SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION … · SUPERIOR COURT OF NEW JERSEY APPELLATE...
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SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-5496-16T1 Speedway LLC, Plaintiff-Appellant, Civil Action On Appeal From a Final Order in the Superior Court of New Jersey, Law Division, Mercer County, Dismissing the Complaint v. Docket No. MER-L-284-17 Sat Below: Hon. Kay Walcott-Henderson, J.S.C. The State of New Jersey and Attorney General Christopher S. Porrino, Defendants-Respondents. BRIEF AND APPENDIX ON BEHALF OF DEFENDANTS-RESPONDENTS STATE OF NEW JERSEY AND THE ATTORNEY GENERAL (Da1-23) GURBIR S. GREWAL ATTORNEY GENERAL OF NEW JERSEY Attorney for Defendants-Respondents, State of New Jersey and Attorney General Gurbir S. Grewal Hughes Justice Complex P.O. Box 112 Trenton, NJ 08625 (973)648-2500 JASON W. ROCKWELL ASSISTANT ATTORNEY GENERAL Of Counsel WENDY LEGGETT FAULK (043321996) RENEE GREENBERG (011062011) DEPUTY ATTORNEYS GENERAL On the Brief
Transcript of SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION … · SUPERIOR COURT OF NEW JERSEY APPELLATE...
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5496-16T1
Speedway LLC,
Plaintiff-Appellant,
Civil Action
On Appeal From a Final Order
in the Superior Court of New
Jersey, Law Division, Mercer
County, Dismissing the
Complaint
v.
Docket No. MER-L-284-17
Sat Below:
Hon. Kay Walcott-Henderson, J.S.C.
The State of New Jersey
and Attorney General
Christopher S. Porrino,
Defendants-Respondents.
BRIEF AND APPENDIX ON BEHALF OF DEFENDANTS-RESPONDENTS
STATE OF NEW JERSEY AND THE ATTORNEY GENERAL
(Da1-23)
GURBIR S. GREWAL
ATTORNEY GENERAL OF NEW JERSEY
Attorney for Defendants-Respondents,
State of New Jersey and Attorney
General Gurbir S. Grewal
Hughes Justice Complex
P.O. Box 112
Trenton, NJ 08625
(973)648-2500
JASON W. ROCKWELL
ASSISTANT ATTORNEY GENERAL
Of Counsel
WENDY LEGGETT FAULK (043321996)
RENEE GREENBERG (011062011)
DEPUTY ATTORNEYS GENERAL
On the Brief
ii
TABLE OF CONTENTS
PAGE
COUNTERSTATEMENT OF FACTS AND PROCEDURAL HISTORY .............1
A. New Jersey’s Regulation of the Sale of Motor Fuel .........1
B. Speedway’s Challenge to N.J.S.A. 56:6-2(b) ................7
C. Motion Hearing and the Trial Court’s Decision .............9
ARGUMENT
POINT I
SPEEDWAY FAILS TO ALLEGE A COGNIZABLE
CONSTITUTIONAL CHALLENGE TO THE BELOW-COST SALES
PROHIBITION. ...........................................11
A. The Trial Court Applied the Proper
Standard to Defendants’ Motion to
Dismiss Under R. 4:6-2(e). .........................11
B. The Below-Cost Sales Prohibition Does Not
Violate State or Federal Constitutional
Due Process Requirements. ..........................15
C. The Below-Cost Sales Prohibition Is Not
Unconstitutionally Vague Or Overbroad. .............28
D. Because the Statute Does Not Deprive
Speedway of Due Process, Speedway Has
No Viable Civil Rights Claims. .....................34
POINT II
THE TRIAL COURT MADE SUFFICIENT FINDINGS
IN SUPPORT OF ITS DECISION TO DISMISS
SPEEDWAY’S COMPLAINT. ..................................35
CONCLUSION ..................................................40
iii
APPENDIX
Report to the Governor and the Legislature of the Gasoline
Study Commission, Created by Assembly Concurrent Resolution
No. 7, of 1952 .............................................Da1
iv
TABLE OF AUTHORITIES
CASES CITED
PAGE
Avelino-Catabran v. Catabran, 445 N.J. Super. 574
(App. Div. 2016) ............................................37
Banco Popular N. Am. v. Gandi, 184 N.J. 161
(2005) ...................................................3, 13
Brown v. City of Newark,
113 N.J. 565 (1989) .....................................28, 30
Brown v. State, 356 N.J. Super. 71
(App. Div. 2002) ............................................20
Commc’ns Workers of Am. v. N.J. Dept. of Treasury,
421 N.J. Super. 75 (Law Div. 2011) ..........................28
County of Warren v. State, 409 N.J. Super. 495
(App. Div. 2009), certif. denied, 201 N.J. 153
(2010) ..................................................14, 15
Curtis v. Finneran, 83 N.J. 563 (1980).........................36
Darakjian v. Hanna, 366 N.J. Super. 238, 242
(App. Div. 2004) ............................................36
Edwards v. Prudential Prop. & Cas., 357 N.J. Super. 196, 202
(App. Div. 2003) ............................................13
Franklin v. New Jersey Dept. of Human Servs., 111 N.J. 1
(1988) ......................................................14
Fried v. Kervick, 34 N.J. 68 (1961).......................passim
Greenberg v. Kimmelman, 99 N.J. 552 (1985).....................16
Hamilton Amusement Ctr. v. Verniero,156 N.J. 254 (1998),
cert. denied, 527 U.S. 1021 (1999) ......................14, 16
Hutton Park Gardens v. West Orange, 68 N.J. 543
(1975) ..................................................passim
In re DeMarco, 83 N.J. 25, (1980)..............................31
v
In re Farmers’ Mut. Fire Assurance Ass’n. of N.J., 256 N.J.
Super. 607 (App. Div. 1992) .................................29
J.D. ex rel. Scipio-Derrick v. Davy,
415 N.J. Super. 375 (App. Div. 2010) ........................14
Legg v. County of Passaic, 122 N.J.L. 100
(Sup. Ct. 1939) .............................................34
N.J. Ass’n of Health Plans v. Farmer, 342 N.J. Super. 536
(Ch. Div. 2000) .........................................10, 11
N.J. Sports & Exposition Auth. v. McCrane,
61 N.J. 1 (1972) ....................................12, 14, 16
Nebbia v. New York, 291 U.S. 502,
54 S. Ct. 505, 78 L. Ed. 940 (1934) .....................passim
Neeld v. Automotive Prods. Credit Ass’n,
21 N.J. Super. 159 (Cty. Ct. 1952) .......................32,33
Ports Petroleum Co., v. Tucker, 916 S.W. 2d 749
(Ark. 1996) .........................................23, 24, 25
Printing Mart-Morristown v. Sharp Elecs. Corp.,
116 N.J. 739 (1989) .....................................13, 36
Reider v. State, 221 N.J. Super. 547
(App. Div. 1987) .....................................9, 12, 15
Scheidt v. DRS Technologies, Inc., 424 N.J. Super. 188
(App. Div. 2012) ........................................13, 30
Sellers v. Schonfeld, 270 N.J. Super. 424
(App. Div. 1993) ............................................36
Sojourner A. v. N.J. Dep’t of Human Servs., 177 N.J. 318
(2003) ......................................................15
State v. Afanador,
134 N.J. 162 (1993) .........................................28
State v. Buckner, 223 N.J. 1 (2015)............................14
State v. Cameron,
100 N.J. 586 (1985) .........................................29
vi
State v. Lashinsky,
81 N.J. 1 (1979) ............................................28
State v. Lee, 96 N.J. 156 (1983).......................28, 30, 34
State v. Mapco Petroleum Inc., 519 So. 2d 1275
(Ala. 1987) .............................................24, 25
State v. Packard-Bamberger & Co., Inc., 123 N.J.L. 180
(Sup. Ct. 1939) .........................................22, 23
State v. Trump Hotels & Casino Resorts, 160 N.J. 505
(1999) ..................................................12, 14
Strahan v. Strahan, 402 N.J. Super. 298
(App. Div. 2008) ........................................38, 39
Teamsters Local 97 v. State, 434 N.J. Super. 393
(App. Div. 2014) .................................3, 14, 15, 16
Town Tobacconist v. Kimmelman,
94 N.J. 85 (1992) .......................................28, 30
United Stations of N.J. v. Getty Oil Co., 102 N.J. Super. 459
(Ch. Div. 1968) .............................................26
Velantzas v. Colgate-Palmolive Co., 109 N.J. 189
(1988) ......................................................13
Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc.,
455 U.S. 489, 102 S. Ct. 1186, 71 L. Ed. 2d 362
(1982) ..................................................29, 34
West Coast Hotel v. Parrish, 300 U.S. 379, 57 S. Ct. 578,
81 L. Ed. 703 (1937) ........................................17
Wilentz v. Crown Laundry Serv. Inc., 116 N.J. Eq. 40
(Ch. 1934) ..............................................22, 23
STATE STATUTES
N.J.S.A. 56:6-1 et seq.....................................passim
N.J.S.A. 56:6-2(a)..............................................2
vii
N.J.S.A. 56:6-2(b).........................................passim
N.J.S.A. 56:6-2(c)..............................................2
N.J.S.A. 56:6-2(d)..............................................2
N.J.S.A. 56:6-2(e)..........................................2, 25
N.J.S.A. 56:6-2(f).............................................26
N.J.S.A. 56:6-2(g)..............................................2
N.J.S.A. 56:6-3..............................................2, 3
N.J.S.A. 56:6-4.1...............................................3
N.J.S.A. 56:6-19................................................6
N.J.S.A. 56:6-20................................................6
N.J.S.A. 56:6-22................................................6
L. 1938, c. 163, § 401..........................................3
L. 1938, c. 163, § 502..........................................3
L. 1953, c. 413.................................................6
L. 1953, c. 413, § 1............................................6
L. 1981, c. 230, § 6............................................3
viii
OTHER SOURCES CITED
R. 1:7-4...............................................35, 36, 38
R. 4:6-2(e)................................................passim
R. 4:34-4.......................................................1
Pressler & Verniero, Current N.J. Court
Rules, comment 1 on R. 1:7-4 (2018)............................35
Pressler & Verniero, Current N.J. Court
Rules, comment 4 on R. 1:12-1 (2018)...........................38
Pressler & Verniero, Current N.J. Court
Rules, comment 4.1.2 on R. 2:6-2 (2018)........................36
Webster’s II New College Dictionary
(Rev. and updated 2001)........................................31 xx
COUNTERSTATEMENT OF FACTS AND PROCEDURAL HISTORY1
Plaintiff Speedway LLC (“Speedway”) appeals the August 18,
2017 decision of the Superior Court of New Jersey, Law Division,
Mercer County, dismissing its complaint against the State of New
Jersey and the Attorney General of New Jersey,2 (collectively,
the “State”). Speedway challenges the constitutionality of
N.J.S.A. 56:6-2(b) – a provision of the Unfair Motor Fuels
Practices Act prohibiting the retail sale of motor fuel below a
retail dealer’s net cost plus selling expenses. The trial court
held that Speedway’s complaint failed as a matter of law to
state a claim upon which relief can be granted. (T23:2-T26:21).3
The court determined that the factual allegations of the
complaint, taken as true, were insufficient to overcome the
presumed constitutionality of the statute. Ibid.
A. New Jersey’s Regulation of the Retail Sale of Motor Fuel
The New Jersey Legislature, in Chapter 163 of the Laws of
1938, established “An act to regulate the retail sale of motor
fuels” (“1938 Act”). Codified at N.J.S.A. 56:6-1 through 56:6-
1 Because the procedural and factual histories in this matter
are intertwined, they are combined to avoid repetition.
2 Pursuant to R. 4:34-4, New Jersey Attorney General Gurbir S.
Grewal is substituted for former New Jersey Attorney General
Christopher S. Porrino.
3 “T” is the transcript of the August 18, 2017 motion hearing;
“Pa” refers to Speedway’s appendix; “Pb” refers to Speedway’s
brief; “Db” refers to this brief; “Da” refers to the appendix to
this brief.
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17, the 1938 Act set forth requirements for retail gasoline
dealers, such as requiring posting of the per-gallon fuel price
on each operational pump, specifying the information permitted
in any other price display, and requiring that all above-ground
storage or dispensing equipment conspicuously identify the fuel
brand or trademark. N.J.S.A. 56:6-2(a), (c), and (g). The 1938
Act also established restrictions with respect to the price
retailers may charge consumers for gasoline: the posted price
must include all taxes, retailers may not employ the use of
rebates or concessions that would have the effect of selling
fuel below the posted price, and retailers may not sell gasoline
at a price below their net cost of the fuel plus all selling
expenses, which the statute defined as “all overhead and general
business expense[s].” N.J.S.A. 56:6-2(b), (d), and (e). Speedway
challenges the constitutionality of the minimum price
requirement in subsection (b), referred to as the “below-cost
sales prohibition.”
Article III of the 1938 Act provides that a retail dealer’s
failure to comply with the provisions of the 1938 Act’s
provisions would, upon conviction, result in the assessment of
monetary penalties for each offense. N.J.S.A. 56:6-3. Failure to
pay the penalties would subject a dealer to imprisonment for not
more than thirty days. Ibid. Conviction of a second or
subsequent offense could result in revocation of the dealer’s
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license to sell fuel. Ibid. The 1938 Act vested the State Tax
Commissioner with authority to administer and enforce its
provisions, and set forth the process for adjudication of
statutory violations and collection of monetary penalties. L.
1938, c. 163, § 401. It required retail dealers to maintain
books and records of their operation as prescribed by the
Commissioner, and authorized the Commissioner to audit any
dealer’s records and obtain testimony in furtherance of
investigating alleged violations. L. 1938, c. 163, § 502.4
In February 1952, the Legislature created by concurrent
resolution a gasoline study commission to further study the
gasoline industry within the State, particularly the factors
governing price fixing in the retail sale of gasoline.5 (Da1-23).
The 1952 Gasoline Study Commission consisted of nine members:
three from the Senate, three from the General Assembly, and
three from a previous Gasoline Study Committee appointed by the
Governor in 1950. (Da5). In addition to price fixing, the 1952
4 In 1981, amendments to the 1938 Act authorized the State
Superintendent of Weights and Measures, including any county or
municipal weights and measures officer, to recover penalties for
violation of the act. N.J.S.A. 56:6-4.1; L. 1981, c. 230, § 6.
5 The Report of the Gasoline Study Commission, which was
attached to the State’s motion to dismiss below, is a matter of
public record akin to legislative history. Courts evaluating a
motion to dismiss under Rule 4:6-2(e) may consider and take
judicial notice of such matters of public record without
converting the motion to a motion for summary judgment.
Teamsters Local 97 v. State, 434 N.J. Super. 393, 414 (App. Div.
2014) (citing Banco Popular N. Am. v. Gandi, 184 N.J. 161, 183
(2005)).
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Commission surveyed unfair trade practices in New Jersey’s
petroleum industry and recommended new legislation to correct
any practices “which might be found to be injurious to the best
interests of all the people of New Jersey.” Ibid. (emphasis
added); (see also Da20).
At the outset of the report summarizing its findings, the
Commission emphasized that:
Special attention has been directed in this
examination to the plight of those New
Jersey citizens – small businessmen – who
own or operate the retail outlets in this
State. The problem of the retailers and of
all other phases of the petroleum industry
have been carefully and fully reviewed both
from the viewpoint of serving the best
interests of the vast army of consumers of a
commodity – gasoline – which has become a
necessity in modern living and from the
viewpoint of recognizing the difficult and
important position of the small businessman
in an industry dominated by giants.
[(Da6).]
The Commission proposed to further amend the 1938 Act by making
it a misdemeanor for any fuel distributor (including a refiner,
wholesaler, or supplier) to offer, or for any retail dealer to
accept, a rebate or other concession in connection with the
distribution of motor fuel or other product marketed by the
distributor. (Da19). The Commission also proposed to prohibit
other distributor trade practices it determined were unfair,
including contracts with retailers forbidding retailers from
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dealing in or using a competing distributor’s products;
discrimination in the tankwagon price6 charged to different
retailers purchasing the same grade of fuel; and abuses in the
leasing of facilities and equipment to retailers. Ibid. The
Commission strongly urged the Legislature to invoke the State of
New Jersey’s police power to protect and promote the public
welfare by ending the unfair practices that it found were
“curtailing instead of strengthening competition” in the retail
sale of motor fuel because “[t]he motor fuel business
constitutes such an important and necessary part in the economy
of this State.” (Da20).
The Commission contemplated an amendment to require that
any distributor engaged in the retail sale of fuel to the
public, either directly or indirectly, sell at retail (as
opposed to wholesale) at a price determined by the distributor’s
cost of doing business plus the posted tankwagon price for such
motor fuel. (Da20). The Commission noted that company owned and
operated retail stations (which Speedway acknowledges it is (see
Pa2) can often operate at a loss if necessary, “in sharp
contrast to the individual dealer who is compelled to carry on
his business at a profit in order to survive.” Ibid. Even after
6 The tankwagon price “or wholesaler price is the price charged
to the retailer by the wholesaler, or the invoice cost of motor
fuel to the retailer.” (Da15).
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acknowledging the considerable influence these stations exert on
gas prices in areas where they operate, the Commission declined
to recommend the amendment because it determined the issue was
“adequately covered” by the below-cost sales prohibition such
that further legislation would be “superfluous.” Ibid.
In accordance with the 1952 Commission’s recommendations,
L. 1953, c. 413 substantively amended N.J.S.A. 56:6-1 et seq.
The amendments included the Legislature’s declaration that the
practices of the sale and distribution of motor fuels in the
State have developed unfair methods of competition in the
marketing of motor fuels and that such conditions have affected
the supply of motor fuel needed by the general public and
thereby have affected the general welfare of the people of the
State; and that the distribution and sale of motor fuels within
the State is declared to be affected with a public interest.
N.J.S.A. 56:6-19; See also L. 1953, c. 413, § 1. The statute was
re-titled the “Unfair Motor Fuels Practices Act.” N.J.S.A. 56:6-
20.
Prior to enactment, the language of the proposed amendments
banning certain distributor trade practices was modified such
that only conduct engaged in with “intent to injure competitors
or destroy or substantially lessen competition” was prohibited.
N.J.S.A. 56:6-22. The language of the below-cost sales
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prohibition in the retail sale of motor fuel was not similarly
modified or otherwise changed in any way.
Within the past ten years a small number of legislators
have introduced bills to amend the below-cost sales prohibition
to (1) permit a retail dealer to sell motor fuel at a price
below its net cost plus selling expenses to meet competition,
and (2) make it unlawful for a retail dealer to sell at a price
below net cost only when done with the intent to injure
competition. See Senate Bill No. 2414 (2008 Session); Senate
Bill No. 484 and Assembly Bill No. 2932 (2010 Session); Assembly
Bill No. 1567 (2012 Session); and Assembly Bill No. 1695 (2014
Session). (Pa30-46). These bills were not enacted; the
Legislature has not altered the original 1938 language of
N.J.S.A. 56:6-2(b). Speedway alleges that the absence of these
two proposed modifications renders the below-cost sales
prohibition unconstitutional; i.e., that without a meeting
competition defense and a requirement that a retailer selling
below-cost intend to injure competition, the prohibition is
constitutionally infirm. (Pb9; Pa7-13).
B. Speedway’s Challenge to N.J.S.A. 56:6-2(b)
Speedway is a wholly-owned subsidiary of Marathon Petroleum
Company. (Pa1). Speedway owns and operates approximately 2700
convenience stores in the United States, and is the second-
largest chain of company-owned-and-operated convenience stores.
- 8 -
(Pa2). Since 2014, Speedway has owned and operated approximately
70 convenience stores in New Jersey, all of which sell motor
vehicle fuel. Ibid. In 2015, Speedway sold more than 6 billion
gallons of motor fuel and $5 billion in merchandise nationwide;
by its own assertion, Speedway is a large, corporate retailer
that sells a large volume of its refiner-parent company’s fuel
products. Ibid.
On or about October 26, 2016, the Middlesex County
Department of Weights and Measures filed two complaints against
Speedway in Woodbridge Municipal Court alleging that Speedway
violated the below-cost sales prohibition at its retail fuel
station in Hopelawn, New Jersey. (Pa21-22). On February 13,
2017, and without detailing any facts regarding the underlying
municipal complaints against it, Speedway filed this declaratory
judgment action. (Pa1-22).
In its complaint, Speedway sought a declaration that the
below-cost sales prohibition in N.J.S.A. 56:6-2(b): (1) violates
the Due Process Clause of the New Jersey and United States
Constitutions, (2) abrogates Speedway’s common-law right to sell
goods, and (3) violates the Federal and New Jersey Civil Rights
Acts. (Pa7-16). Based on these theories, Speedway also sought to
enjoin the State from enforcing N.J.S.A. 56:6-2(b). Ibid.
- 9 -
On May 26, 2017, the State moved to dismiss the complaint
pursuant to R. 4:6-2(e) for failure to state a claim upon which
relief can be granted. (Pa23-24).
C. Motion Hearing and The Trial Court’s Decision
The Honorable Kay Walcott-Henderson, J.S.C., heard argument
on August 18, 2017, (T4:5-T23:1), and granted the State’s motion
to dismiss Speedway’s complaint (T23:2-T26:21). In articulating
the bases for its decision, the court first stated it would not
restate the facts on the record because there are no facts in
dispute in the context of a pleadings motion. (T23:3-5). Next,
referring to Reider v. State, 221 N.J. Super. 547 (App. Div.
1987), the court described the standard for evaluating a motion
to dismiss for failure to state a claim upon which relief can be
granted. (T23:7-20). The court succinctly summarized the State’s
arguments in support of its motion to dismiss: that the below-
cost sales prohibition comports with substantive due process
requirements, survives rational basis review, and is not
impermissibly overbroad or vague. (T23:21-25). Citing the
standard our Supreme Court enunciated in Hutton Park Gardens v.
West Orange, 68 N.J. 543, 564 (1975), the court explained that
in so far as substantive due process is concerned, the inquiry
in a rational basis review of a legislative enactment is whether
the legislative body could have rationally concluded the
enactment would serve the public interest without arbitrariness
- 10 -
or discrimination. (T24:1-7). The court noted that in the
context of price regulation, this inquiry narrows to whether the
legislative body could have rationally concluded that
unrestrained operation of the competitive market was not in the
public interest. (T24:8-12). The court stressed that the
judiciary “will not evaluate the weight of the evidence for and
against the enactment nor review the wisdom of any determination
of policy which the legislative body might have made,” directly
quoting Hutton Park Gardens, supra, 68 N.J. at 564-65. (T24:8-
16).
After setting forth the legal standard for determining
whether a price regulation satisfies due process, the court
reiterated Speedway’s allegation that the below-cost sales
prohibition violates its property and liberty interests to sell
fuel at a price it chooses, and the State’s counterargument that
the statute satisfies a rational basis analysis and therefore is
not an unconstitutional deprivation of Speedway’s claimed
interests. (T24:17-T25:11).
The court then concluded Speedway’s alleged facts were
legally insufficient to support a claim for relief. (T25:12-16).
Referring to the reasoning articulated in N.J. Ass’n of Health
Plans v. Farmer, 342 N.J. Super. 536 (Ch. Div. 2000), Judge
Walcott-Henderson noted the strong presumption of the statute’s
constitutionality and the heavy, affirmative burden on the party
- 11 -
attacking economic legislation to rebut the presumption.
Further, she noted, such legislation will not be declared void
unless its repugnancy to the Constitution is so manifest as to
leave no room for reasonable doubt. (T25:16-T26:9; see N.J.
Ass’n of Health Plans, supra, 342 N.J. Super. at 551).
Paraphrasing N.J. Ass’n of Health Plans, the court stated that
the presumption of constitutional validity is particularly
strong for economic legislation adjusting the benefits and
burdens of economic life. (T25:16-T26:9 (quoting N.J. Ass’n of
Health Plans, supra, 342 N.J. Super. at 551)). Further, the
court said, courts should not sit as super-legislatures; it is
not the court’s function to evaluate the efficacy or wisdom of a
particular legislative enactment. (T26:13-16 (quoting N.J. Ass’n
of Health Plans, supra, 342 N.J. Super. at 552)).
This appeal by Speedway followed. (Pa27).
ARGUMENT
POINT I
SPEEDWAY FAILS TO ALLEGE A COGNIZABLE
CONSTITUTIONAL CHALLENGE TO THE BELOW-COST
SALES PROHIBITION.
A. The Trial Court Applied the Proper
Standard to Defendants’ Motion to Dismiss
Under Rule 4:6-2(e).
Speedway claims the trial court applied the wrong standard
and improperly reached the merits of Speedway’s constitutional
challenge to the statute when it granted the State’s motion to
- 12 -
dismiss. Not so. Speedway’s complaint sought a declaration that
the below-cost sales prohibition was unconstitutional;
Defendants moved to dismiss the action, arguing that the statute
satisfies all constitutional requirements and Speedway therefore
has no legal basis for its claims. The trial court accepted all
alleged facts as true and assessed the legal sufficiency of
Speedway’s complaint, which is exactly what it is called upon to
do in considering a R. 4:6-2(e) motion. Rieder v. State., 221
N.J. Super. 547, 552 (App. Div. 1987) (citation omitted).
Speedway claims that “the trial court apparently concerned
itself with whether [Speedway] could prove the allegations” but
fails to point to even a single fact pled in the complaint that
the trial court did not take as true. (Pb14). Nor can Speedway
point to a single fact that the court suggested Speedway would
be unable to prove. That is because there are none.
Speedway’s vague claim that “[t]he trial court’s ‘analysis’
of [Speedway’s] complaint was diametrically opposed” to the R.
4:6-2(e) standard (Pb15) is similarly meritless. Although
lacking in specificity, Speedway appears to object to the trial
court’s application of the presumption of constitutionality
attached to all New Jersey legislative enactments. N.J. Sports &
Exposition Auth. v. McCrane, 61 N.J. 1, 8 (1972); State v. Trump
Hotels & Casino Resorts, 160 N.J. 505, 525 (1999). Speedway
incorrectly argues that the presumption of constitutionality
- 13 -
does not apply at the motion to dismiss stage of proceedings.
Speedway misunderstands the distinction between factual
allegations and legal conclusions as relates to a motion to
dismiss under R. 4:6-2(e).
The trial court did not pass judgment on the truth of
Speedway’s alleged facts; rather it accepted them as true for
the purpose of reviewing the motion to dismiss. Banco Popular N.
Am. v. Gandi, 184 N.J. 161, 166 (2005). What the trial court did
not do, and what R. 4:6-2(e) does not require, is accept as true
Speedway’s legal conclusions. Edwards v. Prudential Prop. &
Cas., 357 N.J. Super. 196, 202 (App. Div. 2003). On a motion to
dismiss, the non-moving party is only entitled to have its
factual allegations taken as true and to the benefit of
reasonable inferences from those factual allegations. Printing
Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989);
Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988).
The court must then decide whether those facts and inferences,
if later proven, would be sufficient to establish a cause of
action. Scheidt v. DRS Technologies, Inc., 424 N.J. Super. 188,
193 (App. Div. 2012)(citing Printing Mart-Morristown, supra, 116
N.J. at 768). New Jersey’s liberal pleading standard pertains to
facts only; it does not lessen the legal requirements for any
particular cause of action.
- 14 -
New Jersey courts do not hesitate to dismiss on the
pleadings constitutional claims that fail to state a claim upon
which relief can be granted. Teamsters Local 97 v. State, 434
N.J. Super. 393, 413 (App. Div. 2014) (citing J.D. ex rel.
Scipio-Derrick v. Davy, 415 N.J. Super. 375, 397 (App. Div.
2010)); County of Warren v. State, 409 N.J. Super. 495 (App.
Div. 2009), certif. denied, 201 N.J. 153 (2010). Statutes are
presumed to be constitutional, and every possible presumption
favors the validity of an act of the Legislature. Teamsters
Local 97 v. State, 434 N.J. Super. 393, 415 (App. Div. 2014)
(citing N.J. Sports & Exposition Auth. v. McCrane, 61 N.J. 1, 8
(1972) (citation omitted)); see also State v. Buckner, 223 N.J.
1, 5 (2015); State v. Trump Hotels & Casino Resorts, 160 N.J.
505, 526-27 (1999). The power of the courts to declare a statute
unconstitutional must be delicately exercised, and a party
seeking to rebut the “strong presumption of constitutionality”
that attaches to a statute must show that the statute’s
“repugnancy to the Constitution is clear beyond a reasonable
doubt.” Hamilton Amusement Ctr. v. Verniero, 156 N.J. 254, 285
(1998), cert. denied, 527 U.S. 1021 (1999) (citing Franklin v.
New Jersey Dept. of Human Servs., 111 N.J. 1, 17 (1988)). This
presumption is not an affirmative defense to be proven by the
State. It is part and parcel of every constitutional challenge
that is equally applicable on a motion to dismiss, on summary
- 15 -
judgment, or at trial. See Teamsters Local 97, supra; Sojourner
A. v. N.J. Dep’t of Human Servs., 177 N.J. 318 (2003); County of
Warren v. State, 409 N.J. Super. 495 (App. Div. 2009), certif.
denied, 201 N.J. 153 (2010). Therefore, to survive a motion to
dismiss a constitutional claim, a plaintiff must allege facts
that, if true, would be sufficient to overcome the presumption
and demonstrate the statute’s repugnancy to the Constitution.
Applying these legal standards, the trial court properly
determined that even allowing every reasonable inference of
fact, Speedway’s constitutional challenge failed as a matter of
law. Thus, dismissal at this stage was proper. See Rieder,
supra, 221 N.J. Super. at 552.
B. The Below-Cost Sales Prohibition Does Not Violate State or Federal Constitutional
Due Process Requirements.
The first, second, and third counts of Speedway’s Complaint
assert that the absence of two elements in the below-cost sales
prohibition - an intent to harm competition and a meeting
competition defense – renders the statute unreasonable,
arbitrary, and capricious. Contrary to Speedway’s claims, the
below-cost sales prohibition does not violate due process
because it does not impose an impermissible restriction on free
trade and legitimate competition. Nor does the below-cost sales
prohibition unlawfully limit Speedway’s common-law right to
freely sell goods.
- 16 -
As noted, economic legislation is bestowed a formidable
presumption of constitutional validity. Teamsters Local 97,
supra, 434 N.J. Super. at 415 (quoting McCrane, supra, 61 N.J.
at 8). A statute’s presumptive validity can be rebutted only
upon a showing that its repugnancy to the Constitution is clear
beyond a reasonable doubt. Hamilton Amusement Ctr., supra, 156
N.J. at 285. If a statute infringing on non-fundamental rights
is supported by any conceivable rational basis, it will
withstand a substantive due process attack. Greenberg v.
Kimmelman, 99 N.J. 552, 563 (1985) (citing Nebbia v. New York,
291 U.S. 502, 54 S. Ct. 505, 78 L. Ed. 940 (1934) (other
citations omitted)).
The United States and the New Jersey Constitutions prohibit
the deprivation of liberty and property without due process of
law. Retail gasoline dealers are not a suspect or semi-suspect
class for purposes of constitutional class protections and the
retail sale of gasoline does not implicate a fundamental right.
The liberty interest Speedway invokes is not a fundamental
right, but an individual’s right to sell his goods at a price of
his own choosing. (Pb18-19).
Constitutional protection of this liberty interest is not
absolute; the freedom to contract is not unlimited:
The liberty safeguarded is liberty in a
social organization which requires the
protection of law against the evils which
- 17 -
menace the health, safety, morals and
welfare of the people. Liberty under the
Constitution is thus necessarily subject to
the restraints of due process, and
regulation which is reasonable in relation
to its subject and is adopted in the
interests of the community is due process .
. . . Liberty implies the absence of
arbitrary restraint, not immunity from
reasonable regulations and prohibitions
imposed in the interests of the community.
[West Coast Hotel v. Parrish, 300 U.S. 379,
391-92; 57 S. Ct. 578, 581-82; 81 L. Ed.
703, 708-09 (1937) (citations omitted)
(emphasis added).]
Both the United States and New Jersey Supreme Court
recognize the authority under both Constitutions to restrain
otherwise legitimate commercial uses of property. See e.g.,
Nebbia v. New York, 291 U.S. 502, 54 S. Ct. 505, 78 L. Ed. 940
(1934); West Coast Hotel v. Parrish, supra, 300 U.S. 379, 57 S.
Ct. 578, 81 L. Ed. 703 (1937); Hutton Park Gardens v. West
Orange, supra, 68 N.J. 543 (1975); Fried v. Kervick, 34 N.J. 68
(1961). In Hutton Park Gardens, supra, 68 N.J. at 556-63, relied
upon by the lower court, our Supreme Court discussed at length
the history of governmental price regulations. The Court adopted
the standard enunciated by the United States Supreme Court in
Nebbia, supra, a case involving regulation of milk prices. Ibid.
In Nebbia, the United States Supreme Court held that
governmental regulation of prices is constitutionally
permissible where, in the opinion of legislature,
- 18 -
conditions or practices in an industry make
unrestricted competition an inadequate
safeguard of the consumer’s interests . . .
appropriate statutes passed in an honest
effort to correct the threatened
consequences may not be set aside because
the regulation adopted fixes prices
reasonably deemed by the legislature to be
fair to those engaged in the industry and to
the consuming public.
[Nebbia, supra, 291 U.S. at 538 (emphasis
added).]
In assessing a due process challenge to legislative price
regulation, the judiciary’s limited role is to determine whether
the legislative body could rationally have concluded that the
unrestrained operation of the competitive market was not in the
public interest. Hutton Park Gardens, supra, 65 N.J. at 563-64.
As the trial court acknowledged, the judiciary’s role is not to
second-guess the Legislature. (T24:12-16). The court should not
evaluate the weight of the evidence for and against the
enactment nor should it consider the wisdom of policy
determinations the legislative body might have made. See Hutton
Park Gardens, supra, 65 N.J. at 565.
The below-cost sales prohibition is one of a set of
provisions aimed at preventing unfair practices in the retail
sale of motor fuel. The prohibition applies equally to all
retailers and to all sales below an individual retailer’s costs
and thus is not arbitrary or discriminatory. Speedway does not
and cannot posit any set of facts that would preclude the
- 19 -
possibility that the below-cost sales prohibition is in the
public interest and is fair to the industry. The provision sets
a minimum price all retail dealers may charge consumers for
gasoline, a price based on each dealer’s individual costs.
Although reduced retail fuel prices may initially benefit
consumers, as the Gasoline Study Commission noted, “it would
appear that the consuming public pays for the rather high
mortality rate among retail dealers . . . .” (Da13). The
Commission reasoned that to serve the public’s interest, any
dealer cutting prices should be left entirely to his own -
without any kind of artificial support in the form of subsidies
- and that doing so would actually encourage competition by
placing more emphasis on individual dealer initiative. (Da13).
The Legislature reasonably concluded that selling fuel below a
profit-generating price is a disruptive and unfair trade
practice, and accepted the Commission’s finding that all but
company owned and operated retailers are “compelled to carry on
[their] business at a profit in order to survive.” (Da20).
Speedway attempts to distinguish its constitutional
challenge as against the design of the below-cost prohibition.
(Pb17). This is a distinction without a difference for purposes
of a due process challenge to the statute. As written, the
below-cost sales prohibition survives rational basis review. The
Legislature has broad discretion to craft legislation to
- 20 -
accomplish its goals. Brown v. State, 356 N.J. Super. 71, 86
(App. Div. 2002). The Legislature determined, based on the
thorough report of the Gasoline Study Commission, that below-
cost selling of gasoline is an unfair trade practice inimical to
the public interest due to its impact on the retail motor fuel
market, and that the below-cost sales prohibition protects the
public interest and is fair to those engaged in the industry.
See Nebbia, supra, 291 U.S. at 538; Hutton Park Gardens, supra,
65 N.J. at 563-64.
Speedway also claims that the below-cost sales prohibition
curtails - rather than fosters – legitimate competition, and
offers what it terms a “simple hypothetical” in a failed effort
to prove the point. (Pb23). Speedway’s hypothetical actually
illustrates the benefit of the below-cost sales prohibition to
the public observed by the Legislature. In the hypothetical,
Retailer A operates its station more efficiently than Retailer B
and therefore incurs fewer costs in selling fuel and can sell
fuel at a lower price than Retailer B’s price. If lowering its
price to stay competitive with Retailer A would cause Retailer B
to sell below its cost, Retailer B would be in violation of the
below-cost sales prohibition. If Retailer B suspects Retailer A
may be selling below cost, Retailer B is commercially better off
by alerting the state or local Office of Weights and Measures to
Retailer A’s price and lowering its own price as far as possible
- 21 -
without going below its costs. If Retailer B were to lower its
price below costs, it would only hasten its commercial demise,
particularly if it is a small business. It is this race to the
bottom and its impact on the market - and ultimately the public
– that the Legislature reasonably sought to prohibit.
If Retailer A is selling above its costs in compliance with
the below-cost sales prohibition, then competition in this
hypothetical retail motor fuel market is not only preserved but
enhanced. Retailer B remains commercially viable, but
incentivized to make operations more efficient and competitive.
If an investigation reveals Retailer A is actually selling below
its cost, Retailer A will be enjoined and the potential for
market instability is thwarted. Price-cutting below costs in a
highly price-sensitive market, such as the retail sale of motor
fuel, cannot be sustained by any retailer in perpetuity.
As our Supreme Court noted in Fried, supra, New Jersey
previously had a long history of gasoline price wars among
gasoline retail dealers, and the Court took note of the
financial distress suffered by retail operators and their
families from destructive pricing practices. 34 N.J. at 79-80.
In enacting and maintaining the below-cost sales prohibition for
nearly eighty years, the Legislature deemed it to be a
reasonable safeguard for maintaining a competitive market. This
court should not disturb that reasonable judgment.
- 22 -
Nothing in State v. Packard-Bamberger & Co., Inc., 123
N.J.L. 180 (Sup. Ct. 1939) suggests a contrary result. More than
thirty-five years before our Supreme Court set forth the proper
standard to analyze economic legislation in Hutton Park Gardens,
the Court in Packard-Bamberger considered the constitutionality
of a statute prohibiting the below-cost sale of general
merchandise such as groceries. The Court viewed the statute as
overreaching in large part because its application was not
limited to the retail sale of commodities “affected with a
public interest.” Id. at 184-85.
In Wilentz v. Crown Laundry Serv. Inc., 116 N.J. Eq. 40
(Ch. 1939), another decision relied on by Speedway, the court
noted the rapidly expanding conceptions of legislative authority
to restrict trade when in service of the public interest.
Speedway fails to note this important passage from Wilentz:
Indeed, a few years ago every court in the
land would have held that a statute
abrogating that right [to freely contract in
the sale of goods], except in the case of a
business or property affected with a public
interest, would deprive the individual of
his property without due process of law, and
therefore be void. (citations omitted).
Doubtless[,] judicial conceptions of the
power of the legislature to restrict the
individual's liberty of contract have been
undergoing a change in recent years. Nebbia
v. People of State of New York, 291 U.S.
502; 54 S. Ct. 505; 78 L. Ed. 940; 89 A.L.R.
1469. Doubtless[,] legislative power,
usually dormant, may be recalled to activity
by the stress of the times.
- 23 -
[Id. at 43 (citations omitted) (emphasis
added).]
The Packard-Bamberger and Wilentz decisions both recognize
the distinction between general commodities and those affected
with a public interest when evaluating statutes alleged to
infringe the liberty of contract. This distinction is the
difference between reasonable and unreasonable restraints on
trade. In the 1952 amendments to N.J.S.A. 56:6-1 et seq., the
Legislature expressly declared motor fuel to be a commodity
affected with the public interest. The Legislature provided an
intent-to-harm requirement for prohibitions on certain
commercial conduct.7 With respect to the retail sale of motor
fuel - a commodity deemed to be affected with a public interest
– the Legislature reasonably concluded that public interest is
best served by reasonably infringing on all retailers’ right to
sell fuel at a price below their costs.
Speedway also suggests that this court should follow the
Arkansas Supreme Court’s decision in Ports Petroleum Co. v.
Tucker, 916 S.W. 2d 749 (Ark. 1996). (Pb25). In that case, Ports
Petroleum Company challenged the below-cost sales prohibition in
the Arkansas Petroleum Trade Practices Act under the Arkansas
and U.S. Constitutions. Id. at 751, 755. The Arkansas challenge
was a case of first impression, as is Speedway’s due process
7 See supra, Db6-7, discussing amendments enacted pursuant to the
Report of the 1952 Gasoline Study Commission.
- 24 -
challenge, and the Arkansas court acknowledged the paucity of
authority from other jurisdictions regarding the
constitutionality of a below-cost sales prohibition lacking an
intent requirement. Id. at 753. The court followed a standard
adopted by the Alabama Supreme Court in State v. Mapco
Petroleum, Inc., 519 So. 2d 1275, 1284-85 (Ala. 1987) for
reviewing state economic regulations: if the enactment penalizes
innocent conduct not reasonably related to the problem of
monopolistic practices or other deceptive, disruptive or
destructive price cutting, the act strikes too broadly. Ports
Petroleum, supra, 916 S.W. 2d at 690-91. The Ports Petroleum
court determined that prohibiting below-cost selling in Arkansas
interfered too much with the innocent competition “fostered by
below-cost sales.” Id. at 692. The court did not analyze or even
refer to any legislative history or other legislative findings
regarding past disruptive pricing practices in the Arkansas
retail gasoline market or the public interest in prohibiting any
such conduct.
Unlike Arkansas or Alabama, our Supreme Court has expressly
followed the standard in Nebbia and its progeny when reviewing
state economic regulations: if the Legislature curbs
unrestrained and harmful competition by reasonable measures that
are not arbitrary or discriminatory to promote public welfare,
the requirements of due process are satisfied. Hutton Park
- 25 -
Gardens, supra, 68 N.J. at 562-63. Neither Ports Petroleum nor
Mapco Petroleum hold any precedential value here. The
legislative history underpinning New Jersey’s Unfair Motor Fuel
Practices Act amply supports the State’s argument that
prohibiting some otherwise innocent commercial conduct in the
retail motor fuel market – the right to sell below cost – is
reasonably necessary and related to the prevention of the
disruptive and destructive effects of such price-cutting,
thereby tipping the judicial balance in favor of the
constitutional validity of the prohibition.
In relying on Arkansas and Alabama jurisprudence, Speedway
fails to note that in Fried v. Kervick, 34 N.J. 68 (1961), our
Supreme Court already upheld another subsection of N.J.S.A.
56:6-2 against similar constitutional challenge. Subsection (e)
of N.J.S.A. 56:6-2 prohibits motor fuel retailers from giving
any person rebates or other concessions that would permit the
person to obtain fuel from the retailer at a price below the
posted price applicable at the time of sale. Like subsection
(b), the provision prohibits such conduct without regard to a
retailer’s intent. A retail gasoline dealer, Sam Fried, alleged
the subsection violated his due process and equal protection
rights. Fried, supra, 34 N.J. at 69. The Court upheld the
provision, concluding it was a reasonable exercise of the police
- 26 -
power to safeguard the public welfare and was not an arbitrary
or discriminatory restraint.8 Id. at 82.
The Fried Court discussed the history of gasoline price
wars in New Jersey at great length, citing not only to the
Report of the 1952 New Jersey Gasoline Study Commission, but
also to the Annual Report of the Motor Fuel Division. Fried,
supra, 34 N.J. at 80. The Court also cited the Report of the
United States Senate Select Committee on Small Business on
Petroleum Marketing Practices in New Jersey (84th Congress, 2d
Session 1956; Report No. 2810), which declared that New Jersey
“was the market in which competitive problems of gasoline
retailers were most pronounced.” Ibid. The Court correctly
reasoned:
As was indicated in the Nebbia case, the
police power of a state is incapable of
precise definition and limitation. It
develops by an empiric process and its
boundaries expand to include authority to
regulate an evil associated with any
business which for the public good justifies
the particular measure of control. The
Legislature is presumed to know the needs of
the people . . . .
[Id. at 75 (citation omitted).]
8 Following Fried, the Chancery Division upheld subsection (f)
of N.J.S.A. 56:6-2, which bars the use of games of chance in
connection with the sale of motor fuels, protecting retailers
from being compelled to use such games to remain competitive.
United Stations of New Jersey v. Getty Oil Co., 102 N.J. Super.
459, 474-76 (Ch. Div. 1968).
- 27 -
The Fried Court’s rationale in upholding subsection (e) is
equally applicable to Speedway’s challenge to subsection (b).
The Legislature, when enacting these provisions, had in mind
“the many problems associated with price wars and various unfair
and fraudulent practices engaged in by dealers in selling
gasoline to the consuming public.” Id. at 81. The Legislature
reasonably concluded, as supported by the findings in the Report
of the 1952 Gasoline Study Commission, that prohibiting fuel
retailers from selling below a profit-generating price without
regard to their intent is a necessary restriction on the freedom
to contract in order to maintain a competitive market for retail
fuel “in an industry dominated by giants.” (Da6). As noted,
certain restrictions on commercial conduct enacted pursuant to
the recommendations of the Commission did in fact contain an
intent-to-injure requirement. That the Legislature enacted the
below-cost sales prohibition without an intent requirement and
has maintained this language reflects the Legislature’s
considered judgment that the provision is a reasonable
restriction that is fair to both those engaged in the retail
sale of motor fuel and the consuming public. See Nebbia, supra,
291 U.S. at 538; Hutton Park Gardens, supra, 65 N.J. at 563-64;
Fried, supra, 34 N.J. at 82.
- 28 -
C. The Below-Cost Sales Prohibition Is Not
Unconstitutionally Vague or Overbroad.
The below-cost sales prohibition is not impermissibly vague
or overbroad. The terms of the statute are sufficiently clear
that retailers may comply with it. Indeed, the provision has
endured nearly eighty years with virtually no litigation
suggesting a debate as to its meaning. As such, the trial court
properly determined as a matter of law that the below-cost sales
prohibition is not impermissibly vague or overbroad.
Void for vagueness is “essentially a procedural due process
concept grounded in notions of fair play.” Brown v. City of
Newark, 113 N.J. 565, 577 (1989) (quoting State v. Lashinsky, 81
N.J. 1, 17 (1979). The test demands that a law be sufficiently
clear and precise that persons of ordinary intelligence may
comply with it. Brown, supra, 113 N.J. at 577; State v. Lee, 96
N.J. 156, 165-66 (1983); Town Tobacconist v. Kimmelman, 94 N.J.
85, 125 n. 21 (1983). “It is [also] well settled that ‘[a]bsent
any explicit indications of special meanings, the words used in
a statute carry their ordinary and well-understood meanings.’”
Commc’ns Workers of Am. v. State of N.J., Dep’t of Treasury, 421
N.J. Super. 75, 103 (Law Div. 2011) (citing State v. Afanador,
134 N.J. 162, 171 (1993)). The degree of constitutionally-
tolerable vagueness depends on the nature of the enactment and
whether the law affords fair warning of what is proscribed.
- 29 -
Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc.,
455 U.S. 489, 102 S. Ct. 1186, 71 L. Ed. 2d 362 (1982).
An economic regulation is “subject to a less strict
vagueness test because its subject matter is often more narrow,
and because businesses, which face economic demands to plan
behavior carefully, can be expected to consult relevant
[authorities] in advance of action.” In re Farmers’ Mut. Fire
Assurance Ass’n. of New Jersey, 256 N.J. Super. 607, 619 (App.
Div. 1992) (quoting State v. Cameron, 100 N.J. 586, 592 (1985)).
Regulated entities may also be able to clarify the meaning by
affirmatively inquiring or resorting to an administrative
process. Ibid. (citing Village of Hoffman Estates, supra, 455
U.S. at 498).
N.J.S.A. 56:6-1 et seq. is an economic regulation enacted
almost eighty years ago. In all that time the language of the
below-cost sales prohibition has remained unchanged despite
multiple legislative amendments to other provisions. Aside from
the Neeld case discussed below, there have been no other
apparent legal challenges to the provision. Gasoline retail
dealers subject to the prohibition, such as Speedway, may
consult the relevant authorities – namely, the Division of
Consumer Affairs, Office of Weights and Measures – in advance of
any conduct that may violate the law.
- 30 -
Speedway pled no facts that if true would demonstrate that
ordinary reasonable persons are unable to understand and comply
with the law. Nor does Speedway plead that it consulted relevant
authorities regarding its pricing practices, despite being
wholly owned and operated by an even larger sophisticated
business entity dealing in the sale of retail fuel throughout
the United States. Speedway’s conclusory claim that it is does
not know the meaning of the terms “net cost” and “selling
expenses” when setting the retail price for motor fuel in New
Jersey is precisely the type of boilerplate assertion that is
given no credence on a motion to dismiss. See Scheidt, supra,
424 N.J. Super. at 193 (finding that “conclusory allegations are
insufficient. . .”). It is also implausible in light of the
statute’s long and unremarkable history and irrelevant because
the vagueness standard is objective, not subjective. See Brown,
supra, 113 N.J. at 577; Lee, supra, 96 N.J. at 165-66; Town
Tobacconist, supra, 94 N.J. at 125 n. 21.
The term “net cost” is not defined in N.J.S.A. 56:6-2(b),
but it is a corporate economic and accounting term commonly
employed in the retail sale of goods. Moreover, the term is
subject to reasonable interpretation and is one in which a
person of ordinary intelligence can understand and deduce. In
this instance, a reasonable person could look to the ordinary
and well-understood plain meanings of “net” and “cost.”
- 31 -
Specifically, cost is defined as “an amount to be paid or to be
paid for a purchase,” while net is defined as “remaining after
all deductions and adjustments have been made.” Webster’s II New
College Dictionary 255, 734 (Rev. and updated 2001). These
definitions reflect the ordinary and well-understood meanings of
the terms in the statute. These are not difficult concepts. It
is entirely reasonable for the Legislature to expect gasoline
retailers to be able to interpret the “net cost” of gasoline.
Notably, the vagueness test “does not consist of a linguistic
analysis conducted in a vacuum. It includes not simply the
language of the provision itself, but related provisions as
well, and especially the reality to which the provision is to be
applied.” In re DeMarco, 83 N.J. 25, 37 (1980). Thus, the
meaning of “net cost” in N.J.S.A. 56:6-2(b) is not impermissibly
vague.
The term “selling expenses” is defined in the statute as
“all overhead and general business expenses.” N.J.S.A. 56:6-1.
Again, absent any indication of special meaning in the statute,
these words carry their ordinary and well-understood meanings.
In this context, “overhead” is “the regular operating expenses
of a business, including the costs of rent, utilities, upkeep,
and taxes, and excluding labor and materials.” Webster’s II New
College Dictionary 782 (Rev. and updated 2001).
- 32 -
Speedway far overstates the holding in Neeld v. Automotive
Products Credit Ass'n, 21 N.J. Super. 159 (Cty. Ct. 1952), to
support a remarkable claim that the State is estopped from
defending the constitutionality of a statute against a vagueness
challenge. In Neeld, following an audit of defendant’s retail
gasoline operation over a seven-day period in 1951, defendant
was charged with violating the below-cost sales prohibition. The
Deputy Director of the Division of Taxation brought an action in
the Union County District Court of New Jersey to recover
penalties. Defendant challenged enforcement of the statute on
grounds of vagueness. The Neeld court cautioned that, as a court
of limited jurisdiction, its function was not “to pioneer in the
field of constitutional law” and that the “better practice is
for the inferior court to assume that an act is constitutional
until it has been passed upon by the Appellate Court,” unless it
so clearly contravenes the Constitution that there can be no
reasonable doubt. Neeld, 21 N.J. Super. at 161 (quoting Legg v.
County of Passaic, 122 N.J.L. 100 (Sup. Ct. 1939)).
Nevertheless, to adjudicate the matter before it, and upon the
erroneous conclusion that gasoline was a commodity not affected
with a public interest, the court acquitted the retailer and
held that the statute was unenforceable for uncertainty. Id. at
162, 165.
- 33 -
In arguing that this sixty-six-year old District County
Court decision somehow estops the State from defending the
statute, Speedway ignores the Neeld court’s overt disclaimer:
“Although I am inclined to think it invalid, it cannot be said
to be clear beyond a reasonable doubt that the prohibition
against selling below cost, without more, is unconstitutional.”
Id. at 163 (emphasis added). Thus, the court in Neeld did not
hold that the provision is unconstitutionally vague. Speedway’s
assertion that the doctrine of collateral estoppel precludes the
State from defending a vagueness challenge is wholly without
merit.
Significantly, there has been no apparent legal challenge
to the below-cost sales prohibition since the Neeld decision
more than sixty-five years ago. The statute has continued to be
enforced, which in and of itself shows that the provision is
sufficiently clear to the gasoline retail industry to afford
certainty in its enforcement. Our Supreme Court has long held
that:
[O]ne of the fundamental policies of our
jurisprudence is not to declare
unconstitutional a statute which has been in
force without any substantial challenge for
many years unless its unconstitutionality is
obvious . . . contemporaneous construction
and long usage and especially the practical
interpretation by the various departments of
the government, are entitled to great weight
in the construction of constitutional
provisions.
- 34 -
[Legg, supra, 122 N.J.L. at 102 (citations
omitted); see also State v. Buckner, 223
N.J. 1, 34 (2015)(citations omitted); State
v. Trump Hotels & Casino Resorts, 160 N.J.
505, 527 (1999).]
For these reasons, N.J.S.A. 56:6-2(b) is not impermissibly vague
and Speedway’s challenge fails as a matter of law.9
Nor is N.J.S.A. 56:6-2(b) overly broad. In making an
overbreadth determination, “the question is whether the
enactment reaches a ‘substantial amount of constitutionally
protected conduct’ . . . whether the reach of the law extends
too far in fulfilling the State’s interest.” State v. Lee,
supra, 96 N.J. at 164-165 (citing Village of Hoffman Estates,
supra, 455 U.S. 489, 494 (1982)). For the reasons discussed, the
below-cost sales prohibition is a reasonable restriction on
retailers’ right to sell fuel in furtherance of an important
public interest. Speedway’s overbreadth claim also fails as a
matter of law.
D. Because the Statute Does Not Deprive
Speedway of Due Process, Speedway Has No
Viable Civil Rights Claims.
The sixth count of Speedway’s complaint asserted that
through enforcement of the below-cost sales prohibition it has
9 Even assuming arguendo that either “net cost” or “selling
expenses” were vague, a more appropriate and judicially-
efficient mechanism for Speedway to seek relief would be to
petition for rulemaking by the agency responsible for the
enforcement of this statute, as the agency has the expertise to
promulgate appropriate regulations.
- 35 -
been deprived of its substantive due process rights under
federal and state constitutions. Because the trial court
properly dismissed Speedway’s due process challenges, as
discussed above, Speedway has no viable claims under federal or
state civil rights laws. Accordingly, dismissal of this count
should be affirmed.
POINT II
THE TRIAL COURT MADE SUFFICIENT FINDINGS IN
SUPPORT OF ITS DECISION TO DISMISS
SPEEDWAY’S COMPLAINT.
For all the reasons stated, there is no basis to remand
this matter because the trial court properly dismissed
Speedway’s complaint. But even if this court were to remand,
there is certainly no basis for assignment to a different judge.
This court should reject Speedway’s contention that the trial
judge failed to abide by court rules or to appreciate the
significance of this matter.
Rule 1:7-4 requires a trial court to “by an opinion or
memorandum decision, either written or oral, find the facts and
state its conclusions of law thereon in all actions tried
without a jury, on every motion . . . .” See also Pressler &
Verniero, Current N.J. Court Rules, cmt. 1 on R. 1:7-4 (2018).
“Naked conclusions do not satisfy the purpose of [Rule] 1:7-4.
Rather, the trial court must state clearly its factual findings
- 36 -
and correlate them with the relevant legal conclusions.” Curtis
v. Finneran, 83 N.J. 563, 569-70 (1980) (citation and internal
quotation marks omitted).
The requirements of R. 1:7-4 must obviously be viewed in
light of the procedural posture of the case and the nature of
the motion before the court. Because the State moved to dismiss
pursuant to R. 4:6-2(e) for failure to state a claim upon which
relief could be granted, the motion is based solely on the
pleadings. See e.g. Sellers v. Schonfeld, 270 N.J. Super. 424,
426 (App. Div. 1993); see also Pressler & Verniero, Current N.J.
Court Rules, cmt. 4.1.2 on R. 2:6-2 (2018). On such motions, the
trial court’s “inquiry is limited to examining the legal
sufficiency of the facts alleged on the face of the complaint.”
Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739,
746 (1989). The court must give plaintiffs every reasonable
inference of fact and “accept as true the facts alleged in the
complaint.” Darakjian v. Hanna, 366 N.J. Super. 238, 242 (App.
Div. 2004); see Printing Mart, supra, 116 N.J. at 746. Thus,
there are no “factual findings” for a court to make on such a
motion.
Judge Walcott-Henderson’s findings comport with the legal
standard for deciding a motion to dismiss pursuant to R. 4:6-
2(e) and the requirements of R. 1:7-4. In her decision, Judge
Walcott-Henderson noted that no facts were in dispute, that she
- 37 -
was accepting as true the facts alleged in Speedway’s complaint,
and that she was giving Speedway every reasonable inference of
fact. Based upon those facts, she evaluated the legal
sufficiency of Speedway’s constitutional claims and resolved
them as a matter of law, placing her reasons on the record. To
make any additional findings of fact, as suggested by Speedway,
would improperly go beyond the scope of a motion to dismiss.
Speedway fails to cite any case that deals specifically
with a motion to dismiss on this point.10 For example, Speedway
cites this Court’s decision in a post-judgment dissolution
appeal from the Family Part involving child support
calculations. Avelino-Catabran v. Catabran, 445 N.J. Super. 574
(App. Div. 2016). In that case, this Court determined the trial
court patently abdicated its obligation to apply support
calculation guidelines or explain deviations therefrom. Id. at
596. Speedway’s reference to Catabran fails to support its
request, as application of child support guidelines in a family
matter is entirely distinguishable from determining the
constitutionality of a statute on a motion to dismiss on the
pleadings; the former is fact-dependent, the latter raises only
issues of law. The trial court’s decision here is sufficiently
10 Of the nine cases cited by Speedway to support its point, five
are unpublished and therefore not binding on this court. Of
those five, there is not one that arose in the context of a
motion to dismiss.
- 38 -
detailed to satisfy R. 1:7-4 and evinces the court’s
understanding of the constitutional issues presented in
Speedway’s pleading, the applicable standard of review, and its
determination that dismissal of all counts was sufficiently
supported by the law.
Speedway’s contention that the trial judge failed to
appreciate the importance of the constitutional issues is also
utterly without merit. In her decision, Judge Walcott-Henderson
clearly identified the issues raised in both Speedway’s
complaint and in the State’s motion to dismiss. (T23:2-T25:11).
She recognized that there is a strong presumption of
constitutionality and that, as a result, courts do not lightly
strike down statutes. (T25:12-T26:21). Her reasoning for
granting the State’s motion to dismiss demonstrates her
appreciation for the import of the constitutional issues raised
below.
Additionally, appellate courts sparingly exercise their
authority to direct a different judge to consider a matter on
remand. See Pressler & Verniero, Current N.J. Court Rules, cmt.
4 on R. 1:12-1 (2018). Generally, this authority is only invoked
to preserve the appearance of a fair and unprejudiced hearing.
Ibid. Additionally, “bias cannot be inferred from adverse
rulings against a party.” Strahan v. Strahan, 402 N.J. Super.
298, 318 (App. Div. 2008). In Strahan for example, while this
- 39 -
court found that the trial court failed to make specific
findings of fact necessary to sustain the lower court’s ruling,
it found no reason to remand to a different judge. Id. at 310-
12, 318. Nothing in the trial court’s decision suggests bias or
provides any other basis to direct remand to a different judge.
Thus, Speedway’s request for a remand to a different trial judge
should be rejected.
- 40 -
CONCLUSION
For the foregoing reasons, this Court should affirm the
trial court’s order dismissing Speedway’s complaint.
Respectfully submitted,
GURBIR S. GREWAL
ATTORNEY GENERAL OF NEW JERSEY
Attorney for Defendants-Respondents
the State of New Jersey and the
Attorney General
By: /s/ Wendy Leggett Faulk
Wendy Leggett Faulk
Deputy Attorney General
Attorney ID#043321996
Date: February 15, 2018
- -
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STATE OF NEW JERSEY
Rep
ort of
the
N~~,Gasoline study Co~nmisslon
I //
Created by
Assembly Concurrent Resolution
I~Io
. 7, of 19
52
TO THE
GOVERNOR AND THE LEGISLATURE
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~ VIACCRELLISH ~ QUIGLEY CO.
LEGISLATIVE PRINTERS
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TABLE OF CONTENTS.
c~.~r
I.Creation, Or~~anization and Proceduze of the
Commission ...............
... ........
....
7
IZ.
The Petroleum Industry in New Jersey .....
..9
III.
Are There Too Many Service Stations in New
Jersey.... ...
. .... .
.....
.....
.......
....
12
IV.A Cost Survey as Conclusive Evidence of Retail
Prices
......
... ... ........ .
..............
14
V.
Divorcement of ~~holesaling from Retailing ...
1 r
VI.
Subsidies ............
....... .
... ........
...
21
VII.
Leases and Contracts .
...... ...
. .....
... .
. ..
24
VIII.
Dealez Tank~vagon Prices .
.......
... .... ....
27
IX.
Unbranded Gasoline ..........
...... .... .
...
29
X.
Operation of Sign La«~ .
.......
....
. .... .
...
31
XI.
Seri=ice Stations in Relation to Told Highwa5~s
33
.III.
Summary of Proposed Legislation ... .......
.35
XIII.
Conclusions
....
... .
..... ....
...........
....
3~
-iFeUruar3T 1G, 1953.
T o The Honoruble .Al f rnrl ~'. ~~ri~~coll,
Governor of the State o~ 1Vcu Jersc~
To The Honorable 11
1c~r,2~b~,~-s of the Senate a
~tc~ t
h.e Geazeral
.Assembly of the State o~ Ne~.e Je7•sey:
SIRS We, the members of the Gasoline Study Commission ap-
~ointed
ley you in
Febrilar3T of 1952 to
stucl~- the gasoline
industry in the Sate of ~7
e~~ Jersey, «~ith ~~articular refer-
ence to the factors governing the
fizi~lb of prices of gasoline
to the public and any related matter, have the honor and
privilege of transmitting to ~-ou here~~~itli oui• report.
Sincerely,
~SJ ~~VAYICE DL'~iO~TT~ JR.
~'~rAY\E DLT112nNT, J~.,
Clz.air~rna,n
Y ~ S J VINCE~ T E. HULL
VINCENT E. HULL
x x x x x x x x
BRUCE ~°i. ~ALLaCE
S }
1~~ARI~ F. ~~AL+'BERT
~~ARFE F. 1~'ZAEBERT
~S~ANDRE«r A. SAL~'EST
ANDREZ'P A. SALZ'EST
5~,j~.'~LVI\`
R,. SIMI1IiLL
ELVI\' R. SIMMILL
x x~ x x x x x
ALEEYT F. HOR'AR.D
S~ QTTO L. STRAUB
OTTO L. STRAUB
ASSEMBLY (:ONCURRENT RESOLUTION NO. Z
g• LONCUItRENT H
, ESOLU'rION ~~tc`1~~1Slllllg' a, C0T1121715~1011 t0
study the gasoline industry within the State.
~ 'VHEREAS~ A basoline study committee ~nas a
~~l~oi~itect in
August, one thousand
nilie hundred and fift3T ; anci
WI3EREAS1 Saicl ~~.so~zne sway eommit~ee f
ilecl its repoz•t
on June fourteenth, oue thousand nine h
unc~rec~ a
~icl f
i ~ty-
one;ana
WHEAEAS~ A further•
stuclST of the factors g
'OVe]'IIlIl~ the
f ixing of prices of gasoline to the public is now desirable ;
now, therefore,
BE iT REsoLv~n by the General Asse~nbly o f the State o f
New Jersey (the Senate concu~ring~
1. Thez•e is hereby established a gasoline study commis-
sion to consist of nine members, three to be appointed frtirn
t he membership o
f the Senate b~ the President thereof,
t hree to be appointed from the membership of the General
Assembly by the Speaker thereof, and the remaining three
members to be the members of the gasoline study comn~~t-
tee appointed in August, one thousand nine hundred and
fifty. 2. The Commission shall underfiake a study of the factors
governing the figin of prices o~ gasoline to the puUlic and
any xelatec~ mater a.nd upon completion of its study s}~all
forthwith report its findings, conclusions and recommenda-
tions to the Legislature. The members of the Commission
shall elect f rom amonb their number a chairman anc~ a seere-
tary. The members of the Commission and the
officers
t hereof shall serve
ti vithout compensation.
3. _The Commission is authorized to hold hearin~s in dif-
ferent parts o~ the Sate and is empov~~erea
bti~ its sul~pcen~i
to compel the attendance of «ritnesses and the producfioli
of any books, papers and p
ublic and p
rivate records ~
~i2d
r eports, and obtain
alb factual information
~~~hieh
sliall be
necessary to a completion of its study antl furnishin; of
its report, and may ~ call upon any State agency to furnish
i t vith such assistance as it may require.
4. This concurrent
resolution s
hall take
effect immedi-
atel~-.
G
# I.
k i
CRFf+~TION~ nRGANIZ~~T10N ANA ~R~CEDURE OF T IE
COMMISSION.
Pursuant to Assembly- Conctirre~~t Resolution tTo. r, ~n-
troduced by l
~~r. S
inlniill a
~lcl 1
12i's. ~f aebert
in the 1~~2
Lei illative S
essro~~
~aic1 passed i
n February o
f 1952, the
Gasolilie Stutlti~ Commission i~Tas cre~t~cl, to cansi~t ~f three
members of tl~e Senate,
th~•ce r~le~nbers of the
General
Assembly and three me2nbers of the C=asoline Study Com-
mittee appointed b~ tl~e Governor o~ \ c~~v Jel•se~~ in Au z
est
s
of 1950.
The Commission ~r~s diz~ected b~' t}le resolution to study
the factors ~overnin~ the fisin~ of prices of ~~asoline to the
'
public and any related ni~terial and R~~s autl~ori~ecl to hold
hearings
anc~ to compel by subpoeu~ the
attendance o~
~ witnesses and the ~
?rOC111Cti011 of ~
t11V papers, reeorcls and
reports necessary for completion of
its study.
r'~.lthou~li
the resolution eontzinecl no ~l~pro~l•i~tion of ~unc7s for the
wo~.•k of tlae Commissio~i, it
. clid perrrizt tl~e use of z~~y State
~~ency to furnish
suc~i ~ssist~nce ~s
n~ii~~;t l;e r
ec~uit•ed.
TI~e Commi~sioil
l~cllcl its
first
inec~t~n,• on Fel~ruzry
?0,
1~~2, and o
r~anizecl
i~~-
t13c c
~lcc`iou of ~ c
h~it'I11R11
a1ic1 a
~ec~•et~ry.
Tlie~•e~tftei~ 1:11~'OLlS;~lQltf ~~~2 till heZ~'itl~;s, in-
cl.ndin~; t~~o p
ublic
Ile~i•in~~, were Held, ~
lncl ~ t
ot:~l of ~7
«itz~.esses appeared before
tl.~e Conimi.ssion.
~11I testimony
a vas taken under oath end ~~T~s t
i•ai~sc~~ibecl. In on1~T a few
i nstances
~v~s it necessary
~'o~ the
CO11)lIl1SS10I1 to Ilse
its subpoena power to compel the ~tt.endance of
~~~ituesses,
e nd ~mmero~ic
ezl~ibits
«sere
~~olunt~ril~r
introclueec~ il~to
e vidence.
The Commisio~l lle~ e1• eonsidcrecl its mission to h~~ ~olc~~v
~. sttldv of p
rice f
ixin~~~, b
ut.. r
atllez• oue
of s
tir~~e~c-in~ t
l~e
o peration of the e
nti~•e g
asoline
111(111Str~- in f
lee ~t~tc ~f
1 Te~v
Jersey,
~~Tith ~ ~-ie«T to corrc~c~tiil~—if it a~~~~e~red
necessary and desirable b;s le
isl~tive r
ecominencl~tions,
7
any practices which might be found to be iiljuzious to the
best interests of
all the people of Ne~v Jersey. Keegiz~~ in
mind that the pai~amou~~t obligation o«red by the members
of. the ~Commissioii i
s to the c
itizens of this
St~.te, every,,
e f~'ort ha.s bee~z macle to be fair anc~ - not to
shotiv preference
t o a
a1~r one pease of fhe o asoline industry i
ii i
~Tew J
erseti
o~• to any one ~i~oup of people by z°ecommendin~ unneces-
s~,r~T ox undeszrable legislation as,~ p~nlcea ot• cu~•e £or the
~ llegec~ ills of tl~e indz~strv.
Specia.Z attention has been
directed in
this e~.~mination
t o the plight of those Ne~~
Jez•setir cit~zen~--sxrlall business-
men--~jlho own or operate the
retail outlets in
this State.
The pi oblems of the
ret,azlers a
nc~ of a
lb other phases
o:f
t ale petroleum
inc~usf;ry leave
1~cen
carefully
and fu11S~
r eviewed both from the
viewpoiil~ of serving
the
best
i nterests of the vast aiiny of consumers of a commodity—
Vb z
soline—~Thzcll has become a n
ecessit~r in modern living
end from ~
;l~e ~-ie~v~~oint of reco~nizzn
f.he d
ifficult and im-
porta,nt position of she small businessman in an industry
~ dominated by ~i~nts.
~
Of the 5~~ witnesses ~vl~o appe~rec~ 1~efoie the Commission,
s even represented three
clifEerent State-wide or a
ilizations
of retailers, of ~vhieh the priiiciP~l one ~~Tas the 1Tetiv Jersev
G~~ s
pline Re~~.ilers Association ; 12 t~
Tere indi~tidual retailers
e ither o
pel~atir~~ o
i• both
o~~riin~ end operating t
~icii o~vn
s er~~ice stations ; seven testified on }~ehalf of
five small corri-
~~anies
kno~~~il in the industry as
inclepenclent Z~hoIeszlers,
c listi•ibtttors or jobbers;
~►nd
the
rem
aini
ng 3
7 w
ere
eith
ero f
ficer
s or
atto
rney
s of
12
0~ th
e m
ajor
oil
com
pani
es d
oinb
b usi
ness
in N
e`z~
Jers
ev.
T I~e
mem
i~e~•
s of
the
Com
mis
sion
cles
i~e
to ~
cl.no
~~vle
d:;e
with
dee
p ap
prec
iatio
n th
e fi n
e co
-ope
ratio
n of
the
se ~
~vit-
ness
es a
nd t
heir
cons
truct
ive
cont
i•ibl
i~io
ns
to a
bet
ter
u ncl
erst
~ndi
zl~
of th
is c
on~~
lex
indu
str~
~.
The
mem
bers
als
o~ v
ish
to t
1~an
l: m
ost
~ rat
eful
ly t
ees
sten
o~rz
phic
ass
ista
nts
mad
e av
aila
ble
to th
is C
;om
xniss
ion
foz~
t~ie
ir co
mpe
tent
anc
~f Z
itll£
uI s
ervi
ce,
II.
TH
E P
ET
RO
LE
UM
IN
DU
ST
RY
IN
NE
W
JER
SE
Y.
Con
side
ratio
n of
the
pet
role
um in
dust
ry w
ithin
the
phy-
sica
l bou
ndar
ies
of a
sin
~~e
Sta
te is
mad
e m
ore
diffi
cult
byth
e fa
ct th
at th
is is
an
inte
rnat
ion~
il bu
sine
ss o
f f ~
~eC]L1
21~~1V
babe
pxo
po~•
tions
. It «
~~s,
ther
efor
e, n
eces
sary
fo
x th
em
embe
rs
of
this
C
omm
issi
on t
o de
vote
a
cons
ic~ei•
able
amou
nt o
f tim
e an
c~ e
ffort.
befo
re a
cqui
z•in
~ an
eve
n el
emen
-ta
ry g
rasp
of
the
subj
ect-m
atte
r an
d th
e is
sues
invo
lved
.Th
is is
an
inte
grat
ed iz
ldus
try.
The
maj
or o
il co
mpa
nies
'te
stim
ony
disc
lose
d th
at s
tart
ing
~t'1
~~1
~~1C
oil
wej
ls, «
~~ler
eth
e cr
ude
oil
is p
rodu
ced,
and
con
tinui
ng t
hrou
gh t
here
finer
ies,
the
trans
porta
t2on
frac
ilitie
s su
ch a
s ta
nker
s, ta
nkca
rs a
nd p
ipe
Tine
s, t
he b
ulk
stor
age
plan
ts a
nd t
l~e d
is-
tribu
tzon
tb.
eref
rozn
to
tY~e
z•et
ail o
utle
ts,
tl~e
pare
nt c
onz-
pani
es b
~- th
emse
lves
or
~~ith
t•he
hel
p of
the
ir su
b~icl
i~~•ie
;>co
ntro
l the
situ
atio
n.
1~.s
~vill
be p
oint
ed o
ut la
ter
111
t~l1
Sre
port,
the
: maj
or
oil
com
pani
es
also
ex
erci
se
~ la
ne
amou
nt o
f co
ntro
l ove
r th
e re
tail
outle
ts. It s
]~ou
lcl b
e em
-~h
asiz
ed th
at th
is e
ont.r
ol is
not
nee
ess~
irily
b~c
l and
that
inm
~nv
inst
znce
s it ~
~as
resu
lt~c~
in
inc
l~ea
secl
efficiE
~l~c~
~ of
oper
atio
n zn
cl i
ii zr
~~l:iz
l~ ;;~
solin
e an
d al
lied
petro
leum
~- ~ro
cluct
s ~v
ail~
ble
to t
he in
i~lio
ns o
f co
nsum
ers
~t r
easo
n-Zb
le p
rices
. Ho
~~~e
ver,
tvis
int
er<a
t~ol
i cli
s+in~
Lusl~
.es
tl~e
peta
•ole
um in
clus~
r~T
f rpm
mos
t oth
er lc
incls
o~~
busi
ness
.C~
vea~
the
Nea
rs t
here
3~a
s l~
ecn
~. ~~
~ac1
u~11
evo
l~ltio
~i f
rom
t he
old-
time
"sp
lit"
stat
ions
, wh
el•e
a d
eale
r ~~
~ould
offe
r~ .t
ret
:~~ii
sev
eral
diff
eren
t br
ands
o~
gaso
line
at t~
~e s
pine
s f.z
tion,
to tl
l~ n
locl
ern
one-
bt•a
na s
tatio
ns o
f es
pens
i~~e
con
-st
rtiet
ion.
.T
he m
ajor
oil
com
panS
T te
stim
ony
empl
~~siz
edt ~
1~3t
t~1
1S ~
t~RS
~l
211t
~lil~
zl tr
ericl
. bro
u`~~
t on
by
flee
clesii
~c o
fth
e av
er~t
e m
otor
ist
to p
urch
ase
~aso
li~~e
of
~~ ~~
~1'tic
,ll~r
bran
d in
~ s
tatio
n ~v
luch
dis
pens
ed o
nl~t
that
hr~
ntl
<ind
« Thie
h ~v
a~ n
ot p
llvsi
eally
una
ttrac
tive
by r
easo
n of
i~~t-
z~1
d um
ps o
f ~TZ
rious
colo
~•s,
sizes
~nc
l sha
pes.
11
1tJ~o
u 11
som
ed e
~lle
rs i
ndic
ated
tl~
~t c
ompe
titio
n h~
c1 b
een
curt~
i]ed
by
9
this trend rather than increased and improved, they
seei~lecl~
t o agree t
liat the one -brand type of service station is here
to stay.
Thi's evolution, anion; other thin
s, bas actually resulted
in a decrease in the total number of
retail outlets in \Tew
Jersey. In 1941 there were 11,340 licensed retail outlets in
t his State; in
1951,
10,605 licensed retail outlets. 4s
modern service stations bre~T iii number, consumers shifted
t hezr demands from the small outlets, such as those
~vliich~
used to ~revaii in front of rural ~rocery sto2•es, to the more
e laborate nei~hl~orhood end hi~l~«Tav stations offe~•in many
additional
services end pioducts b
esides ~
asoli~le,
Also
i nc].icative of this trend has been the appearance i
ii i
•ecei~t
vezrs of multi -pump stations ~viih several islantl~ of pumps.
The retailers for the most part condemned this innov~tian
as not being efficient because not usually re~ponsi~-e to the
demand at a poi: ticula~ station end ~l~o because not sup~~ly-
zng the
~ personal to~zcb," characteristic of the small busi-
nessman. Ho~ve~er, the major ozl companies a~~e ~~lannin~
c o~ltinued experimentation ~~ith this tti~pe of station in order
to meet the e
onlpetztion of ~ f
e~v
inclepenc~ent
o~~~rators
selliil~; "unbranded" gasoline at multi-pump s
e~°~c ice s
t~-
tions along some of the busier hi~bways in 1'e~v .J~rsetT.
. ~41~hou` h Chet e are over 10,000 licensed retail outlets in
Ne«r
Jerse~~, i
t ~~as testified
that only a~~out 6
, 00 ~
tre
c lassified as ~~s stations—tl~~t is,
stations uThe~•e
the
greatest percentage of
profit is derived from t
he s
ale of
~zsoline. The ba.Iance of retail outlets consists of stores,
g~.ra~es, backyard pumps where an e
mplo;~
- er
sells some
gasoline to l
i is employees end a few' other
ki~lds o
f ~dis-
peilsin; agencies.
The Commission found several variations in the o
i~nei•-
ship and operation of service stations
(1) Company o
tivned and operated for t
a'c`11711I1a o
i re-
h~bilitation purposes ;
(2) Stations
o~vnecl
b~T
the
major oil companzes
~ilc~
l eased to dealers;
YO
~(3) S
tations Ieasecl by major o
il companies and sub
-let
to dealers ;
(4) Stations rented to dealers
b~~ o«Tners or lessors other
than major o
il companies end operated by those
dealers ; and
(~) Stations owned end operated by c~e~lers.
i The testimony of the
re~»:•esent~tives of the ~
.2 major oil
~comPanies a~peai~in~ before the Commission inc~icatecl that
a, total of 35 stations
sl2ould be considered i
n the
first
c~,te~;oiv above and that those stations t
ivere
staf~etl b
yTcompany-
paid emplotirees either as tra.inin
stations or for
purposes of r
ehabilitation. It is
difficult to b
reak down
ea.ae~tl~r tl~e specific numbers of the next t«~o classific~tiQus
~ Uut
it. lvould appear that approximately 3,500 service
sta-
tion~ in ~Tew Jerse;~
a.re ether company-oz~~ned and leased
or
cam~an3--leased znd sub-
let.
Ill many i
nstances the
R ~e~ses involved are of the two- or three-party type
ust~ally
involving
financing by banks ~vhicll ~
tre `villing to furnisli
f money for construction purposes on the secuzity
of. pay-
ment that only a major oil company lease as distinguished
from an individual xetailer's lease can provide.
The Com-
mission would estimate that the fourth and f
ifth cl~ssific~-
tions would not together constitute more than
4:0 ~~cr cent
of X11 of
t~~e service stations licen~ecl in \Te« Jersey.
11
..
,t iiz.
ARE THERE TOO MANY SERVICE STATIONS IN ~FE~V 3ERSEY?
The testimony
an this point vas cor~fl.icting. It has
a lready
been noted
that the number of licensed retail
o utlets
in ~Tew Jersey bas
decreased
Burin; t
he
~:~~st
decade whereas the total gasoline consumption, the ~vera~ e
number of gallons .sold
per
outlet a.nd the
automobile
re
gi stration have all increased considerably. \Zoreover, as
previously mentioned, there are about 6,400 licensed ser~Tice
s tations and r
etailers, the balance of approximatel~T 4,400
r etail outlets consisting of other types. The retailers and
t heir orbanzzation representatives t
estified that there are
t oo many service stations in Ne~v Jersep and ~ba~ continued
e xpansion on the part of major ozI companies «Tas thro~vin7
t he
gasoline supply out
o~ p
roportion
to the
c~emancl at
least in c
ertain are~.s o
f the
State and t
hat
this action
m~.terially helped in the precipitation of "price ~~~ar~."
It ~~as the opinion of t
l~e major oil compallyT represent~-
tives, on the other hand, that even if it were. conceded that
there are too many retail outlets of all kinds in
l~Te~v Jersey,
there are probably not enou~l~ ;oocl service s
t~.tions and
that their policy of e~pandi.n into ne«T
o~• adclitioi~al areas
u~oulcl depencl upon tivl~ether a survey of the economic condi-
t.ions involved w~.rranted in their opinion tie construction
of new service stations.
One witness
stated that t
he major• o
il c
ompa.~~ies lead
saturated certain sections of the State Svith service stations,
and he proposed a study of the licensing of retail outlets.
He also cited examples of xe~ulating the number of ser~~ice
stations by municipal ordinance.
A number of eg~mples ~vere presented of
t~vo o
i• iliore
dealers sellinb t~~e products of the same company and being
i n competition «ith
eacli other although distant only
the
Y 2
width of a highway or a f e~~ hundred f eet f rom one another.
While such a practice ~1-ould not appear to be very sound or
reasonable, this Commission believes that it can be adjusted
by better
relations
bettiveen the major o
il companies and
their respective retailers end that
tl~ez~e is no necessity, noi•
.would it be in the public interest, to recommend t
l~e re~ul~-
tion of the number of service stations by legislation.
1
IV.
A COST SURVEY AS CONCLUSIVE EYInENCE OF RETAIL PRICES.
One of th
e tz
vo principal pro
posa
ls advanced by the
Ne~
vHer
sey Ga
soli
ne Retailers .r
~ssoci~,tion «as for
Ie~islation to
r equ
iz•e
that a suzvey be conducted to de
tezm
ine the avr~ra.~e
c ost of operation ~t the
retail le
vel.
In support of
this pr
opos
al t
he as
soci
atio
n pr
esid
ent
c ontended
that ind
epen
dent
ret~a.il dealers
o~eratzn~
sta-
tions which the
y le
ase from o
~~vn
ers or
lessors oth
er f:han
maj
or o
il companies o
r o~
vniz
~a and o
pexQ
tin~
their own
s tations co
uld
sati
sfac
tori
ly c
onduct t
heir
bu
sine
ss at a
z nar
g~in
of 5.8 cents per gallon (that is 5.8 cents above th
et ank~~la~on pr
ice of
a gallon of
gasoline charged to the
2~1 by
t heir
suppliez•s), whereas a company o
~~necl and operated
s tat
ions
, conf rontec~ with pen
sion
plans, f rinbe be
nefi
ts end
other ite
ms of ex
pens
e no
t af
feet
in~ inelepenclent re
tail
ers
would be fo
rced
to operate at ~ mar~ii~, of
no les
s t11~n szx
t o nin
e ce
nts above
its su
ppli
er's
tan
k« agon pri
ce; that the
s mal
l busi~lessman opez~ating leis o~vn st
atio
n and encleavoi•-
in~
to provide for
his
et~stomers tl~e be
st pr
oduc
ts and
s ervice ~t
the
lo~~est posible prices is more interested and
~ vau
ld be more com
pete
nt to handle ~~tsoline at th
e retail
l e~Tel tha
n a salarzed employee of a major oil company; that
t his pla
n would not gua
rant
ee an zncome to every dealer,
but «could compel ind
ivid
ual re
tail
ers
~~7h
o leave been oper-
atin~ abo~-e the average cast to reduce to the average oz• be
e lim
inat
ed from the
business ;
and
. fi nally that
this would
not be pr
ice
fisin~, bu
t ~•
athe
r an orderly Play of ec
onom
ics
r esu
lt.i
na in sa
ving
s ~o the consuming public.
This spokesman z•e
vie~
cved
the
precedents for such le~
isla
-ti
on in 1~
lich
i~an
acid Massachusetts but ind
icat
ed tha
t th
el:i
ncl of
sur
veSr
11e z•e
comm
ende
d in l~Tety Jersey ~uouid differ
f rom those
in that the
findin s
of
average
cost ~
~oul
dbecome conclusive evidence of the minimum p
rices
rat~
lEr
than merely prima facie ez~
iaen
ce as in those S~~tes. He
I4
stipulated that th
e co
st of su
ch ~
, St
a.te
-wid
e survey in tiew
Jersey
~voulcl pr
oUab
lS- a~~p~•o~imate $1
,000
.00 and t
l~~.t it
coul
d be con
cluc
tecl
bti
T some competent acid im
part
ial fi
rm.
I-Ie su7~;estecl teat tll
i~ c
osts could be Uo
ine by l
.~i~
~s~ocia-
tiai
i U~
at tl~~,t ~
sux~~~e~r to li~
t~~c
zi~~~- ~ve
i~l~
t «could }~~ve to be
~~uthorized
1~3T
at~
prop
~°la
te Ie~islation.
Iil
ad~
~oc~
~cy o£
~ cost
sur~
-e~~
, sevezal
references ~
~ere
mad
e to t]
~e f
air-
trad
e le~isla~ion
in Ne
~v Jersey
tivhi
ch
resu
lted
iii
the s
t.a~~ilizi~l
of i
~~.t~il l~i•icc~ f
o;• anol~c t
l~~t
in ~
i
clee
atle
b~~
rer~uiz ink that on the ~•e
s~.I
e o~
br<
incl
ecl procluets
eitl
~~r the
in~t
nuf~
~cft
~z•~
r ot
• ~~Tiiole~~ile~• co
alc~
n7~t1:e .
~ con-
tr~.ct witli one i
•etai]ci'
II~,
il~~ St
ate
1:~v
«Tl
~ cl
~ c~iRtract
~l~e
i•eta.i.i p
~~ice
~~Ta
s e5
tabl
is~~
ec1.
Then th
e ma
zluf
actu
rer
or
~cliolesaler ~
a~Te
~lo~ice t
o Al
i ot]ier ret~~ilers ~
vl~o
il~
tu
rn
hzcl to ~.bitle by the same price.
It «Ta
s te
stif
iccl
that. about
t hree years
~l~o t
iie major o
il companies sta
rted
not
if.~
ink
the
trade
ge~ler~Llly
th~it thev i
~~aul.d
Iio Io
n~er
fair-trade
n~s
olin
e ~ncl s
hot•
tly
after
tliat price
tiv~r
s be an a
t th
e
re~azl le~
~el.
In 1~'1~1, the
te~
timo
~~t-
discloses, tl
~e Sup
z•em
e
Court of t
iie United States i~
l p~
ssz~
~~ u
~~on a L
ouis
~~:t
n~i
s tr~
,tut
e sinlil~.r to tvc
~ car Jerse~~ Fair Ti•
adc~
Act, l~e~cl f
il~~if
~
t l~e only pe~•son ~vllo co
uld be Uotlnd under s
iic'.1
1• IC
'.~1
S~~~
i021
ti v~s
the cle
~ler
~vl~o act
uall
y ~i
_~ne
c1 tlae ~reement ~ri
~1~
t]1e
in~j
or oil comp~I~~~.
~1Z~Gt ~~
t~- le
major oil
cc~
ml~a
n~- testi~xion~~ clisa;:~recd wi
th
t he
st<~
.tem
ent
~.}~~~t
iiiclel~e~lcle»t. re
tZil
ers
eoulcl e
f~ee
ti~ ely
o~~
erat
e at a l
o~~-ei• mar~;ii: leer
~<•~1
11~n
of
~~~soIit1c i
~l~~
~n
s tation
o~~~n~tl ~ncl operatccl
b~T ~n int
e~;r
a~ec
l co
rn>>
~~.l
yx Z
l-
thottg~a the
z•e~~z~ese~~t:~tives of
o~ie
or•
t~~•o conlp~iiies
coil-
cecl
ecl th
at c
ertain e~
onon
~.ie
s of
o~er~ition wl~icl~ ~n
i1i-
cli~
icTu
~ 1 ret
~.il
er ~
~-il
osc1
s~~tioai is leis sole sou
rce of
income
~ ~loulcl be compelled fo
~cl
ol~t
f re
quent]y are
riot
or
cal~ilot
be
practiced
at com
p~n~
% ~~1~lOI1S o~e~~~,ted prim~~z~il~ zs
t rZz
nina
pro
ject
s.
_
It
is t
~~ortliy o~
note
, too, tha
t ~ i•epre~ent~lti~~e
of one
o the
i ret.~til~i•
o~•~•ar~zz~~tio~~
ft~t
lzT
o~~p
osea
le~i5l~ztioil
c~i-
rectecl at l
~i•ice f
izi~l~. The idea
of p
~•ice
fi~i
~a~ «as ~
Zlso
2 epu
~i~~
nt to
t1~i
e iilc~epezldent «~holes7lers, dis
trib
utor
s ~~ic~
Y5
d 0
jobbers who appeared before the Commission and ~~ho bad
apparently not been affected by the dew Jersey Fair• Txade
I e~i~lation because
t~iat only permitted the establishiz~~ of
prices on products when resold under the brand ~~ame.
The Commission, therefore, believing that a cost survey
o f tie p
i•ol~oseci I
;iiid would ~
~esult i
ii p
rice f
i ~in and b
e-lzevinb further that such legislation would tend to eliminate
x ather than preserve the
free enterprise systen7
within
r easonable bouzids and w
culcl not serve t
l~e best interests
o f the ~
~uUlic, must be
recoz•clecl as opposed to
siic~ a cost
s urvey.
16
►~
DIV
OR
CE
ME
NT
OF
WH
OL
ES
AL
ING
FR
OM
RE
TA
ILIN
G.
Tlie
sec
ond
prin
ci~a
,i pr
opos
al a
dvan
ced
by th
e ~1
ew J
er-
sey
Gas
olin
e R
etai
lers
Ass
ocia
tion
was
to d
ivor
ce t
ie m
ajor
oil c
ompa
nies
ent
irely
f ro
m th
e re
tail
phas
e of
the
inc~
ust~
•y.
In
sul
~~or
t of
thi
s pr
opos
al,
tl~e
pres
iden
t of
thi
s as
soci
a-tio
n pr
esen
ted
azi
exce
llent
brie
f at
the
pub
lic h
earin
g of
Dec
enlb
ez•
2, 1
952,
whi
ch' ~
iea.
rina
was
dev
oted
ent
irely
to
this
im
z~or
tant
que
stio
n.
~Ie
conc
eded
tha
t th
ese
are
noSt
ate
prec
eden
ts i
n s
uppo
rt of
suc
]a a
mop
>e, b
ut t
liat
anan
alog
y m
ight
be
dra«
n fr
om t
he o
pera
tion
of t
}~e
liquo
ri n
dust
ry in
New
Jer
sey
whe
re n
o w
hole
sale
r is
per
mitt
ed~o
ope
rate
a r
eta
il liq
uor
esta
blis
]am
ent.
In d
iscu
ssin
b th
el e
gal b
ackg
roun
d fo
r di
vozc
emen
t, he
rev
iew
ed d
ecis
ions
o f th
e Fe
dexa
l Cou
rts, i
nclu
ding
; the
Uni
ted
Sta
tes
Supr
eme
Cou
rt,
effe
ctin
g di
vorc
emen
t in
the
rai
lway
sle
epin
g ca
rbu
sine
ss, c
erta
in p
hase
s of
the
mot
ion
pict
ure
indu
stry
and
tie m
eat p
acki
ng b
usin
ess.
~-Ie
arg
ued,
mor
eove
r•, t
~~.t
divo
rcem
ent
wou
ld b
e so
und
e con
omic
s an
d w
ould
ser
ve t
l~e
best
int
eres
ts o
f th
e co
n-su
min
g pu
blic
. H
e co
nten
c~ec
l tha
t th
e in
tegr
ated
maj
or o
ilc o
mpa
ny o
f to
c~~y
is
a ve
rtic
al m
onop
oly
~~hi
ch t
ends
to
• lim
it ra
ther
tha
n en
cour
age
f i•ee
com
petit
ion
and
that
t~~is
l im
itatio
n is
in e
ffect
fro
m th
e o
il ~~
ell t
o th
e co
ns~.
lmer
. K
es t
ated
tha
t th
e m
ajor
oi
I co
mpa
nies
hav
e so
in
sula
ted
t hem
selv
es t
hrou
gh th
e m
edia
of
trade
res
trict
ions
, lea
ses
a nd
cont
ract
s as
to
mak
e it a
lmos
t im
poss
ible
for
~. s
m~I
lb u
sine
ssrri
an t
o ra
ise
suffi
cien
t fu
nds
to c
onst
ruct
a i
iew
s exv
ice
stat
ion
of h
is o
urn
or to
pur
chas
e an
e~i
stin
~ st
atio
ne n
d ob
tZili
a b
i•Znd
ed s
uppl
ier.
He
poin
ted
out
that
the
e vol
utio
n to
one
-bra
~ld
stat
ions
pre
viou
sly
disc
usse
d in
this
r epo
rt w
as n
ot e
ncou
rage
d by
the
dea
lers
the
mse
lves
but
r ath
er ~
v~s
stim
ulat
ed b
y co
~lce
ssio
ns m
ade
to t
he ~
•eta
ilers
by t
he m
ajor
• o
il co
mpa
nies
to
go o
ne-b
rand
.
1 7
t7
He advocated le~islatioii wh
ich
t~~ould ~reveait thc
> «~
~iol
e-saler from e
ntei
•in~
; retailing and whi
ch ~
cvoulcl cr
eate
an
age
ncy
with
in the ~
Te~v
Jez~sey Department of LaUo~• and
Industr5r to enforce
tkic
ne~~t ~
•equiremeut. Thzs ~~roY~osed
e nact~mei~t «•
otll
d aeciare
it to be the pol
icy of t
l~~ St
ate of
New Jersey- to
f~•ee a r
etai
l dealer from c
ontz
•ol
eitliet• ai-
r ectly or in
dire
ctly
e~e
rcis
ecl by his sup~~lier. He ~ar
opas
edf u
rther that thi
s special ag
ency
wit
hin the
Dcl~
artn
lei~
~ of
Lab
or and Industry would have to consent to any sup
plie
rc a
ncel
ling
the
lea
se of a r
etai
ler and i
voulc~ a
lso Have t
oc o
nsent to
any increase in
rent ch
ar~e
cl b~- ~ sti
~~pl
ier.
The
advantages of divorcement he describet~ as being
(1) .t~
.n immediate hal
t to
the construction of new ser~%ice
s tations exc
ept by p
xivate c
apit
al a
lld ez
cept
in
l ocalities t
i vhe
re t
ie demand ~
voulc~ 1
~- ar~•ant sz~ch
e xpa
nsio
n ;
(2) The removal of all possible p~•essure b3~ the
su~~pliei•s
on ret
ail dealers ;
(3) The re
stor
atio
n of free com~e~ition
betw
een
the
l evels of wh
oles
alin
and ret
aili
ng in th
e ~a~oline
i ndust~•y;
(4) Savings to tie consuming public bt
- eliminai.io~~ oi'
tlic
d ifferential in tarik~~~agon prices. «-
lierel~ ~ coni-
me~
•cia
l consumers
and cci•tain
otl~
~er
pz~e
ferr
edc ust
omer
s ca
z~ t.oda~T bur
r na
soli
ne a~
cllea~~~;z~ ta
itl~
-~~aaon pri
ces than the ret
ail cl
eZlE
rs ~rl
~o z
•ese
ll to
t he public; and
(5) .A.clditional benefits to
all
coi
lstl
mez•
s in
rio
t lz~.~•in` to
abs
orb in
t1~e tanl~i~va~on prices the ul
tima
te cos
t of
f ~iltu•e of ii
ew s
ei•~~ice stations constructed by ma-
joz• oil compal~ies, whi
ch st~
.tzo
ns p
i•o~-e not
to ~e
s elf-supporting, ire
not
physically suitable fot• con-
duct
in~ any other typ
e of business
anc~ the cos
tso f tivh
ich are transferred indirectly to th
e consum-
ers by the com
pani
es in th
e form o
f ta
nl~~
s~ag
onprices.
18
Finally, be stated that divozcement ~~ould have to become
effe
ctiv
e gradually and ~e c
once
ded
that
bec
ause
of
the
many leases presently in effect be
t~re
en the o
~c~T
ners
of ze
al
pro
i~er
t.,y
a~ld th
e major o
il com
pani
es, a minimum o
~ 10
~-e~
~s ~
~~ou
ld be
rec~
ui.r
ed for t
~iis p
l~►n
to b
ecom
e du
lly o
p-ez
•a~ti
ve.
T he
coun
tera
r um
elits
~3T
er•e
ma~1
~- an
d va
ried
ancZ
v~~
ereno
t co
nfin
ed s
olel
y to
the
maj
or o
il co
mpa
nies
, fo
r th
ere
~ ~~ez~
c als
o de
aler
s ~~
~}lo
test
ifiec~
they
ti~•e
re b
3T n
o m
eans
eer
-t~
in th
ey ~
;=ou
ld be
nefit
by
cli~~
orce
rnei
it. C
olic
eivi
n~ d
i~~or
ce-
m~n
t as
a p
lan
to z
x~ak
e it u
nla~~
vful f
or a
com
pany
sel
linb
gaso
line
at «T
~:~ole
s~le
to o
~~n,
oper
~.te
, ass
ist i
~~ th
e fin
anci
ngof
or h
ave
anv
othe
r• co
nnec
tio~~
with
~ s
ervi
ce s
tatio
n se
ll-in
~ ga
solin
e y to
the
pltb
lie,
the
oppo
nent
s m
~cle
, az
non
otlze
.~s, t
hese
re
lies
(1)
Such
a la
~~-
coul
d vi
olat
e th
e pr
ovis
ions
Z~a
inst
im-
pairm
ent
o°f t
he o
Uli~
~tio
n of
con
t~•a
cts
cont
aine
din
Uot
h tl~
e Fe
cicr
al a
nd S
tate
Con
stitu
tions
;{?
) In
c~i~
Ticlu
al ot
ivner
s of
rea
l Ian
oper
ty ~
val~
ting
to le
ase
ctesi
r~.b
le l
and
site
s to
maj
or o
il co
mpa
nies
for
deve
lopm
ent ~
Tould
be
deni
ed th
at p
rivile
ge;
(3)
The
build
in
of H
eir
serv
ice
stat
ions
~~~
oulcl
not
bere
tard
ed o
r st
oppe
d an
d th
e to
tal n
uml}e
r of
ser
v-ic
e st
atio
ns x
educ
ed b
ecau
se w
ain
se~•
vice
stat
ion
oper
ator
s «~
oulcl
mov
e c~
uiel:lt
T to
fill th
e m
ap e
ause
c~by
tae
rem
oval
of
gaso
line
«7ho
lesa
,lers
fro
m t
here
tail
leve
l ;(4
) P
rice
war
s ti~
-ould
not
nec
essa
rily
be e
limin
ated
be-
caus
e of
the
shi
ft in
ser
vice
sta
tion
owne
i•sl~
ip t
oin
divi
dual
s or
to -r
eal e
stat
e in
vest
men
t cha
ins ;
(5)
112a
ny d
eale
rs ~
~vou
ld be
req
uire
d to
fi n
d ne
~v s
ourc
esof
fin
anci
ng p
az~t
icul
arly
whe
n er
idea
vorin
J to
pur
-ch
ase
egis
tin~
serv
ice
stat
ions
~v~
aich
the
maj
or o
ilco
mpz
nies
ti~~o
ulct U
e xe
quire
d ~o
sel
l und
er a
ivor
ce-
2nen
~: an
d ~~
Taulc
l be
herd
-pz~
esse
d to
loca
te le
nder
ssu
ffici
ently
inte
rest
ed in
the
deal
ers
to a
ssum
e th
eri
sks
whi
ch m
anor
~vh
olesa
lea~s
hav
e ta
l~en
to a
ssis
tc le
~ler
s to
get
sta
rted
in b
usin
ess ;
1~J
d N
(G) Many r~ealers ~v
ould
be f orce
d to pur
chas
e equipment
such as pumps and tanks now installed by major
oil companies on a loa
n ba
sis ;
V
(7) Dealeis generally do not
understand di
vorc
emen
t znd
are not
enthusiastic for
it; and
(8} The buy
ix~a
pub
lic,
rathea• than fain throu~;l~ divoi•ce-
ment, ~~T
ould
suffer from a deterioration of se
rvic
eand a lower ord
er o
f facilities a
vailable to mo-
torists.
In the
final
~.z.1~113 sis divorcement t~h
ich ap
pear
s on t
hesu
rface to h
ive-
certain x
i~eritorious fea
ture
s would place
t his Commission in th
e position of ordering major oil com-
pani
es not to own or operate or have any con
nect
ion wi
thre
al pi oper
ty at th
e retail Ie~
=el.
Although t
his
tl~eoz•y, as
pre
viou
sly noted, has been approved in certain other
fields..
of ind
ustr
y and is in ope
rati
on wit
h at
least some beneficial
resu
lts,
the members of
this Commission do not
fee
l that
tl~.e3~ po
sses
s a sutlicient
lino«
►lec
~~e
or u
r~cl
erst
andi
ng o
f a
llth
e i am
ifica
tions
of
di`-
oz ce
men
t; to
sup
port
it a
t th
is t
ime.
~ 11oi•
eo~c
Ter,
and
mos
t im
port
ant,
the
mem
bers
are
not
pre
s-en
tl~T
co7i~
-ince
d th
at u
nder
~Eh
is pr
opos
ed p
lan
the
co~l
sum
-in
a z~
ublic
wou
ld r
ecei
ve b
ette
r se
z•vic
e at
loi~T
er c
ost
than
i s p
z•es
ently
fur
nisl
lecl
. Th
e C
omm
issi
on, t
hexe
£ore
, is
con-
~tr~
ined
~t
t}pis
time
to r
ecom
men
d ab
ains
t le
~isl
~tio
n to
i n~z
T~ler
nenr
tl~e
t1~eo
~•y
of d
ivor
cem
ent.
20
`Ti.
SU
BS
IDIE
S.
Ther
e M
ould
see
m t
o be
little
dou
bt lo
ut t
hat
pric
e `~~
a.rs
star
t a.t
the
reta
il le
vel a
.nd
that
they
are
cau
sed
prin
cipa
llyby
the
desi
re o
f a ~
•eta
il dea
ler i
n a
part
icul
ar a
rea
to c
oine
r~,
larg
er v
olum
e c>
f the
sal
e of
gas
olin
e in
that
are
a fo
r bix
n-se
lf by
tie
cle~
-ice.
of d
ropp
ing
his
reta
il pr
ice
belo
w t
hel e
ti el o
f th
e po
sted
pric
e in
that
are
a. W
hile
suc
h w
ars
a~•e
star
ted
a~ tl
~e x
etzi
l lev
el b
y de
aler
s t~
.em
selve
s, th
e C
om-
mis
sion
foun
d th
at th
e ~~
~az•s
tiver
e us
ually
pro
tract
ed b
y th
epr
actic
e of
the
maj
ox o
il co
mpa
nies
in
bl'~
,11t
111~
suU
siclie
sto
som
e of
the
ir de
ale~•
s.T
he c
ompa
nies
<~t
tem
pted
to
just
ify
this
pra
ctic
e by
poin
ting,
out
tha
t it
vas
nece
ssar
y t.o
mee
t co
mpe
titio
n in
~~i a
rez
~~-1~~
ere a
dea
ler
of o
ne c
ompa
nyT
had
delib
erat
ely
czlt
belo
w t
ie p
ost.e
cl pr
ice
to in
cre~
lse h
is v
olum
e of
sal
es,
even
t.l~o
ugl~
such
~~ r
educ
tion
«-ou
ld o
f nec
essit
y- c
urta
il hi
sm
~rni
lt of
pro
fit p
eas
;~]a
on.
Cas
h su
bsid
ies
~~~r
ied f
rom
o~ie
to s
ip c
ents
per
~zl
lon
depe
ndin
g up
on th
e in
tens
ity o
ft h
e pz
~ice
~v~ir
in
~ l
ive
n a
rea
at 7
liv
en
tin
ge ~
1nd
wer
e~ ~
~lt'I
OLI
SIV
(~£
'~C
l•il~
~cl
€1S
~ ~ I'
e~~l
:~('S
~ ~ ~
~ ~
t.emp
o~'~T
"~T C
11SC
Oti1
1tS~
~ ~
"em
ez•:;
enc~
' ~i1
~01t
'~1X
1CC
S,'~
"t
eTT1
~JO
T'~l
I'V al
]otiv
~iic
es,"
"sI~
~e-
ci<~l
~llo
tiv~n
c~s,
" "tc~
mpo
z•~~
•v c
ompe
titiv
e ~il
lo~~- a
iices
" ~i
iicl
"vo
lunta
2•~-
ai
lo~y
ri~ic
es."
Ot~
el•
form
s of
su
bsicZ
ies
ap-
pe<~
~•ed
in f
orbi
vene
ss o
f re
nt b
y a
less
or c
ompa
ny t
o a
l ess
ee d
eale
r, zip
f'ur
nisl
~inb
ad~
rerti
sing
to th
e de
aler
at
the
e lr~e
nse
of t
he c
ompa
ny a
nd in
lo~T
erin
b th
e ta
nk~~
vago
np r
ice
to c
erta
in re
taile
rs o
nly.
One
dea
ler p
rodu
ced
exhi
bits
i n th
e fo
rm o
f or
ibin
~l in
voic
es c
lear
ltiT s
hovi
ng th
e te
mpo
-r~
rt~ d
isco
unts
gr~
ntec
l to
bim
in
red
uctio
n of
the
pric
esI~
~lid
~iy h
in~
to v
is s
upp~
iei•
for
b~.s
olin
e de
liver
ies
durin
gt h
e pr
ice
~r~~
•.I
t is
int
eres
tinb
to n
ote
that
the
maj
or o
il co
mpa
nies
s toP
pec~
i•a
iitin
b su
bsid
ies
on o
r ab
out b
~lar
ch 1
, 195
2, ~
.nd
l l~~ e
not
sin
ce t1
1~t t
ime
en~a
ed
in th
e pr
actic
e et
cept
in
21
d w
very minor instances. Si
nce
phis Commission or
gani
zed
for the study o~ the operation of the pe
trol
eum in
dust
ry in
New Jersey ju
st prior to that dat
e and began to take testis-
rr~ony a
t about that time, th
e Commissiari
mem~~ers ar
ei ncl
ilie
d~ ~~o
Uelieve t
~iat tae ces
sati
oli of
suUsidies was not
e nti
rely
coi
ncid
enta
l.
I- ~eb
ai Bless of the
tempararST
benefits o
f price wars t
omotorists in
the form of red
uced
re
tail
pr
ices
, it
~~-oulcl
appear tha
t th
e consuming pub
lzc somewhere alo
ng ~l~
e line
pay
s fo
r the rather high mortality ra
te among retail dealers
and the tremendous c
ost of p
rice wars t
o the
Znajor oi
Ic ompanies. As a matter of fact, tie companies tliemselves
a~~e for ob
viou
s reasons not ent
husz
asti
e about paring sub-
sidi
es even based on the
all
egat
ion of having to do i
t to
mee
t corr~petition.
Tt t
i vas pointed out that price
~~va
rs, wh
ile lo
cal in
sco
peat then outset, spread, as the
ir intensity brows, all
uch li
ker ipp
les zf ter a peb
ble lids been tos
sed in
to a pool of calm
watez•. Thus i
vl~en
subs
idie
s, t
ivlletlie~• i
n ca
sh or some
othei form, are
offezed or accepted d
it•e
ctly
or
indi
rect
ly,
they rep
rese
nt discrimination in f
a~ro
i• of the ae~lers of
apartieular
supp
li.~
r wi
thin
the
ciz•
cums
crib
ed area of an
inci
pien
t pz•ice ~~ar anc~ discrirnnatio~l ~~~
inst
other c~e~lers
of the
same supplier ii
l ad
jace
nt a
reas
not
immediately
affe
cted
. These lat
ter
dezle2~s continue to
pay the
posted
tank
tiva
~on
p~•i
ces of th
eir
suppliers
until the
l~ii
ce ~t~~r
extends in
to the
zr areas ~nc~ ultimately become State-«~icle
ixz sc
ope.
It is tie clecisi.on of thi
s Commission tha
t. thi
s cl
iscr
imin
a-tioil constitutes an uilfai~~
ti•a
cle pr
acti
ce and t
li~t
the com-
p~zl
ies gild the
dealers are
equ
~lly
~ ~t
fau
lt ~vh
ez~e
~ub
sicl
ies
are
off
ered
vy the former and solicited or ac
cept
ers
UST the
latter.
It would appear to be
in the interest of
tl~e
consum-
in~ public fog
• airy dealer cutting prices to be lef
t en
tire
lyon ]pis o~
~Tn,
to "sink or swim" ~v
itll
out any I;i
nd of artificial
support.
T~ii
s ~~Tould
encoura
e, r
iot
aest~03~ or le
ssen
,co
m~~etition by ~lacin~ more emp~iasis on t
l~e initiati~~e of
tie individual re
tail
ex.
~~
This Com
miss
iozl
, therefore, rec
oni~
nell
ds tl~
e ad
opti
on of
1c islat.ion malcin~
it ~
, misdemeanor f
og• an3r d
istriUutor,
refi
ner,
who
lesa
ler
or supplier to
offer or for any r
etail
cle~ler to
accept, dir
ectl
y or i~ic~irect.ly, a ~•ebate, co
~~ce
ssio
n,
~.11o~~•ance, di
scou
nt or Uenefit, of
an~r kind or nat
ure
~~liat-
~oe~'~I, in connection ~vif;h ta
le sal
e or distribution of inoto~~
f'u~l oz o
ilier products mai~uf~ctL~i•ed
b~-
tlje di
stri
buto
~~,
refi
ner,
«~h
oles
aler
or
su~~plier. L
~3
d
VII.
LEASES AND CONTRACTS.
As previously
- noted, most of the service stations iu \env
Jersey are
either o«~ned by the major o
il companies and
l ersea to retail dealez•s oz' are leased by the companies from
t he
real property on~ners and sub
-let to dealer~. ~~Then a
dealer desires
to b
ud- a service station s
ite
ancZ construct
s tation or to
n~al~e a s
iz~l
~le capital iinprotTemezrt. to l
i is
s tation
lle ~requentl~~
fi~icls that he has insufficient
fuiitls
~ncl must borro«= mone~T. His bank, ho~vever, wit] not lain
l iim s
ufi~cient capital until
~~e makes along -
terns lease to
liis supplier w~lich,
iil turn, leases it back to l~im on a one-
~Tear basis, On the security of the long-term lease b~ tlae
c lea.Ier t
o tl~e major oil eompaii~* suPplyzri~ l
~im
~~Ti
tl~ its
products, the dealer's b~nl;
~c•ill then ~lono~ l
eis
j~ec~nest
for funds.
The companies s
te~tec~
tli~lt t
lte~- en
clef
~coi
ecl to ~
~c~oti~zte
l eases vith owners o£ serriee
st~.tion sues foi• iii
avet
~<i e
Ien~t11 of ten 3 ears, ~~TlZereas t
he~~ pub
-let to
their dealers
for• periods dues ~~~iii~ one
~"C~ll•. This p
roeeau~•e
usually
e nables a com~~anv
to f
i~ in zdv~nce the rents i
t l~Till ~~ay
the
o~vllers oven• a loi~~ period of time
ailcl Rl
so leaves
floc
comp~njr free to male ~d,justments upwaz~tls
o~• cZa1~T~nc~Zrr~s
ti~Ti~ii its st
ab-lessees oi• clealei•s.
The rent a
. cleale~~ is eti~eetec~ to day for his
service
~fiation depends la2•~ely n~~on
t~~e ac~uai gallona` e sold, the
potential volume, the t-alue of tl~e property and past etperi-
ence at
tale l
ocafion
in q
uestion or in the area selected.
Some dealers pair a fl at monthly rent~.l and others p~~ ~•ent
based upon a c
l~~r~e of so much per
gallon,
«Tith some
m~jar suppliers using a slidin
scale on ;al
lona
~~e to p
z•o-
~Tide incentive £or tl~ei~ c~ealexs to "push" th
eir sales. The
~ •epresentatives of one major o
il company condemned the
straight aa~Iona~e retail type of lease as penalizing dealers
~~
for
doing a ood joh
i31 increaszn~ t
he vo?ume of tlleiz
gasoline sa]e5 #lirou~h h~lyd ~~v
ork.
One of t
hese representatives
clescz•ibed
the customary
tie-,y
ear term of leases or sub-
leases to c~e~lers ~s being a
compromise l
~et~vicen the
coml~~l~int on one h~ncl
of. con-
tz•ollin~
~. large s
li~~~e of the
rc~tai~ ma3•ket
tl~i•ou~ti lan~-
te~•
n1 commitments auc~ the
crit
ici~
n~ on the other h
~nc~ of
trlrin~
to dictate
to dealers
b~T means of
threats of im-
~u~cli~te
e~%~ctzo~l.
~rtTerzl c
ic,iler~ e
l~jec*ecX to t
lie' ~Te~ r
l~r
lease
oi•
su}~-le~~~se as~,bein~
too
short
to assist tlienz iii
c~#~ecti~Te Tony-rzn~;c ~~Ianriin~, l
out the testimoncT seern~ clear
tltz~ th
ese
le~~ses
~lnd
sub-
leases ~ ~~
e ~utorn~ltic~~ll~T
rene«~-
~'ale from y
eaz• to ~e~~• unless eit
her•
of the
p~rt,ies thereto
giv
es written Iiotice of termination
~~Titl~in the stated pet;od
of tirrze prior to t
1.1e
encl of t]~e te~.•m.
~~Thile
it is
e~sil~~ understandable t
hat a com~~any, p~~•-
ticularly ~vhen
le~sin~ ox sul~-letting ~ s
tation to
~i iie~v
cle~,ler, ~vould not ~~ish to contract for more t
liai~ one
ye;~z•,
ui~f~ir treatment
«gas :
found
t.o Dave been ettencled
to~e
~re~•al cleale2•~
iii e~:treme xental i~icreases ch~r~ed to those
c ic<<~lers beeaus~ of their initiati~-e in substantially aubment-
ii~~ t
licii• allal»~e :
l111
1ll€
1.1~
.~~.
Tn fact, one c
le~ler t
estified
t l~~t. l~i~ rent tir~~
r~li
secl
from ~a0.00 per month to
~30~.(?~
1►c~i'
I11
0Ilt
~l I
ll th
e co
urse
of
siz
~-c~a
~•s ~
s ~
dire
ct r
eci~
lt of
~ ~is
indu
stry
in h
uilc
~in~
a a
oo~l
bus
izles
s. Y
t is
diffi
cult
foi•
t he
mem
bers
of
this
Com
mis
sion
to
uncle
z•st
ancl
~~Tl~~~
t ci
r-ri~
llzst<
~nce
~, if
;~n~
-, co
uld
po~~
ihl;~
- j~i
~tif~
~ su
ch ~
~~~
ei•e
ar~cl
~~~c
e~siv
e in
cre~
~c in
rent
.Th
is s
ame
~~-it
ness
l~o
inte
cl o
ut t
hat
whi
le a
ctua
lly h
ec o
uld
sell
the
I~ro
tluct
s of
com
petit
ors
of h
is s
uppl
ier
~t h
iss e
rvic
e st
atio
n, th
e pr
essu
re o
n hi
m t
o se
ll th
e tir
es, b
at-
terie
s, a
cces
sorie
s an
d o
ii of
}lis
sup
plie
r in
ac~
d~tio
n to
g aso
line
gre«
~ ou
t of
an in
dica
tion
that
his
leas
e m
ight
not
b e re
new
ed if
lie
clic
k not
sel
l the
se o
ther
pro
duct
s. T
his
isa n
ea~
ample
of
~cvh
at is
kno
wn
iu t
l~e
indu
stry
as
"tie
-in
s ale
s,"
and
the
influ
ence
exe
rtec?
by
veile
d th
reat
s on
the
p~lz•
t of a
n ov
er-z
ealo
us s
ales
man
may
wel
l be
cons
ider
able
.O
ne c
ompa
ny's
con
tract
s, if
sig
ned
by it
s de
aler
s, o
blib
~te
2 5
t~.em to purchase
fifty per cent of their estimated require-
ments of the stipulated product ox products from that com-
pany, wit~i any violation of the products contract pxobably
r esulting in t
ez•rnination of the real property lease, tivhe~•e
a lease is also involved.
Actually, too, a cozztract wit11 a dealer ~vbo maS= or may
not also be under lease or sublease of a vnajor oiI com~~an~~
may not prohibit the dealer from selling other brands of
basoline than those of his supplier.
~3ovcTever, even more
s o here than iu the case of
tie-i.n sales, be
~~-oulc~, accorclin
to the evidence, prol~a.bly face cancellation of his lease upon
the u
sual 10 days t
o 30 clays ~
~vritten n
otice
pz•~oi to the
e ~~iration of the term or an increase in rent
oz~ the loss of
liis supplies of gasoline
anc~ oilier products or some o
ilier
penalty.
This Commission is o£ the opiniol2 that e~ ell though the
use of undue influence or intimidation upon a r
etailer in
e ndeavoring to compel him to male tie-in sales of the allied
products, of the
supplier may o
ccur i
nfrequently, it con-
stitutes an unfair and undesirable trade practice arising out
of what appear t
o be perfectly
valid
lease and contact
methods emplo3~ed in the
petxolezun industry. This Com-
mission recommends, t~leiefore, the adoption of Ie~islatio~~
making i~ a misdemeanor foz any c~istiibutor, re
fi2ler, t
i ~liole-
saler or supplier to lease or ivake a contract on conclztion,
promise, a.breement or
unaerstandiiig ghat the l
essee
o~•
purchaser thereof sbali not use or d
eal in ~
oor~s, ~rares,
mercl~a.ndise, supplies or
otliez• commodities o~ a competitor
of such
c~istributo~•, z•efiner, uTholesaler or supplier. Since
i t ~~vould be grossly unfair for the tanks or pumps furziishecl
t o any dealer by a
. distributor, refi~~er, wholesaler ar sup-
plier to be used by that dealer for any other motor• fuel
than fh~it of the particular distributor, refiner, ~~~~.iole~aler
oz• supplier, that excep~~on i
s specifically made from p
his
l egzslative recommendation.
26
V ~f
I.
'~EALEH ~~`A,NKj~AGUN PRICES.
T~.e dealer t
azik~ua~on or uliole~~ilc
l~i:ce is
tl~c~
;>rice
cliai•aed to the r
etailer
bS~ the
wholesaler, or i
lie
i~~~
-oice
cost of motor fuel to the ret~lil~r. The major oil couiis~~i~ic;s
foi
.lie inos~ ~~.rt coo their o«-
1i d
isti't~)Liti21~ tllrou~li
~~icili-
ties owned ~
zlc~ oper~tecl U~' tlienl• Ili
S0111~ i~ist<,~~ee~ ~
iicl
particularly in the
moa.~e •remote s
ections
of New Jer~eti ,
some of the major oil companies m~~ke use of
ir~clet~eirdent
jobbers ox distributors.
The e
vidence
disclosed
t]~at because
~~ew Jersey is a
~•ela~i~-ely small State geog~•aphic~ill~~
~vith a l
ii~111~- c
on-
centratedpopulation, the ord~n~ry ~-ariations
ill
~.~z~il~~ti~~i~oii
prices based nn ~
i•~.1isl~or~atio21 cosh front the termin~Is o~•
storage
plants to
the
ret~ulin;~ a~~eas,
ai~e ne~li
~il~le
~~iicl
i n most s
ituations
nollezistciit. However, one n~~jor oil
comPai~y ~
,clmittecl t
o t~~e ~3ossiUilit~~ of i
ts l
i~iviu~ sec en
clifferex~t ~xicin~ ~rcas to an~tcli it
.s se~~en tiistz~il~utin~ ~lre<<s
~~ itl~in the Statc.
The iiorm~l t
ziil{«l~t;~~ort
~s~•icc
c~~~ ~~e~ul~~•
o~• liause t
ii~~i
i~cl
~~tsoline ~n
~Te1v Jersey is
I.~.G ceut~
I~er ~zllon, to
`~-liic~~
s 1~ot11cl be ~tciclecl five Bents l~cr ~~Ilou for
Sf~.tc ~~nc1 Tecle~•<il
t axes. T~~e iiornial
taiil:~~•~~otz p
i•zce on p
renzitin~
~a~olii~ie
~ vonlc~ be s
ome~
~►Th
at l.ii
~;~~e
i•, ~i
p~ro
limat
el~T
one
~~ll
cl z li~
ilfc c
i~ts
mo3
e pe
r ~~
lloii.
T~~e
evi
denc
e di
sclo
sed
~l~a
t so
me
of t
he c
oml~~
aii~.e
s iii
l ieu
of
r~,n
tin~
subs
idie
s in
tim
e of
pric
e w
ars
reclu
cecl
t ie
t ~,nl
;.~va
~on
pz•ic
e to
cer
t~iin
ret
aile
rs iu
cer
tain
are
~~.
LTn-
glie
stio
nabl
y th
is w
as a
far
mor
e ho
nest
app
roac
h to
mee
t-in
a co
mpe
titio
n th
in th
e l~
rac~
;ice
of ~
lain
tain
in~
l~i4
lier
ors t
ancla
rc~
tani
~~ra
` on
pric
es r
ind
r<tn
tin
z•cb
~tes
oz~
dis-
coun
ts.
~Iow
ever
, th
e en
cl re
sult
of p
~~iee
c~i
serim
ii~<t
tio~l
v as
muc
h th
e sa
me.
It
was
fur
ther
est
ablis
hed
by «
T~.y
of i
nfor
mat
ion
that
t lic
ta1~k
~~*a
~on p
ace
even
ii, n
o~•m
~zl t
ir~~e
s is
not
r~ec
ess~
lrily
2 7
rn
the same foz a
ll buyers
since la
rge commercial accounts
and unbranded jobbers zna
y ~nrchase gasoline at one and
a ha
lf cen
ts to two cents a gallon cheaper th
an the same
baso~i.ne would be furnished by the
sup
plie
z~s to their retail
dealers.
Ho~~~ever, it was stated that thi
s aiffezential ofte»
r esu
lted
£rom such buyers obtaining the
iz• gasoline sup
r~Ii
esat the
storage
plan
ts, thereby
saving t
he companies the
c osts
of transportation from their
plan
ts to the
outlets
i nvolved.
The testimony of the re
pres
enta
tive
s of at le
ast two of
t he
major oil companies indicated
~t~tat ~T
ew Jersey is
unique
in t
hat there
is no need to g
radu
ate tankwagon
pt ices on t
he b
asis of transportation c
osts. There would
s eem the
refo
re to be a sound ~iasis in
the tes
timo
ny of bo
thdealers and major ozl companies for the
recommendation of
t his Commission t
~iat no d
istributor or wholesaler should
be allowed
to discriminate in
pri
ce by selling at di
ffer
ent
r ate
s to dif
fere
nt purcliasers of branded motor fue
l of lik
egrade or quality. The pur
pose
of this pro
posa
l is
~o require
a major oil
compan3~ to sel
l to all of its dealers in the State
of New Jersey at
the saint tani~~~ agorl price anc~ any viola.-
tion
thereof would be a misdemeanor. Each major oil com-
pany t
i vould thus have e
tTery ri
ght and opp
ortu
nity
to set
its o~
~n tank`vagon
price, but
, having once established th
es ame, would be bound to se
ll at that price to each and every
z•et
aii dealer of that par
ticu
lar company located and doi
ngbusiness wi
thin
this State.
In o
ther words, the members o
f th
is Commission con-
sider discrimination in tank~vagon pri
ces,
lik
e th
e granting
o f sub
sidi
es, an unfair trade
prac
tice
adversely a
f~ec~in~
the best int
eres
ts of the people of New Jersey and recam-
mend legislation to snake
it a misdemeanor for any distrib-
utor
or ~;Tholesalei, either dir
ectl
y or ind
irec
tly.
, to dis
crim
i-nate in tank~va~on p
rices between
diff
eren
t retail dealers
purchasing
the szme g~ ode or
qua
lity
of branded motor
fuel, ~~v
hich
las
t is defined in th
e proposed act as that motor
fuel which
~. retail de
aler
sel
ls using the tra
de name of th
ez•efiner or su
ppli
er.
~X.
UNBRANDED GASOLINE.
U'~lbranclecl
aasoliz~e
is that w
~~ic~
is re
tail
ed under
a
name ~~i
~~ic
l~ does not i•epreselit the trade name of the
xefi
nei•
or supplier.
It is often gasoline p
~•oduced and r
efin
ed by
m<~jor oil eompai~iLs but not
sol
d a.
t retail uilc~er the
ir bra
nd
nzmes. O
~~ai
nari
l~c~
, it is so
ld at prices ap~rogimately two
cc~~
lts
pei~ g
allo
~a lower t
la~n the gas
olin
e dispensed
tinde~~
t l~e t~•
~de names of t~
~e•n
i~jo
r companies.
It n-as te
stif
ied that o
zi~ occasions, pa
z•ti
cula
rl3-
ix~
for
mer
Sea
rs, unbranaea g
asoline was not of as good a quality
as gasoline
retailed und
er major bz and names because i
tmight have been
gasoline p
urch
ased
in "spot" or "con-
ti~act" buying of
infe
i•io
i pz
•odu
cts.
Examples were c
ited
whe
re an ind
epen
dent
distributor or wh
oles
aler
either
sell-
inb
~o r
etail dealers or
also operating
retail o
utlets was
~Ule to buy gasoline at lo~~~er prices from major s
uppl
iez~
shaviil~ t
eznporar;~~ excesses o
~• o~~ersupplies o
f Ga
soli
ne--
-l:llo~vn in the
parla~ice of
the
tra
ce as "distress" gasoline
—«*l
~icl
~ eoulcl not be readily moved because the demand at
t he
retail outlets of the major oiI
companies d
icl not eq
ual
t l~e
sup
ply av
aila
ble.
It eras tes
tifi
ed t
liat unbranded gasoline today
is either
e~~ictlz• t
ie same gasoline :or ~
t le
ast as good a quality
~~~
tiol
ine as b
ranclec~ g
asol
ine
because
it i
s gasoline pur-
c:l~~l~ecl from th
e majoz oi
l companies by comparatively
~ n1~
11 t
list
i•ib
utoz
~s or op
erat
ors
tivho
retail
it under trade
names which do not have as «side a public ac
cept
ance
as the
t ;•<~c]e names o
f tlae m~
.jor
br
ands
. ~3otivever, the
outlets
t liroizgli which ul~bxanc~ed
gasoline is so
ld at
retail fre-
c~ue»tlz• ar
e lint as pretentious in ~,ppea.rance or as favor-
a1,1
~- loc<itea ~s t~~
e br~ziclecl out
lets
, and in some instances
t ine ~tteiia~nts do riot furnish extra, services such as
~vind-
shielcl wiping or e~iecking the
oil, eater, battery and tires.
Norm~tll~-
#11ese d
iffe
renc
es a
ccount for
the a
bility of an
t 121~1•an~led operator to
sell h
is mo~ox fuel at prices t
~vo
c ents
to«~er th
an the
branded de
aler
and st
ill
real
ize
a~ ~
ti~f~ctarzr
i~etuz•n on his inv
estm
ent.
2 9
It is worthy of note and of great ciedit to the major o
ilcompanies that the record does nat disclose a single proven
instance—even at the
height of the
price
ti vars—of the
"s~~~apping" or exchanging or substitutinb of brands with
the 'resultant p~•oduct bein; inferior to that advertised.
The et-iclence is conflicting as to whether the sale of ,un-
branded
gasoline i
s a c
ontributing factor to price
tvaz~s.
It appea~•ed
tlizt in t
«•a or three areas of the State
price
wars
I~~cl ~~een precipitated or started in p
~,xt b
~T the con-
s~ruction
and operation
of large
multi~ump ul~bzandecl
retail outlets, situZtetl ~1o11a heacTily
trat
i°el
ect hib11~t1aXs
~tnc~
selling gasoline «-ithout the furnishing of any extra s
e2•~--
ices at prices as much as
five cents per gallon below
the
posted
branclecl ~~riePs for those particular areas. The i
.n-
creasecl volume in
ga.1
1ona
~e obtained by a z
~etail operator
in that situation u-ould normally compensate for 11is loss in
margin of profit per ballon.
It zs the opinion of this Conlmissioii that the bulk of the
~
testimony
conclusively establisliecl
that unbranded and
~
branclect dealers can exist together ~ncl maintain a relatively
~
stable economic situ~.tion o~~ ~
l price differential of aiat more
than t
`~To cults p
eg.• gallon
ti vithout there bein
a~1~.T n
otice-
~.ble
effect on
~~ ~~Tell-conducted b~•~nclecl o~eratio~~.
~t~n-
brancled ~asoliiie lz~zs been sold for many ;~Tec~rs in i
~Te~
~~ J~r-
se~r and is ~ nztur~il z~esult of free conil~etitive enter~~rise ~t
1 ~ork. If an urab~.•aildecl cle~ler can mike a reasonaUly
ood
living at ~ price c
lifferen~i~il of ~re~ter thin
taro c~nt5 per
ballozl, t
hat should be
leis privilege.
Uilcle~~ no cire~umst~nces
should t
his
l~a~•t of the report of the Commission be
coii-
struec~ as eonc~emiling
t11e sale of tin~ranclecl
pi'OC~11Ct.S. Tl~e
consuming public should cert2inly be permitted the apl~ar-
tunity of
purchZsiii unbranded products i
f motorists so
desire. It is, o£ course, ~•easonzble to assume that
t~~e major
oil companies because o~ inteyi•atecl o~~erations, lard e suns
of money e
~pencled for a
dvertising (heir products, more
e laborate service
st~.tions at more fa~cTorable locations a
iicl
est~•~, services to the motorists
~v~l
l continue to f nd ~
videt~
public acceptance among consumers.
tl
~,:.
OPERATION OF SIGN LAW.
pn N
lay
22, 1952,
t}ae Go~~ernor
of New Jez sey
signed
into Iaw a bill which was I~~
.sse
d at the 1952 Session of the
1Tew Jcz•se~ Legislature ~ncl sponsored by Senatoz~
.A.lf z
•ecl
C. Clapp of Lsse~ count3-.
Tlie purpose of this lativ vas to
prohibit the
display o
-£, "ciict~s" or "jumbo" sibns ~
i•e-
~-iously erected on or near the premises of r
etail dealers
Zdvertisinb lower prices in
~~~•hat frequently amounted to
misleading ~ang~ua~e.
The law required in suUstaiice that no signs ~
~elating t
ot }~e p
ieces of motor fuel would be
pe~•mitted on or about
t ie premises where motor• fuel is sold at retail or on other
premises under the control of the
retail dealez other than
s igns displayed and maintained on pumps or other dispens-
ing equipment from i~
vlai
ch the motor f
uel
is s
old. T]~i5
s tatute
contailied the
sl~ecific~tions as t
o tl~e size o
f the
~~ermittec~
51 ;11
5 aild the iil
etl~
od by which they
~~~ez•e to be
att~lched to pumps and limited t
he signs to showing only
t he
unit p
rice per
gallon 1T
tClt
if~l
lla
all
tales, State and
rcderal. The size of anti f ~
~~ctional part of the unit price
~tT<ls also established in the la~~-.
Zt is interesting to node that the testimony of i•ep~•esenta-
tives of all p~iases of
t~~e ~~et~•oleum industry in New Jersey
was almost unanimously in favor of this legislation.
Tie excellent enfoxceme~i~ of this la~v b3~
the i~7otor Fuels
~'~1 Bu~•eau of the Division of Taxation of the State Gov-
el.iin~eut is
~c~~er~ill~% b
elie~~ecl to l
i~i~
Te ~
ccomplislied three
purposes:
(~.
) ~~he virtu~.l elimiliatioii o£ unsightly and misleadinb
s igns designed to lure motorists into service st
a-tions by representin` in ~Taz•ious and sundry ~v~l~-s
prices
~~vhicl~ upon iilvesti~ation ~~~ere found
i;i
31
many cas
es not to apply t
.o gas
olin
e at all
but to
s ome other commodity such as cig
a.re
~tes
;
(2}
;curtailment of the
rapid spreading o
f pr
ice wars;
and
(3) Abolition of a t
raff
ic hazard
in t
hat motorists
fre-
quen
tly became so in
tens
e on loca~~ng the lowest
pos
sibl
e pr
ices
in a given area th
at they pa
id in-
suff
icie
nt at
tent
ion
to th
eir
driv
ing and became
i nvolved in accidents. 32
XI.
SERVICE STATIONS II
I RELATTO~( TO TOLL }~IGIiVVAYS.
The tes
timo
ny of the major o
il company . ~
~~hich suc
cess
-
~ully bi
d for the ~aso]ine retailing contract along the New
Jerse~T Tur
npik
e iu
c~ic
ated
tha
t th
e co
ntra
ct vas awarded
on the bas
is of a bid for X11 of the comparatively few retail
out
lets
to be
pexmitted~: along; the hi
h~v
ay.
rIt ap
pear
sfurt
her th
at the
prices
of~~ regular and premium gasoline
supplied by t
his,
com
~aan
y Zion; the
Turnpike re
maiz
iec~
cons
tant
during
the pace war ~
~~hi
ch was boin~ on when
t he Turnpike was ope
ned
to t
raff
ic and tha
t the
price of
rebu
lar ga
soli
ne rem
aine
d at 2~.
4 ce
nts pe
r ga
llon
, includ-
in; tax, th
roug
hout
the few xex
r~ai
ning
months of the price
way. It
is wo
rthy
of no
te that th
e gallonage so
ld alo
e; the
Neu Jer
sey Turnpike represents ap
pros
imat
el3T
ten
per
c ent of the
total volume of gasoline retailed in
the State.
It wou
ld app
ear
tl~~.t the maintenance of suc]~ pr
ices
, ~~ar-
ticu
larl
y in
tune of a pri
ce gua
r, ~~
~aen
bas
o~in
e ~7as ~•e
tail
in~
~~t lowez• figures along pu
blic
hi;
h~va
ys of th
e State adjacent.
t o t
l~e Tu
rnpi
ke, do
es not
reflect free co
mpet
itio
n ~t ~~vor~z
~ u~cl do
es not
serge the
best i
nterests of tie eo
nsum
in~ ~ub
lic.
In fac
t, phi
s si
tuat
ion
~~~a
s described by one
witless
~s <
i "State monopoly" because fhe Sate rec
eive
s a certain
1 •ci
ltal
per ~~l
lou fz~om
tl~e
major o
il cox
np~n
yr l~o
ldin
~ the
f t•~
nchi
se for
a per
iod of
yea
rs.
This Commission is of the opinion tha
t consumers
«~oulr~
b e better served ?~y ezt
her on
e of two alt
erna
tive
procedures
o n t
oll hi~hw~,ys of
the
futuze end, therefoY•e, makes the
f oll
o~vi
n~ rec
omme
ndat
ions
(I) Each location
foz~
a r
etail outlet on any future
toll
~ llahway sh
ould
be
bid upon s
epar
atel
y and the
c ontract fox th~.t particular site should be awa
rc~e
clt o the
lo~
~est
bid
der, rather thin permit ~, bulk bic
~f of aZl
ret
~.il
outlets on the
same hi~
h~va
~~ ; ar
33
a
(2) No retail ou
tlet
s at all sho
uld be permitted alo
ng the
righ
t of
way of the toll highway in question, which
%"
would presumably
result in
thei
r co
nstr
ucti
on at
''
the zn
terc
han~
es, the
locations of
service s
tati
ons ites becoming subject to competition be
t~~e
en the
major oil companies and any small indepenr~en~
b usinessman po
sses
sing
the req
uire
d capital.
~4
XII.
SUlY~MARY OF PROPOSED LIGGISLATION.
By ~~~,y of summa~•y and for tkie re
ason
s set forth in
tlic
appr
opri
ate portions of
tllis re
port
, the
mem.bE~rs
of t
lii~
Comznissioii nlal.e the
f~l
lo`~
Tin
recominendatioz~s fo
r le Yi
s-la
iion
i~~
liic
h have bee
n clr<iftec~ in a
bill f
or. si
mult
aneo
ussubmission wit
h th
is rep
ort
fio the 1 53 Ses
sion
of the \Te1v
Jci
•sey
Leg
isla
ture
(a) iYl
akin
it ~,
misdemeanor poi• a
.ny distributor, ~•efiner,
~uho
iesa
ler or suppliex
to o
ffer or fo
r pi
ny r
etail
dealer to
~cce
~~t,
dir
ectl
y or i
ndiz
ectl
y, a r
ebat
e,concession, al
lowa
nce,
discount or b
enefit, of
any
kind
or na
tu;•
c ~~~l~~tsoever, in co
nnec
tion
with the
sale of C~1S~I1~l1~1
.0I1
of
the
motor fuel or otl~ez
pro
duct
s n~
arl;
etec
l by
t~~e
di
stri
l~ut
or,
refi
ner,
wholesaler or sup
plie
s ;
(h}
1~T~.kin~ it
<i mi5clemen~lor for any clist~~ibtttor, refiiiet~,
wholesaler or supplier to
le~
.se
o~• nialte ~
: co
ntr~
lct
on condition, pr
omis
e, a~~
~eem
ent or underst~,nclin~
that the
lessee or l~t
~rch
aser
tL e
reo~
shall zio
t use
or deal in
;-•ooc
~s, «g
yres
, n~
ereh
ancl
i5e,
supplies or
otl~ier c~mmoc~itie~; of
~ competitor of
su
ch cl
is-
t~•ibt~t.or, ref
iner
, ~;~li~Icsaler or su~pliel• etc
ept.
tl~~t
t }iis shall not Zppl~T to tanks or pum
~~s if
furnished
by the
clisti•ibutor, re
fine
~~, ~v
bole
sale
i• or
suppliez•
to be us
ed in th
e di
stri
buti
on of id
s mofor fuel ;
(c)
1~~
Iaki
n~ it a
misc
~eme
~~.t
ior for any di
stri
buto
r or
~ ~Tl
~ole
sale
~•, ei
ther
cl~rectl~T or i
ndirectly, to
c7is
-c~
•imi
vatc
in
tanl:~i°i on prices between cliff re
ntt •e
tail dealers l~ureli~3sin~ tal
e sazl2e ~r~~cle or• ~uzJit~T
of bra
nded
motor fuel ;
(d) ~I~,kin~ it
~ miscleme~inor for
az~v di
stri
bttt
o~•,
refiner,
1 vl~olesaler o
z• sup
plie
r to
lea
se or to
sub-e
ase
toany z
•eta
il dealer
t~l~
e facilities anc
~ equipment for
35
N 0
the operation of a
, retail service o
z• filling station
as
specified herein, to wit: At an amount not in
r excess of ten per cent {10%) of the amount to be
paid to the owner or lessor, or not less than ninety
per cent (90%) of the amount to be paid
to the
owner ox lessor for such
facilities or equipment;
and
(e) Contaznin~ the necess~i•y .p
rovisions for enforcement
of (a}, (b), (c) and (d) above b
~T t
~1e Director o~
the Division of Ta.~at~ion in the Department of the
7 'reasur~- of
tl~e State of
~Te~~- Jersev.
This proposed legislation is to be kno~vn as the "Unfair
Motor Fuels Practices ~1et," anc~ i~
finds considerable sup-
port, as noted i
n tl~e Stt~tement a
ttZclled to the
bill, in
l egislation of a similar nzture
~~~hicll leas been enacted in
2 4 other States.
The unfair
trade
practices
~cvhicli this Ie~i.slatiou is
designed to correct are clearly substantiated in the recorded
t estimony and accompanyin
exhibits obtained. as a 1
•esult
of the tliorouDh elamina~ion conducted by this Commission.
The motor fuel business constitutes such an important and
necessaz~y part in the economy of this State that this Com-
mission strongly u~~bes
t~i~.t the police power be invoked foz•
t ie purpose of px~otectin~ and pro~notin~ the public welfni•e
by terminating d
icci•iminative p
ractices curtailing instead
of strenatheil~ny competition in the sale of motor fue] at
the
retail level.
T or are the proposals 1lereinabove ~ffirmaticely adv~ncec~
the only ones to recei~~c
tl~~e careft7l ~,~tention of this Com-
mission. Abuses have been
obsez•ved in certain phases of
tl~e zi~~ht and p
i~i~-ile~~e of leasin; and contracting, particu-
l~rly i~ith respect to apparently excessive rental increases
an leases and sub -
leases and with respect to the high degree
of control sometimes asserted
over• dealers
desi~~ina to sell
their
respectitiTe interests in
their
1•etail establishments f
.obuyers of their ojvn choice.
~s pi~e~ io
usl~- s~iscussecl
izl this 1
•el~oi~t, this Commission
is e1t~•emely concerned
over• the excessive
zen~a.~ increases
son~ietilnc~ macle b~ i7izjor oil companies on leases and sub-
lc<ise~.
T.lic
~rie~nl~ers
i~e~~lize
that si~uatioils may arise
~~~l~iclt just.i f y
i•enfia~ Zajustments upw ~~ ds as
~vell as clo~~vn-
~~~~irc~~. 'Pl~e Co~r~mission, therefore, recommends legislation
~s st~~tecl in " (d} " above, establisliin~ a maximum as
u7ell
a5 minimum range for
rental adjustments
in orcler to
pz•~tect primaril3° t
l~e ~Telfaie of the public as
well as
t]~e
i~itc~r•ostecl pa~•tzes.
~~
Uile ade~itional subject
e~~iewed l
eas been t
hat of cam-
pany o~~tned and operated
stations. As previously
stated,
these
reia~l outlets are r
elatively
~e~v in number and are
m~tiiitained
~rzmaz•ily for training ox rehabi]itation pur-
~~oses. Because the majoz~
oil companies are fox the most
j ~~rt intebrated corporations and can, therefore, operate
s ilch
outaet.s at z loss
~f necessary, they can tvrouah such
s t~itions eYez t considerable i
nfluence on the posted r
etail
p~•ice5
i1t the
p~i•ticular
areas
~~~here
these
outlets
are
l ac:~tec1. B
ec~tizse of the eery nature of this type of opera-
tio~t, it i, oft~~i dit~icult faz a major• oil company to conduct
~liclt ~
t~itiolis ~t a profit. This is ~n sharp contrast to the
i ncli~~icju<<1 clealei~ ~~Tho is compelled to c~rzy
oi~ his b~asiness
alt ~
i ~>>~olit. i
n orcicr to survi~~e. This Commission has given
n~ncli tl}Uu~ht to ~iclvoc~.tina le;islation ~vhicli would require
~i~~-
clista~ihtitoi•, r
efiner,
ti~rholesalez or supplier engabed,
c li~•~ctlr
o~' lI1C~1T•ectly, in the
retail sale or d
istribution of
motoz• fuel to the
public, to s
ell or offer for sale at retail
at ~~~i•ice determined by the cost of doing b
usiness plus
t ie posted t
ank«rayon puce for such motor fuel.
Hotiv-
e~-e~•, it is
tl~e opinion o
f this Commission t
~izt this topic
i~ ~clec~u~tel~~ covered b
~~ the e~istin~ statutes of the State
o f Ne~tit Jersey prohibiting retail sales at prices below cost
p lus s
elling e:~penses and ghat any further recommenda-
tions
~~lon~ these lines «
Totild be superfluous.
37
N
XIII.
CONCI.USIO~i S.
In bri
ngin
g this rep
ort to a close the
members. of
thzs.
Commission reiterate
that
th
ey }
gave at
.all times
been
mot
ivat
ed by a desire to be fair to
alI phases of the gaso-
line
industz•y in New Jer
sey consistent ~~-
ith th
e welfare of
all of th
e pe
ople
of
tlii
s gr
eat State. As a mattez• of f n
ct,
a ve
ry con
side
rabl
e amount of
tiizle and e
nez•gy bas been
aevotecl to
this st
udy,
and any objection by any pez son or
o n behalf of
any par
t of
the anc~ustry that
insufficient op-
port
un~t
y was gra
nted
by the
Commission far the
pur
pose
of hea
ring
of
eti idence
~~ro
uld come wi
tli
ill gr
ace.
The
gen
eral
pu
blic
hearing
of June 16th anc~ th
e December
2nd pu
blic
hea
ring
on dzvorceme~~t e
acli
consumed on
lyhal
f a day sol
ely because no one present in the .~
.sse
mbly
Chamber on tho
se occasions req
uest
ed any add
itio
nal time
t o be he
ard.
~Vloreo~~er, one 1~7eek from December 2i~
d vas
allo
tive
d for th
e fili
ng of any memoranda o
r briefs t
~~hi
chanyone des
ired
to su
bmit
, and none ~~~
as fo~thcomin~ either
clurin~
t~i~it week or tl
iere
afte
r.
I n condemning certain trade practices as
unfair ~
ncl
in~
proposi
nb le
~;is
l~.t
ion
to correct
these
inequities,
ever
ye ffo
rt u~as made by the Commission members. to "call our
s l~aots as we see diem" and to avoid favoritism to or
unjust
c astigation of
any phase of
i.he ind
ustr
y. On the contrary,
t he Commission recognizes that the maj
or• oi
l companies, th
ei ndependent «
=ho~
esal
ez•s
, di
stri
buto
rs or
jobbers a.
nd the
r etail dealers all have ser
ious
pi~
ol~l
ems fo
r «~hicl~ no ready
ansz~ei s are
a.va
il~,
hle,
and tb
a~ many of
these
are
too
s pecific to lend the
msel
ves ea
sily
to solutions by a general
I egisl~,~ive app
roac
h.. It
~vauld seem ghat with these ques-
tion
s th
e real answer lie
s in a mutual effort on the
part of
a.11 phases o~ the
ind
ustr
y to better understand the proUlems
of eac
h ot
her and to endeavor though bet
ter relations to
~ mpxove wherevez pos
sibl
e in
their common cau
se of se
~•`~
inb
38
the people. The gasoline "strikes" of th
e pa
st ~~zth their
attendant difficulties aid th
e oc
casi
onal
"marches" on
Ti•
ento
u during lebislati~te se
ssio
ns do not seem to be very
rers
oll~
ble
o~.• co
i7st
ruct
iti~
e ~,
ppro
~,ch
es.
Tliis is a big
anti
c and liigl
ily im
port
ant in
dust
ry, and the
situ
atio
n in
Net
iv J
er•s
e;~~
is further com~~licated by the fact
tl~~it this
geo~
l•ap
l~ic
all~
~ small State
sits astride the
prin-
ciPZ
l <~.
i serial hi
gh«r
ays connecting the
metropolitan centers
on the nor
thea
st and sou
th vest. The pax capita consump-
tioi
i of
gas
oliz
ie in
~ Ve1
~~ Jersey i
n 1950 ~
~~as
270
ballons
as com
pa~~
~d t~Tith 18
0~ba
llon
s in N
eti~r Yozk and 210 gallons
in Pen
nsyl
vani
a. I
~~uch of
-thi
s heavy consumption res
ults
~fror
n transient
traffic and from th
e lo
wer
Stat
e ga
soli
ne
t~ztes in New Jersey as compared wit
h those in adjoining
Sta
tes.
Ne~~T JerseZT, th
erefor
e, pre
sent
s a unique market for
the
products of
a ~~i
ahly
com
peti
tive
ind
ustr
y. Free competi-
tioi
~ is
~,
fine thi
nb pro
vidi
ng it do
es not become rut
hles
s
t o the point where it is unfaii. G
asol
ine pr
ice «Tars at first
g lan
ce ~.ppear to,
and do, benefit the consuming pub
lic for
a l
vhil
e, but
it is ext
reme
ly dubious whether they
real
ly
help anyone ove
r the lo
ng pul
l.
Alt
houg
h more or le
ss "normal" times, ra
ther
than pri
cewars, presently prevail i
ii I~Te~v Je
rsey
, the le
gisl
ativ
e pr
o-posZls of this Commission to
coz•
i•ec
t unfair tza
de pra
ctic
esapply just
a.s ap
tly,
bec
ause
f~lir pla
3T must ~,nc1 sliould be of
par
aiil
otul
t zmportZnce Zt al
l tu
nes.
The sma
ll businessman
a l~v
ays bas been
~nc~ sho
uld continue to be
a ver
y important
pez
•son
in the United S~ztes of
America arzd in
the Sta
te of
Nee
v Jersey.
~Tr. I
~,ob
ert C. Crane, one
of th
e members, ~vho «as una
ble
t o fl tte
nd tl~
e hezrin
~s aci
d meetings of th
e Commiss%on az~d
ar~o
dis~~rees
«~it
l~ cert.~~in
findings,
is not
signing
this
r eport for
the
reasons etp
ress
ed in
leis
fet
ter of
Febi~uaa•v
1~, ~~
~3, ~d
a~•e
ssed
to the chairman rin
d l~
~s requestec~t that
his
let
ter be
a~~
l~cn
clec
l ~s z min
orit
.~~ re
po~~
t.~Z1'• -Albert 1
+'. I~Iowarcl, an
othe
r member of
tl~e
oi•
i~ii
z~l
g~s
oli~
le stuc~~c~ co
mi~l
itte
e, Appointed i
n August, 1J~~0,
1~~f
d N N
the Governor, attenclecl only one hearinb o~ this Commission
and his stated his unuTillingne~~ to si~.n this report.
Senator Bruce A. ti '
Yalla~;e was unable to attend any of
t he hearinbs or meetings of
iliis Commission and c1oe~ not
wish to sign the report at this time, UI
?tll ~lE ~laS I
]flC~ ~Lll~tl~el•
op~ortunit~
- to stucl~- tie p~~oposed le~islation.
Resl~ectivelSJ submitted,
~_I'~~~ G~sv1,r~; F:
S`~`L'DY CU~I1bIZSSI~N.
l ~Zembers Appointed b
jr the I'~•e~iclent of the Senate
~S~ ~~AYNE DUMONT
1 JR.
~ ~rt~Y:vE
Dv~zotirT, Jx., Cjau~ir~nan
S J VII~T CENT E, r~ULL
VIITCENT E. HULL
X
:C
]{
?~
]~
ti ~ X
BRUCE A. ,GVALLACE
Members A~~l~ointed by the Speaker
of the
General
Assembly
~S~ ~IAR,IE F. M~EBEftT
l ~~AxiE F. ~IA~BERT~ Secretary
~S~ 'ANDREW ,A. SALVEST
ANDREW A. SALVEST
~S~
~'LVIN R. SI:1~R2ILL
ELVIN R. SIM112ILL
~ Ieziibers o
f 0~:•i~znZl Gasoline Study Committee Ap-
pointed by the Governor
x x x x x x x x
A7,SEItT ~, HOWARD
S J OTTO L. STRAUB
OTTO L. STI',AUB
4U
I'ebi•uary 10, 1953
Ho~~ol•able iV~yne Du~noi~t, JI•., Senator,
State HoL~se,
Tz•ci~tola, I~
Te~~ Jerse3~.
11Ly clear Senator Dumont
I regret exceedingly ~Iy inability to attend the meetings
of the Gasoline Study Commission due ~o the very l
ieavy
scliedule of my activities• el
sewhere. However as I said at
tie be~~rzziinb, Z wrote the original report submitted b3~ ,t
heGovernor's committee appointed in 1950 at the conclusion
o f thcix investigation az~d zt that time felt that any fuxther
activity on xny part, un
til you ~iad completed your investig•a-
tion, mibh~ have lent an a
Lti a of
prejudice
in t
he p
ublic
concept of ~rour cletermiiiation. I f eel that ~~ou have dealt
ti vit]~ this matter e~tez~s~vely, yet, having read
all the
testi-
rnot~y ~
vliicll ,you l
i ave furnished me, I find n
otl.iin~ w
~lich
~voulcl support the
desiz•abzlity of ~ovexnmen~ intervention
i n the field of ~~soline sales.
Iii i
•e~~i~•a to legisla.tioii, I l~elie~-e that Federal la~~s exist
t~t<lt fui•1ii~l~ a pzotectio~~ to
all concerned
if tbei•e we~~e an
e ~~rnc:~~ desire t
~ co-operate on e
ither a t
est of t
he s
ales
~ ~rUr.eclure~ or t
t~e
l~l~v itscl£. I h~.~-e felt fz•ee to consult my
o«~~i c
;lo~e
<iclvisoi•s
i1i
t-}iis mater and f ncl the
proposed
t e;;i~I~.~tion ~~ot to l
ily- l
ilcii~~. I
, therefo~~e, request
t11~t you
c icletc m`- ~~~~me as beir~~ a l~nrty to submission of this Pro-
posec~ l
e~;i~latioii i~~asmuch as I cannot support i
t i~1 its
present state.
~ Io~~~~ver, ~~ouz• ~~eport on the ~~roceec~~ngs o~
tl.~e Gasoline
Study Commission i
~ a
vez•y
~~~oi•thy clocuz~~ent and I com-
me2zcl ~
~ou
for• y
ouz~ f
'oi~thri~llt manner•
iil
discussiii~
tl~e
mzny issues. In con~l~~~irison, ~io~~evez~, to the z°eport of t
l~e
1~J 54 comi~iit~ee, ~v~iose investigation was conc~uct.ed a
t the
he~~;ht of the
pxice
~y or
s, I must submit tliat yotu• conclu-
sions on ~
~~t~~ ~7 r
elative
to t
he r
ecaminciidation
For
the
aclopti~n o
f le~islatio~i m
al:in~; it a misdenle~nor t
o offer•
4 1
N W
oi• accept a rebate, etc. are rather indefinite and r feel that
our committee frowned upon the practice only in connection
ti vitn~ price wars. Rebates and discounts az e an established
~ar~ of wholesaling and ~
•et.ailing and ~voulcl appear ~~~~olly
l egal 'except
~vhe1•e discrimination could be droved.
Tl~ere-
fore, Ibelieve that your summation of the subsidy question..
i s somewhat tTague.
Sectzon VII, dealing with leases aucl contracts, does not
dive sufficient weight to the position of the
proc~uce~• znas-
much as it does not seem tlni~easonable for a producer• to do
e verything in his po`ver to have }ais ~~roduct re~~~~esentea in
t he best manner possible anc~ do ever~'~Illllb to protect these
s ales within legal means.
Section VIII, dealing
with tankwagoii prices,
again
t ouches upon a matter ~~hich involves discounts and I be-
lieve that there are s
ufficient Taws to protect against
dis-
cximination
the type tliat was e
videnced in the
Tate gas
ti ~~ars. However, cliscoui~ts and sales at production centers,
o r in this instance
refineries, i•ePresenting the
deletion of
t ransportation costs, is a worthy p~•actice and actually
al-
lows f oz competition if someone can provide transportation
at a cheaper r
ate so that he may provide g
asoline at the
r etail level at lover cost to tl~e consumer.
I ~:m happy to note in your conclusion
u rhich t
i ve recommended in our report ha
able acceptance.
ti '~Te felt t
liat this cireu
hacl much to do with price wars.
that the sign Iaw
s had such Favor=
s type promotion
Relative to Section ~I, the section tlealin~ with service
stations on t
oll highways, I ~
,xn in }iearty accord since the
tendency today in ~ e
tailing Gasoline on these told highways
seems samew]aAt monopolistic.
The entire point that I have in contro~ ersy appears to
be that your investigation was splendid, your• finciin
s, other
than ~~here I have c
lif~ered, seem ~
irell directed, vet i feel
that the la~~~ w
l~icli ~
- cu ha~-e proposed
is riot reZ~i•esentZtive
o f t'oux• findings. I must G din urge ~s I d
ick in t
~~~
a•epoz•t
42
o~ tie 1~}~p
rou}~ tliat the Federal la«T against
cliscrinlina-
tian be
i~esori:ecl to i
re c
o~ltrol of another ~~s v
~~<zl•.
Otlier
tll~l~l t
eat, State control of ~~1so::lle retailing tvoulcl be ha~•m-
ful to t
l~e
bu~-iii~ public
its well as
detz•imeiital to t
he i
n-austrti-. I elm i
•easo~labl~~ cert~zn t
hat the lags b
over~iir~~;
substituti~~~ o~ procluct
l~a~~e never been nuest.ioned for at
the ~
~eibllt of the ~
~rice
ti~Tar we found but one instance
ofsu
bstitute brazed
o~• iaiferior l~rocluct not as ~tdvei•t.ised.
It may seem strau~~ on the olae hand to commend you for
your ci~o~~ts and o
il the othex call for deletion of my si~na-
ture on the z
•eport, si
i~if~riri~b my d
xs~~p~ror~ al
of the pro-
gosed legislation, but such i
s my intention and, I believe,
my prerogative.
Very truly yours,
ROBERT C. CRANE
~:~
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