You asked for a summary of the divorcement law and for a review of the transcripts of the public hearing and legislative proceedings to determine (1) the perceived problem and (2) the anticipated outcome.

SUMMARY

The law prohibits petroleum refiners from operating gasoline service stations in Connecticut. The prohibition was adopted in 1979.

During a lengthy public hearing, proponents offered many reasons for adopting the bill. The reasons included, among others, that company-operated stations enjoyed an unfair advantage, refiners favored company-operated stations during periods of shortage, the legislation would protect full service stations and stop the growth of "gas and go" stations, and the legislation would stop refiners from changing the retail industry.

Opponents also offered many reasons against the bill. These included, among others, that existing federal and state laws protect dealers from predatory pricing and abusive practices from suppliers, the bill would reduce competition and therefore consumer prices would increase, federal agencies which have studied the issue all oppose the legislation, and major oil companies have only a small segment of the industry in Connecticut (fewer than 50 out of about 3,200 stations) and had only opened five new ones in the preceding five years.

The legislative debate in both chambers focused more on gasoline supply during shortages than did those who testified during the public hearing. The bill's proponents argued that the overall supply to Connecticut would not be reduced because dealer-operated stations would replace the company-operated stations. Opponents argued that federal gasoline allocation rules would reduce the overall supply if the company-operated stations were eliminated.

SUMMARY OF STATE LAW

The law prohibits petroleum product refiners and producers from operating a retail gasoline service station after July 1, 1980, with its employees or those of a subsidiary, a commissioned agent, or independent contractor managing the station on a fee arrangement (CGS §§14-344a to 14-344d). The law had prohibited the refiners and producers from opening such stations after July 1, 1979.

The law requires the consumer protection commissioner to adopt regulations defining the circumstances under which a refiner or producer may operate a station temporarily. These allow them to operate a service station for up to 90 days if the former retailer has died, vacated it in breach of a lease, been evicted for cause, or if it acquired the station as a result of a merger or stock acquisition. The regulations require the refiner or producer to obtain the same license required of all service stations and a certificate of authority to operate for a specified period from the commissioner (Conn. Agencies Reg. §14-344c-1).

The law exempts (1) the allocation of fuels to state-operated facilities; (2) state fuel storage; (3) the operation of state-owned retail service stations by a refiner or producer (such as the stations along the Merit Parkway or I-95); and (4) one station operated by a refiner or producer with its employees on July 1, 1979, which is used as a training facility, test marketing center, or for advertising purposes.

PUBLIC HEARING TESTIMONY

The General Law Committee heard six hours of testimony on the issue on March 13, 1979. Proponents of the legislation offered a myriad of reasons why the bill should pass. They argued that:

1. company owned and operated service stations had an unfair competitive advantage,

2. major oil companies were enjoying record-setting profits,

3. there was favoritism in allocating gasoline during periods of supply shortage,

4. if the increase in company-operated service stations continued, there soon would be no more dealer-operated stations,

5. everyone except the majors suffered during the recent energy crisis,

6. dealer-operated full service stations needed protection against the growth of company-operated "gas and go" stations,

7. the legislation would stop the decline in the number of service stations,

8. although the bill would force majors out of the retail market, it would actually foster competition because retail dealers act more competitively,

9. the bill would increase a dealer's margin without affecting the price paid by consumers,

10. the bill would prevent the majors from using unfair pricing policies to force dealers to close,

11. the bill would stop the trend away from full service stations to "gas and go" stations, and

12. the bill would stop company-operated stations from changing the retail industry.

Opponents also offered a myriad of reasons why the bill should not pass and offered their own ideas about why the bill was being promoted. They argued that:

1. the General Assembly should not interfere with the free market,

2. the recently-adopted federal Petroleum Marketing Practices Act provides adequate protection against abusive actions taken by suppliers,

3. the legislation's proponents have not offered any empirical evidence of predatory pricing to justify the legislation,

4. if predatory pricing exists, it should be addressed through existing anti-trust laws,

5. the legislation's real purpose is to protect one segment of the industry against competition,

6. consumers would be forced to pay higher prices,

7. the legislation would reduce competition by eliminating a whole class of retailers,

8. the legislation would not protect full-service dealers against the competitive pricing offered by chain retailers and convenience stores,

9. Connecticut's franchise act offers strong protection,

10. the majors do not dominate the retail market in Connecticut because they operate few than 50 of about 3,200 service stations,

11. the bill is designed to increase a retailer's profits because it removes a competitive segment of the industry,

12. the public would be hurt by the loss of high-volume, low-price stations,

13. the bill reduces the number of retail outlets and this will increase the retail price,

14. the bill simply is legislating away the competition,

15. the federal agencies which have studied the issue, the Federal Trade Commission, the Department of Justice, and the Department of Energy, all oppose the legislation, and

16. the major oil companies have opened only five new stations in Connecticut between 1974 and 1979.

LEGISLATIVE DEBATE

The House of Representatives debated the issue on May 11, 1979, and the Senate debated it on May 23, 1979. Both chambers defeated amendments that would have required studies instead. Many of the same arguments were repeated. The legislators were more concerned with gasoline supply during shortages than were those who testified during the public hearing. The bill's legislative opponents argued that the bill might, under federal gasoline allocation rules, reduce the supply of gasoline sent to the state during shortages. Proponents argued that the bill would not affect gasoline allocation.

DD: ts