The Maryland Court of Appeals yesterday upheld a 1974 state law that requires major oil companies to sell the retail gas stations they own and operate in Maryland.
In a unanimous decision, the Court held that it "could reasonably conclude that control of the retail gasoline market by producers and refiners would decrease competition and that the continued presence of independent retail dealers was necessary to preserve competition."
Major oil companies own and operate approximately 200 of the 3,000 retail service stations in the state. When the law was passed during the 1974 oil crisis, major oil companies owned about 100 gas stations in Maryland. Independent service station operators were chaging the oil companies with moving gradually to take over the most lucrative station locations.
The law was not enforced while it was being tested in court. Maryland Comptroller Louis Goldstein has the responsibility under the law for issuing regulations to control the oil companies' divestiture.
The court's ruling yesterday overturned a decision by the Anne Arundel County Circuit Court that the law was unconstitutional because it deprived the oil companies of their property without due process of law, and because it made an arbitrary distinction between oil companies and other service station owners about who can own gas stations in Maryland.
The plaintiffs in the suit included some of the nation's largest oil companies, among them Exxon, Gulf, Ashland, and Phillips.
The state's highest court rejected their argument that the law impeded free competition, noting, "There is every indication that the purpose of the statute was to preserve competition within the retail gasoline marketing industry in Maryland.
"The General Assembly, after considering the activities of producers and refiners in the industry, concluded, as have several congressional committees, that the recent tread of increased direct operation of service stations by producers could substantially decrease competition and lead to the control of the market by a few major oil companies," wrote Judge John Eldridge for the court.
Most service stations are owned by major oil companies, but leased to independent operators who actually run the stations. The law would not affect service stations not manned by employees of the oil companies.
It could not be determined yesterday if the oil companies plan to appeal the Court's decision.
Oil companies are the targets of legislation in this year's legislative session, as they are most years when the price of energy is rising.
This year's bills and would ban the conversion of full-service gas stations to gas-only stations, a proposal the oil companies vigorously oppose.
At hearings early this month, inpendent service station operators testified that the oil companies that lease them their stations are forcing the rent up so high that the dealers are forced to sell out, to us freeing the oil companies to convert to inexpension gas-only stations.