Maryland's new law prohibiting oil companies from charging their dealers fees for processing credit card transactions will undergo its first legal test in a state court Monday, in effect pitting dealers against dealers.

A second suit challenging the constitutionality of the law has been filed by Texaco in federal court in Baltimore.

Regardless of the outcome of the lawsuits, no clear-cut winners will emerge. And, ironically, the state's response to complaints by dealers who oppose the processing fees could force some stations to close while others lose a substantial volume of business.

On one side of the issue being heard in state court, SMO Inc., a LaPlata jobber and Texaco retailer, is challenging the legality of the law enacted last month. Although SMO is listed as the plaintiff in the matter, several Texaco dealers have agreed to share its legal expenses.

Some of those dealers are members of the Greater Washington Maryland Service Station Association Inc., the trade group that lobbied successfully for passage of the law, which was scheduled to go into effect July 1.

An injunction won by SMO and a subsequent 10-day postponement of a hearing have delayed implementation of the controversial measure.

"I'm not sure who will gain, but it will be the dealer who loses if this law is overturned, and the customers will lose," contends William L. Shoemaker, executive vice president of the GWMSSA.

If the law is allowed to stand, however, "It's going to have a devastating effect" on dealers whose business depends heavily on credit card transactions," countered SMO President J. Blacklock Wills. "It's going to put them out of business."

Credit card purchases account for about a third of the business at Maryland service stations, GWMSSA estimates. That will vary, of course, depending on a station's location and the volume of credit card transactions involving service bay work and sales of nongasoline products.

Nonetheless, Shoemaker agrees that stations located along interstate routes could be affected adversely by the fee ban because they attract large numbers of travelers who use oil credit cards. In fact, Shoemaker says he knows of at least one such station where credit-card transactions account for 80 percent of the dealer's business.

Although there apparently had been widespread support among dealers for passage of the bill, many apparently have had second thoughts now that Texaco, and possibly other companies, will drop credit cards in Maryland.

Facing the loss of business as a result, many of those dealers "became panic-stricken," Shoemaker says. "They're in a Catch-22 situation," he acknowledged.

Actually, Texaco has notified its customers that it will continue to accept the cards at its Maryland stations, pending the outcome of court cases.

Other oil companies are awaiting the outcome before deciding what course to take in Maryland, although Mobil Oil Corp. notified dealers and customers that it no longer will accept credit cards for diesel and aviation fuel and that, after July 1, Maryland residents would not be eligible to use their cards in states where cash discounts are offered.

Mobil has not joined in the Texaco suit, but its position is essentially the same as that expressed by Texaco in court papers. Both companies have scored the "unconstitutionality" of the law.

"Our main point is that we feel that this law is discriminatory and punitive toward a single industry," said H.G. Ingram, public affairs manager for Texaco USA's Northeast region.

Oil companies say the law is discriminatory because it doesn't apply to bank cards for which dealers must pay a processing fee.

"That's not the same thing," says Shoemaker, who contends that unlike bank cards, oil companies' cards are "a promotional tool to sell other products.

"The question is, if they get a processing fee, how does anybody know whether an additional fee is buried in the wholesale price?" Shoemaker asked.

Ultimately, the consumer pays, so the oil companies might have been better off had they decided to charge an annual fee for the privilege of using their credit cards.

Several million owners of travel and entertainment cards don't seem to mind paying for the privilege of using them. What's more, the oil companies, unlike Maryland banks, wouldn't have to set up credit card operations in Delaware to escape Maryland's ban on annual fees.

Interestingly, Texaco considered the annual fee as an option, "but in analyzing it the company also felt the retailer benefitted from the card also," Ingram explained. "We felt there would be a number of inactive cardholders who would be penalized."

If the law is allowed to stand, consumers may lose the convenience of an oil credit card but many Maryland dealers will lose more.