this is submitted as a separate sheet to be inserted at this point.

(Letter to Foley dated Nov. 10, 1959:)

STATEMENT OF RAYMOND V. CASTER, 190 NEWBURG ST., BUFFALO, N.Y., FORMER OPERATOR OF CASTER'S TEXACO, 205 ONTARIO ST.

My background in the Gasoline Business is contained in the letter below, the content of which is pertinent to this statement.

RAYMOND CASTER'S TEXACO,

205 Ontario, Buffalo, N.Y., November 10, 1959.

Mr. JAMES FOLEY, 135 East 42nd St.,

New York 17, N.Y.

DEAR SIR: I have leased this station since 1953. I worked there prior to that for another operator since 1943 except for the three years I spent in the service. Before that I worked in our River Road Plant as a dock watchman, and at the Lansing St. Plant, loading scrap rubber that was collected for the war effort. Now you are wondering why I am writing this letter. I have been going to for some time and I believe Now Is The Time. I can't see why the employees of this company are so afraid of losing their jobs if they speak the truth as they see it.

In our stations we advertise "Preventive Maintenance" to our customers and I believe that the Company would also want the equipment in their stations properly maintained. However, this is not the case in my station. For instance in 1954 and in 1955, one of my lifts broke down. Both times it was recommended by a competent man that it be replaced as it was old and would only keep breaking down, but oh no, just patch it up. Finally, after two years, and two times repaired costing close to $500, it really broke down and I almost got hurt. Then it had to be replaced.

For two years I have been complaining about shortages due to the tanks leaking and nothing was done about it. Finally, when my customers complained about water and dirt getting in their gas tanks, the tanks were checked and now I have new tanks in. Over this two-year period I have lost a lot of gasoline and I believe I should be reimbursed for this loss. I made an appointment with my company supervisor on a Friday to discuss this situation and waited all day for him and he never came. The following Monday I tried to call him and I was informed that he had left on a week's vacation. I waited another week and then found out that he was out helping to sweep, clean, and paint some of our bigger stations as by the grapevine they were told that you were coming to Buffalo. Believe me, Mr. Foley, if my station isn't clean enough for you to walk in at any time, well I would just be ashamed to call myself a Texaco Dealer. Eventually I contacted my Supervisor who advised me to have a report made out by my bookkeeper. After reviewing this report which my bookkeeper had turned over to my company Supervisor, I found that it was in error. I asked that this report be destroyed and I would obtain the records and make my own report: which my wife and I have done. After giving this yearly report to my Supervisor, he asked for just the records from August 18 to October 15 of 1959 as he had decided that I should settle for just 3 months-which would only amount to about 10 percent of my total loss. This, in our opinion, is very unfair. Before I was told to settle for this amount, I was informed by the River Road office that my records were incomplete and that I could collect nothing. However, I believe that this was just a threat so that I would be satisfied to settle for just the three months' loss.

I have also been threatened by this same Supervisor and his superior with the loss of my lease for such reasons as not buying more TBA thru Firestone and Goodrich. He also said "Come on Ray, we have a contest on this month and if you get a lot of extra oil this month I'll see that you get a lot of new light fixtures, etc. Just recently I have been threatened with the loss of my lease if I didn't cut my gas price.

I have also seen many incidents of wasted company money and poor inspections of repair jobs but I have taken up enough of your valuable time. I am sorry I felt the necessity of writing this letter but I feel that I have been treated unfairly and hope that you will give me a fair shake.

Well, I will sign off for now and hope that you and yours will have a very merry Christmas and Happy New Year.

Respectfully yours,

RAYMOND CASTER.

I received no direct reply from Mr. Foley but it was forwarded to Mr. Pannel, the Buffalo District Manager, who passed it to Mr. Roth the area Sales Manager, who passed it on to Mr. Valida-who continued to do as he had done before.

Shortly after this run-a-round a general price war engulfed the whole Buffalo area and I was offered a "competitive allowance" on condition that I post a "competitive" price. To do so required me to reduce my own “margin" or markup from 7 cents (which was needed to cover my operating expense and a salary for myself) to only 4 cents-of which the company still exacted 2 cents for rent. This left me only 2 cents per gallon from which to pay all of my other operating expense and nothing to be applied to my own living expense. I refused to reduce my own markup but I did assure the company that I would reduce my retail price by the exact amount of whatever allowance they might decide to grant. That offer was refused.

I was thus confronted by a dilemma. If I reduced my markup to obtain their "allowance" I could not recover all of my costs-and would thus live off of the capital investment in my business. As I sold stock and gasoline I was short of money to replace the same amount that I had sold.

The other choice was no better. If I held to the needed markup my retail price would be higher than my competitors (who had been forced to reduce markup by 3 cents and received an allowance of 4 cents which would put me 7 cents out of line on retail price. With such a difference it would be impossible to hold my eustomers for gasoline and a further loss of other sales, of oil, T.B.A., and repairs. I tried it both ways but I could not escape the price discrimination squeeze.

In August of 1961 I tried to counter pressure that squeeze by joining in a suit by 33 Texaco Dealers of the Buffalo Area against Texaco, to recover damages resulting from that Price Discrimination. In this suit only the names of eight of the dealers were revealed in the original action the remaining 25 were included

through the words "and others." This was done because of the fear of company pressure. However, on a legal maneuver by Texaco, Judge Henderson ruled that the names of all complainants must be revealed. After the names were revealed the Texaco salesman made several pointed remarks about how silly it was for me to continue with the suit. Despite his remarks I continued in the suit. On January 23, 1962, I was notified by registered mail that my lease was terminated effective February 10, 1962. It did however state that:

"Our District Sales Manager, or salesman, will call on you within the next ten days in an endeavor to reach an agreement on a new lease acceptable to both you and Texaco, Inc. In the event that negotiations are not completed . . . occupation of premises may contine on basis of Ph. 8 of lease."

STATEMENT OF RAYMOND V. CASTER TO FEDERAL TRADE COMMISSION

The company did not renew the lease but allowed me to continue under terms of paragraph 8 of the old lease. During the year which followed I was frequently criticized about my "housekeeping" especially when the price on my pumps was higher than at company consignment stations.

On March 15 Mr. Ossman came into the station and said, "Ray, if I let you stay, Mr. Cunningham will fire me-besides, your price of gas is always too high." On March 25 I talked to Ed Group and he said he started school on March 4 so he could take over my station on the first of April. He wanted the station at Ontario and Skillen but they advised him to take my place as I would be going out on April 1.

Because of Mr. Ossman's statement of March 15 I sent the letter to Mr. Foley and Mr. Long dated 3/18/63 which I used on page one to introduce my problem. At about that same time I told a customer, Edward Jetter that my lease was being terminated again, but that this time it was the real thing. On March 26 he wrote to Mr. Foley-as reprinted here.

"DEAR MR. FOLEY: I have patronized the Texaco Service Station at 205 Ontario St. in Buffalo since many years ago when it was owned by the Goodyear Wende Corp. This station was at one time owned by Mike O'Brien, Wilmer Podger and for the past 19 years by Ray Caster.

"I understand that Texaco is about to cancel Mr. Caster's lease. May I state in his behalf that Mr. Caster has always given excellent service to myself and many motorists, that in addition to operating this Texaco Service Station he has been actively and prominently identified with all community activities in the Riverside area, and as a war veteran has done much for the American Legion both personally and as a station operator.

"Several businessmen in the community and his many friends in the American Legion and the Riverside Kiwanis Club have suggested I write to you suggesting that you reconsider the replacement of Mr. Caster as an operator of your station.

"Yours very truly,

"EDWARD T. JETTER, (Publisher),
"West Side Times.”

On March 19 the Texaco salesman asked me to show him my receipt that I had paid the rental charge for their credit card imprinter. I did not have the receipt at the station so I asked if they didn't know from their records whether it was paid. He said they would not be able to locate their copy for at least a week. He said he had orders to pick up my machine unless I could show my receipt. This was obviously harrassment which would cause me to lose business because I could not make credit card sales.

About March 25, I called the New York Texaco Office by phone and was referred to Mr. Doss. He promised to investigate. The report of his investigation is recorded in his letter to me. He wrote (3/28/63):

"You were promised that an investigation would be made and this has completed. All of the facts before me indicates the justification for the cancellation of your lease and we do not wish to countermand the action take by our district sales people."

On April 2, Mr. Foley answered my letter of March 18 as follows:

"Since the records on this location are maintained in our Buffalo office, we are asking Mr. J. A. Rathbun, our Division Sales Manager to interest himself in the matter and arrange to have a member of his staff contact you at an early date.

"Sincerely yours,

P. B. HICKS."