BP Franchisees Go to Trial Over Pricing Policy
LOS ANGELES — A legal challenge centering around BP's pricing policies, brought against the oil giant by some franchisees, is having its day in court.
According to Law 360, an attorney for BP West Coast Products LLC's franchised gas stations told a California state court jury that the oil company's outdated pricing policy was making it impossible for the franchisees to compete.
Brian Brosnahan of Kasowitz Benson Torres & Friedman LLP told the jury that BP was still following a policy it set in the 1980s of assuming the margin on fuel purchases was 8 cents a gallon, a system that drives up the price it charged the owners of Atlantic-Richfield Co. branded stations for gas, the legal news outlet reported.
ARCO stations are supposed to be a discount brand, Brosnahan told the court, but they were having to raise prices near to what "the majors" charge their customers, he said. The majors are Chevron Corp., Shell Oil Co. and Exxon Mobil Corp.
In addition, according to Law 360, Brosnahan said ARCO stations don't advertise the same way the majors do and they don't have the same amenities. For example, he said, the stations don't accept credit cards and they charge customers a premium for using debit cards instead of cash.
BP attorney David Harris of Greensfelder Hemker & Gale PC, meanwhile, told the jury in his opening statement that they'd only been given part of the picture on how gas station owners earn money. If they charge less than the majors, they sell more gas, according to the attorney.
"There are many ways to sell gasoline. It's not one-shoe-fits-all. There are different ways to do it," Harris said.
It's in the oil company's interest to set prices for its dealers at which the dealers can effectively sell the gas, he said, so there's no reason the company would overcharge. Harris held up data about the station owners' sales as evidence that BP's pricing model works. He showed the jury a series of charts demonstrating that the four plaintiffs whose cases were bundled for this trial all sold higher-than-average volumes of gas every year. The stations also earned a higher-than-average gross profit.
The gas station owners, who paid as much as $1 million each to become BP franchisees, claim customers have spurned their pricier gasoline for the more affordable unbranded gas BP is selling to their competitors.
The plaintiffs, owners of BP and ARCO gas stations and ampm mini-marts, also allege BP defrauded them by failing to disclose known defects in a point-of-sale and inventory control software before they signed contracts requiring them to use the faulty software, according to the suit.
The trial kicked off July 10 in Los Angeles.