Zone Pricing Suit Against Shell Dropped

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Zone Pricing Suit Against Shell Dropped

SANTA ANA, Calif. -- A federal judge here dismissed a lawsuit filed by California gas station owners against Shell Oil Co., alleging the company overcharged operators for gasoline, in an effort to push customers to local stations owned by Shell, the Los Angeles Times reported.

Attorneys for both sides were prepared to give closing remarks to the jury, when U.S. District Judge James V. Selna's decided to throw out key expert testimony and end the case.

Earlier this week, the jury heard testimony from Robert Michaels, an economics professor at Cal State Fullerton, hired by the Shell dealers to quantify the damage caused by the alleged pricing policies. While the jury was taking a break, Selna removed Michaels' testimony and dismissed the case, the report stated.

"I find that the methodology used by Dr. Michaels does not meet the standard," Selna told the attorneys. Without Michaels' evidence, "the jury cannot compute a reasonable estimate of lost profit for these defendants," he added.

"Consumers lost," said Mike Madani, one of six Shell dealers who brought the lawsuit. "We were very, very hopeful that we could get a federal decision here that would help all of California."

Anne Peebles, a spokeswoman for Houston-based Shell Oil, told the Times the company was pleased by the judge's decision. "The plaintiffs clearly failed to present evidence to support their allegations," she said.

Madani testified that Shell had charged him as much as 13 cents a gallon more for gasoline than it charged another Shell station about one mile away. As a result, Madani was forced to raise retail prices, causing him to lose business to the company-owned Shell location.

Thomas Bleau, an attorney for the Shell dealers, told the Times he would appeal the ruling, and will seek a permanent injunction that would bar Shell from charging dealers different prices based on competition zones.

The case went to trial May 29 and included 14 days of testimony from economic experts, Shell dealers and others. The case was closely watched, as it was one of the few challenges to "zone pricing" that went to trial, the report stated.

Opponents including consumer groups criticized refiners for splitting communities into geographic pricing "zones" and giving dealers different wholesale fuel prices according to territories. The practice yields higher prices for drivers and allows oil companies to indirectly control retail prices by raising or lowering the dealer's fuel bill, according to the opponents.

However, refiners defend the practice as a reaction to competition in various areas.