Gas-price trial put on hold

By Frank Cho
Advertiser Staff Writer

After three years of legal wrangling, the state and oil industry attorneys yesterday agreed to delay the state's $2 billion antitrust trial against the companies so a judge could decide whether the state has enough evidence to go to trial.

The delay in the trial, which had been set to start in just three months, came as Chevron Corp., the state's leading gasoline supplier, argued in federal court that Hawai'i's gas prices are high because of its small market and a Legislature that has saddled the industry with high taxes and anti-competitive legislation.

Hawai'i has the highest gasoline prices in the country, and the state says Chevron led a conspiracy to keep prices artificially high and threatened to cut off gasoline supplies to the other oil companies if they did not go along with Chevron's plan.

The oil companies have denied the charge and are asking U.S. District Judge Samuel King to throw out the case for lack of evidence.

"This case was trumped up from the start and it still is," said Chevron attorney Robert Mittelstaedt. "(The state is) doing this, they say, for the sake of trying to lower gasoline prices in Hawai'i. Forcing these companies to spend millions of dollars, literally millions of dollars, to defend themselves from this case is no way to lower prices."

Gasoline in Hawai'i is taxed at a higher rate than any other state, according to the Oil Price Information Service, a petroleum tracking service. Almost 55 cents per gallon goes toward state and federal taxes in Hawai'i — or nearly 30 percent of the average price of a gallon of gas.

Mittelstaedt said state legislation passed in 1991, about the same time the state said the conspiracy began, also limits the number of company-owned gas stations in Hawai'i and has kept prices high. The law, which has been amended several times since then, was passed at the request of independent dealers who feared that company-owned stations would offer cheaper gasoline and take business away from them, Mittelstaedt said.

King, who gave no signal yesterday on his thinking, was not expected to rule on the request by the oil companies for several weeks or possibly even months. He could dismiss one or all of the charges against the oil companies or simply let the case go to trial as it is.

"Judge King has been enormously patient. I suspect we will have a decision in early January," said Spencer Hosie, a San Francisco-based antitrust lawyer who is leading the state's legal team.

The state filed its lawsuit on Oct. 1, 1998. The complaint named divisions of Chevron, Shell, Texaco, Unocal and Tosco Corp. and accused them of fixing gas prices and allocating market share among themselves as early as 1987. It also accused the companies of organizing a boycott of Aloha Petroleum because it was undercutting gas prices.

BHP Hawaii and Tesoro also were named in the original suit, but were dismissed from the case as part of a $15 million settlement.

Much of the case has been kept secret under a court-ordered seal preventing the public from seeing much of the evidence. The state and lawyers for the oil companies are meeting next week to review the case files and plan to open most of the records to the public.

In the trial, the state is seeking billions of dollars from the oil companies, saying that for years they conspired to keep gas prices high, overcharged consumers at the gas pumps and then tried to conceal the conspiracy.

But oil industry lawyers have argued for four days that the state does not have any evidence that shows the oil companies ever conspired to set prices, punished competitors or divided the market among themselves.

Jeffrey Ono, another state attorney, said the state will rely on an accumulation of evidence and not any one piece of evidence or a so-called "smoking gun."

"I don't think you can point to one snippet of paper or one piece of testimony to say that this is what makes our case," Ono said. "But the accumulation of the evidence is very powerful."

Because Chevron has about 30 percent of the retail market, the state considers it to be the leader of the conspiracy and a key part of the state's case..

But Hosie argued that the other oil companies reaped huge profits of 50 to 60 cents a gallon compared to 10 cents on the West Coast and 2 to 3 cents in other parts of the country.