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Massachusetts Franchisees Sue Shell

BOSTON -- Four years after filing suit against the Royal Dutch/Shell Group of Cos., Shell service station owners in Massachusetts went before a U.S. District Court judge in Boston Monday and claimed that Shell took several measures in the late 1990s to drive them out of business, reported the Boston Globe.

Operators of Shell franchises charge that Shell raised wholesale gasoline prices and rents franchisees were required to pay the company. Gary Greenberg, representing the station owners, said the pricing policies unfairly hurt gas station dealers and decreased the number of Shell franchises in Massachusetts to 96 in January 2003, from 177 five years earlier.

The case, brought by eight Massachusetts franchisees, could affect agreements with thousands of Shell franchise owners across the country.

In his opening statement on Shell's behalf, attorney Paul Sanson defended the company's actions as "a reality of business" and said its policies were not designed to drive dealers out of business. He said that although raising oil prices and rents may have hurt some dealers, that does not make the actions illegal.

"You don't want that to happen to anybody, but is that the defendant's fault?" Sanson said. "Every time a landlord raises rent or prices go up, it's going to affect people."

Greenberg argued that Shell's goal was to drive independent operators out of business as part of a corporate strategy by the world's third-largest oil company to boost profits by increasing the number of company-owned and operated gas stations.

"Shell makes significantly greater profits when it sells gasoline to the motoring pubic through a company-owned store," he said.

By raising the wholesale price at which it sold gasoline to dealers, he said, the oil company forced the dealers to either raise their street prices to customers to "uncompetitive" levels and lose volume or maintain competitive gas prices but take smaller profits that were inadequate to cover employee salaries and other expenses.

Under Shell's franchise system, dealers set the gasoline prices they charge at the pump.
"Shell adopted a plan to take over the local neighborhood stations, without having to pay fair value" to the franchisees, Sanson said.

Sanson said the oil company set new franchise rules and "both sides have to live by them." He disputed a claim that the wholesale prices Shell charged independent dealers for gasoline were unreasonably high. They were "in the range" charged to dealers throughout the oil industry, he said.
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