Big Oil's Stance on Discounts for Cash: Don't Ask, Don't Tell?
By Barbara Grondin Francella
The major oil companies don't like -- and in some cases don't allow -- retailers to offer discounts for cash transactions. Or they don't care, but don't encourage the practice. It all depends on whom you talk to.
"There has been a general view, probably wrong, that if you are branded retailer, you cannot offer discounts for cash," said Dan Gilligan, president of the Petroleum Marketers Association of America, based in Arlington, Va. "I don't think major oil companies are enthusiastic about cash discounts, but they aren't prohibiting them."
Of the major oil companies that were contacted for this article, only Shell Oil Products US and BP plc responded to an inquiry regarding discounts for cash transactions.
"Shell-branded gasoline station operators are independent business people who make their own operating decisions and, who by law, have the right to set gasoline prices and expanded payment options as they believe appropriate," noted Karyn Leonardi-Cattolica, a Shell spokesperson.
"Although the industry reports show that over 60 percent of consumers use credit cards for gasoline purchases, Shell does not endorse one form of payment over another," she continued. "We are aware that some operators are looking to 'discount for cash' and other payment programs to reduce the service costs incurred by accepting credit cards, which have increased appreciably over the past few years.
"Our customer value proposition is to provide a consistent and pleasant experience with our quality products and services at each of our branded stations coast-to-coast. Inconsistent pricing methods do undermine this, but again, we have made ourselves clear that marketers are free to price as they see fit."
Shell offers branded wholesalers and retailers zero credit-card processing fees on Shell-branded cards and is testing and implementing alternative lower cost forms of payment such as ACH (Automated Clearing House), biometrics and debit, she said. The major oil company also offers ongoing reduced merchant service fees on MasterCard, American Express and Voyager fleet cards.
"These facts need to be taken into consideration along with local market conditions when a wholesaler makes decisions regarding their local marketing tactics, including whether or not to offer a discount for cash," Leonardi-Cattolica said.
Although BP's corporate locations do not offer discounts for cash, branded dealers or jobbers are allowed to do so, noted spokesperson Scott Dean. Its BP-branded Visa card, however, offers "attractive rebates," he said, including 5 percent rebates on all BP location purchases.
There is nothing in the ExxonMobil franchise agreement that would restrict branded retailers from offering discounts for cash, spokesperson Beth Snyder recently told The Associated Press. The company, however, recommends sticking with one price.
Despite these official positions, in June the state of Connecticut passed legislation that would nullify any bans that would prohibit discounts for cash purchase that may be written in Big Oil contracts. Gov. Jody Rell sent a letter to the roughly 1,200 gasoline dealers in the state, informing them she had signed the bill and urging them to begin offering cash discounts. Any gas station owner who ran into difficulties with their parent companies over offering the discounts were advised to contact the Department of Consumer Protection.
"The State of Connecticut will intervene where there is any attempt to undermine this effort," the governor told dealers in the letter.
Soon after, Gerry Katz, owner of Gerry's Shell Food Mart in New Haven, Conn., began offering a 20-cent discount, selling regular gasoline for $4.30 a gallon to those who paid with cash.
"I'm very optimistic," Katz told the New Haven Register. "It makes me as competitive as any prices in the city. Besides people changing over to cash, we're hoping that it will increase the foot traffic inside the store."
In July, Rhode Island Attorney General Patrick C. Lynch issued a legal opinion stating gasoline retailers are allowed to sell gasoline at a lower price to customers who pay with cash instead of a credit card, as long as the retailer "clearly and conspicuously" displays both the cash and credit price.
The attorney general was asked by the state's Department of Business Regulation (DBR) to clarify whether state law allows dealers to charge two different prices for gasoline for different payment types. State law does not specifically prohibit nor allow a station to charge different prices for cash or credit.
The DBR had had received complaints from some consumers who believed they were misled into buying gasoline at stations that displayed one price, but charged a higher one at the pump for using a credit card.
The major oil companies don't like -- and in some cases don't allow -- retailers to offer discounts for cash transactions. Or they don't care, but don't encourage the practice. It all depends on whom you talk to.
"There has been a general view, probably wrong, that if you are branded retailer, you cannot offer discounts for cash," said Dan Gilligan, president of the Petroleum Marketers Association of America, based in Arlington, Va. "I don't think major oil companies are enthusiastic about cash discounts, but they aren't prohibiting them."
Of the major oil companies that were contacted for this article, only Shell Oil Products US and BP plc responded to an inquiry regarding discounts for cash transactions.
"Shell-branded gasoline station operators are independent business people who make their own operating decisions and, who by law, have the right to set gasoline prices and expanded payment options as they believe appropriate," noted Karyn Leonardi-Cattolica, a Shell spokesperson.
"Although the industry reports show that over 60 percent of consumers use credit cards for gasoline purchases, Shell does not endorse one form of payment over another," she continued. "We are aware that some operators are looking to 'discount for cash' and other payment programs to reduce the service costs incurred by accepting credit cards, which have increased appreciably over the past few years.
"Our customer value proposition is to provide a consistent and pleasant experience with our quality products and services at each of our branded stations coast-to-coast. Inconsistent pricing methods do undermine this, but again, we have made ourselves clear that marketers are free to price as they see fit."
Shell offers branded wholesalers and retailers zero credit-card processing fees on Shell-branded cards and is testing and implementing alternative lower cost forms of payment such as ACH (Automated Clearing House), biometrics and debit, she said. The major oil company also offers ongoing reduced merchant service fees on MasterCard, American Express and Voyager fleet cards.
"These facts need to be taken into consideration along with local market conditions when a wholesaler makes decisions regarding their local marketing tactics, including whether or not to offer a discount for cash," Leonardi-Cattolica said.
Although BP's corporate locations do not offer discounts for cash, branded dealers or jobbers are allowed to do so, noted spokesperson Scott Dean. Its BP-branded Visa card, however, offers "attractive rebates," he said, including 5 percent rebates on all BP location purchases.
There is nothing in the ExxonMobil franchise agreement that would restrict branded retailers from offering discounts for cash, spokesperson Beth Snyder recently told The Associated Press. The company, however, recommends sticking with one price.
Despite these official positions, in June the state of Connecticut passed legislation that would nullify any bans that would prohibit discounts for cash purchase that may be written in Big Oil contracts. Gov. Jody Rell sent a letter to the roughly 1,200 gasoline dealers in the state, informing them she had signed the bill and urging them to begin offering cash discounts. Any gas station owner who ran into difficulties with their parent companies over offering the discounts were advised to contact the Department of Consumer Protection.
"The State of Connecticut will intervene where there is any attempt to undermine this effort," the governor told dealers in the letter.
Soon after, Gerry Katz, owner of Gerry's Shell Food Mart in New Haven, Conn., began offering a 20-cent discount, selling regular gasoline for $4.30 a gallon to those who paid with cash.
"I'm very optimistic," Katz told the New Haven Register. "It makes me as competitive as any prices in the city. Besides people changing over to cash, we're hoping that it will increase the foot traffic inside the store."
In July, Rhode Island Attorney General Patrick C. Lynch issued a legal opinion stating gasoline retailers are allowed to sell gasoline at a lower price to customers who pay with cash instead of a credit card, as long as the retailer "clearly and conspicuously" displays both the cash and credit price.
The attorney general was asked by the state's Department of Business Regulation (DBR) to clarify whether state law allows dealers to charge two different prices for gasoline for different payment types. State law does not specifically prohibit nor allow a station to charge different prices for cash or credit.
The DBR had had received complaints from some consumers who believed they were misled into buying gasoline at stations that displayed one price, but charged a higher one at the pump for using a credit card.