State presses gas-price case
By Frank Cho
Advertiser Staff Writer
Neither the state nor the half-dozen oil companies it is suing appear ready to agree to an out-of-court settlement of the state's $2 billion anti-trust case. But with the trial just six months away, reluctance to settle has not stopped them from talking about it.
Bruce Asato The Honolulu Advertiser
Hawai'i long has been an expensive place to buy gasoline, and the state believes much of the cost can be traced to collusion among oil companies in fixing prices at the pump.
Bruce Asato The Honolulu Advertiser
The state is suing Chevron, Shell Oil, Tosco, Unocal and Texaco in federal court alleging the companies for years overcharged Hawai'i drivers for gasoline. The lawsuit alleges that refiners and wholesalers agreed to keep prices artificially high and, as a result, made enormous profits at the expense of Hawai'i consumers.
The case is set to go to trial in Honolulu on Feb. 5.
The oil companies have denied the charge and in July filed a motion for summary judgment, asking the judge to dismiss the case. A hearing is scheduled Oct. 17.
Attorneys for both sides decline to comment, citing the sensitivity of the case and a confidentiality agreement between the parties. But Friday's meeting was not the first time the two sides have tried to explore an out-of-court settlement of the largest antitrust action in state history.
Earlier this year, oil company lawyers and state attorneys met quietly with a mediator on the Mainland to try to hammer out their differences. That effort also failed.
Most experts familiar with the case acknowledge there is no urgency to do anything now before federal Judge Samuel King hears arguments in October on the oil companies' motions to dismiss the charges. Even then, both sides will have three months before trial and that could become a natural time for settlement talks.
Still, any settlement discussions may have significant hurdles to clear. Over the past three years, the oil companies have contended that they have the edge in the case and have prevailed on most significant points of law in court. But the state has remained steadfast in its belief that it can win if the case goes to trial.
Some close to the oil companies said the odds of a settlement are somewhat unlikely, given that the two sides have strikingly different assessments of who is winning in the legal maneuverings so far. And that widely divergent view could pose the most significant obstacle to any settlement discussions.
Chevron and the other oil companies have not talked publicly about the possibility of a settlement. But if the case goes to trial and they lose, it could have far-reaching impact beyond just the state's gasoline market.
"It is a warning shot to other industries that you can be tied up in expensive litigation if you take on anticompetitive practices," said Gerard Russo, a professor of economics at the University of Hawai'i at Manoa.
Russo said gasoline is not the only industry in Hawai'i that is dominated by one or two players who could find themselves under intense scrutiny if the state wins its case. And that could end up costing consumers much more in the long run, Russo said.
"It's a signal that this is not a friendly business environment. That might lead to less investment in Hawai'i and higher prices because you will see less conpetition," Russo said.
State Attorney General Earl Anzai said it is difficult to compare the state's lawsuit to other antitrust cases such as the Justice Department's case against Seattle software giant Microsoft or chip-maker Intel.
"This is a one-of-a-kind (antitrust) case," said Anzai. "No other case has the geography or an economy like ours."
The state filed suit in 1998 against 13 corporations, including Chevron Corp., BHP Hawaii Inc., Shell Oil Co., Texaco Inc., Tesoro Petroleum Corp., Tosco Corp. and Unocal Corp., seeking $500 million in damages.
The state accused the oil companies of conspiring to artificially keep gasoline prices high, and then hiding the conspiracy from authorities.
The state later expanded its lawsuit and raised its claim to nearly $2 billion.
All the companies have denied the charge.
In November 1999, BHP Hawaii and Tesoro agreed to pay the state $15 million to settle their role in the antitrust lawsuit over alleged gasoline price fixing, averting their involvement in a trial that could have cost the companies millions of dollars more in legal fees and penalties. They continue to deny any wrongdoing.
Reach Frank Cho at 525-8088, or at email@example.com.