Seven cut-rate gasoline companies are being tried here on federal price-fixing charges in a case that could have wide repercussions throughout the oil industry.
The government has been working since a 1974 grand jury session to prove that the independent firms and their trade association, the Society of Independent Gas Marketers of America (SIGMA), conspired to fix prices on 17 billion gallons of gasoline sold between 1967 and 1974 in six Mid-Atlantic states and the District of Columbia.
The trial, which involves $4 billion in gas sales over the period and has kept two dozen lawyers busy for three months of testimony in U.S. District Court here, is expected to go to the jury by the end of the week.
At stake is far more than the possible $50,000 fine and/or one year jail term that the law provided for antitrust misdemeanor violations when the case was brought. If convicted, each company faces the threat of millions of dollars in treble-damage lawsuits from consumers who could claim they were frauded.
"That could break all the companies," said one of the attorneys.
Independent gas firms such as BiLo and Saveway and RedHead - subsidiaries of some of the defendant corporations - have always maintained them cutthroat competition among them benefited consumers by insuring the lowest possible prices.
The heart of the defense is that the antitrust laws are being turned against the small companies they were designed to protect.
Defense attorneys argued that what the government calls collusion was only an occasional coincidence of pricing, and that the hour-by-hour telephone discussion of prices between the firms and SIGMA was to provide market information that each firm needed in order to survive.
Government attorneys said the alleged conspiracy was "not perfect."
Charges against three of the originial defendants were ordered dismissed during the trial by U.S. District Judge C. Stanley Blair on grounds of insufficient evidence. The three are Williard H. Burnap, executive vice president of Continental Oil Co.; Norman Goldberg, senior vice president of Amerada Hess Corp., and Charles J. Luellen, group vice president of Ashland Oil, Inc.
The three corporations of which they are officers remain as defendants, as do Kayo Oil Co., Crown Central Petroleum, Meadville Corp. and Petroleum Marketing Corporation (PMc), and Robert R. Cavin, executive director of SIGMA.
"There was no master plan mapped out in somebody's board room . . . but discussions, commiserations, mutuality of thinking," Assistant U.S. Attorney Rodney O. Thorson told the jury in his closing argument Tuesday.
He said the testimony of the 26 government witnesses showed "a larger picture" of a conspiracy that frequently was derailed temporarily by maverick gas stations that refused to go along with the alleged price-fixing.
"You didn't have to say things directly . . . it was inherent in the conversations," Thorson said, citing testimony by Amerada Hess pricing administrator Irving Grossman. Grossman, Thorson said, was "an enforcer" for the alleged conspiracy's goal of holding the independents' prices around 2 cents below those of the major oil companies.
Grossman testified he would call Crown, for example, to find out why some station had dropped its rates and "always" would "encourage them to restore prices . . . to stabilize the market." Thorson said. He said the word "restore" always meant "raise."
SIGMA's "telephone man," Richard Reynolds, "was not a dictator, not a czar," but was paid to "help the companies coordinatre their price moves," the prosecutor said.
"Everybody knew what everybody else was going to do and could raise prices without fear they'd be hanging up there high and dry all along," he told the jury.
Although the alleged system worked by telephone, "it was not different than if those people were siting in a meeting room doing that selfsame thing. That is a price fix," Thorson argued.
The government introduced charts tracing telephone calls between SIGMA and the various defendant firms before and during selected price changes. The prosecution said these showed that the phone calls led to coordinated action.
Defense attorneys countered with their own charts showing that price levels would change several times a day.
"Practically every price rise, as soon as it happened, it fell apart," SIGMA defense attorney David A. Donohoe said in his closing argument today. "Price information was one factor on which these companies made their own independent decisioons."