Gasoline companies ask judge to dismiss state suit
By Frank Cho
Advertiser Staff Writer
With the state's own expert witnesses providing the ammunition, Hawai'i's oil industry lawyers attacked the state's $2 billion antitrust lawsuit against the companies and asked a federal judge to throw the charges out.
Hawai'i's gas prices are the highest in the nation, but oil company lawyers argued yesterday that has more to do with Hawai'i's oligopolistic market structure than with a conspiracy among oil companies to keep prices high.
"They are still making things up," said Robert Mittelstaedt, attorney for Chevron, referring to the state's case. "They can't even explain how anyone would make money importing more gas or starting price wars."
The state believes that the oil companies should be competing more aggressively by lowering their prices or importing cheaper gasoline.
But because of a limited number of suppliers and the fact that demand remains relatively constant regardless of price, there is no incentive for oil companies to cut gas prices, Mittelstaedt said.
He said the state's own experts had found that cutting gas prices 5 cents a gallon would require an oil company to increase its sales by a third to make up the difference.
The state, saying it had new evidence, filed the price-fixing suit against divisions of Chevron, Shell, Texaco, Unocal and Tosco Corp. in October 1998. It accused the companies — which include the state's two refinery owners and all its major gasoline wholesalers — of fixing gas prices and allocating market share among themselves, in violation of antitrust laws, from 1991 to 1998.
BHP and Tesoro also were named in the original suit, but dismissed from the case as part of a $15 million settlement.
The remaining oil companies are now asking Judge Samuel King to dismiss the suit, claiming a lack of evidence.
Calling the state's case "absurd" and "silly," industry lawyers said the state is "fabricating" evidence and taking testimony and documents out of context. "The No. 1 problem is there is no evidence of such an implausible conspiracy," Mittelstaedt said.
That state has to prove there could be no explanation other than collusion for the oil companies not to lower their prices or import cheaper gasoline.
That may be hard to do, since a state investigation of the oil industry by Hawai'i's attorney general found as early as 1990 that the state's "high entry barriers and an inelastic demand make price wars very foolish for the industry."
The state believes that the oil companies controlled market share through gasoline supply agreements and used their dealers to communicate wholesale prices to each other.
Early on, the state had hoped Dave Young, a former Chevron public relations executive, would provide key testimony about meetings he attended in which he said Chevron met with competitors to talk about gasoline pricing strategies.
But oil company attorneys said the state's chief counsel, Spencer Hosie, had learned in November 1998 — barely a month after the suit was filed — that Young had not attended such meetings.
Young declined to comment last night about his testimony, which is still under a court protective order.
Both sides are working on a plan that would unseal thousands of documents and hundreds of hours of depositions collected over the last three years under seal. They expect to submit the plan for court approval next week.
On Monday the state will have a chance to rebut the oil companies' claims. The hearings were set to end yesterday, but extended for a third day when testimony ran too long.
Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com
