Four owners of full-service gasoline stations in the Aspen Hill-Wheaton area have gone to court in Montgomery County to see if they can contain sales at "pump-your-own" stations that they say are driving them out of business.
The plaintiffs, who already enjoy more protection from self-service operations than their colleagues in most other states, are seeking monetary damages and a judge's order forbidding two owners of self-service stations from selling gasoline below a 7 percent markup that the plaintiffs say state law ordains.
The seldom-used state Unfair Sales Act forbids dealers in any business from trying to injure competition by selling below cost. Cost is considered to be 7 percent above the price the dealer paid his supplier (to allow for freight and business expenses) unless the dealer can prove his costs were less.
The defendants Boo Chung, a 42-year-old Korean immigrant with a station in Wheaton, and Abdhol Hussein Ejtemai, 35, an immigrant from Iran who runs a station in Aspen Hill, agree their prices are low. Ejtemai's charge of $1.119 for a gallon for self-service regular is in fact the lowest-priced gasoline in the metropolitan area, according to American Automobile Association figures.
The defendants say they are simply passing to their customers the savings of their no-frills operations and not selling gas for less than they paid for it.
"If everyone had to sell at 7 percent of their costs, that would be price-fixing," said James J. Fitzgibbons, Chung's attorney. "Why should the public have to pay 7 percent above cost?"
If the full-service stations win, said Maurice J. Beggiani, who also represents Chung, there will be "chaos" in courts as other stations follow suit.
A decision by Circuit Judge Calvin R. Sanders is expected this week.
Full-service dealers have traditionally been frightened by self-service operations, and not without reason. Ten years ago, major oil companies owned most full-service stations in Maryland, and were closing or tearing them down to build self-service stations.
In September 1973, hundreds of full-service dealers rallied in Baltimore, and later began lobbying that resulted in laws forcing oil companies to sell or lease their stations to individual dealers. Similar legislation was passed shortly afterward in the District.
Both jurisdictions subsequently passed zoning legislation designed to preserve a balance of full- and self-service stations, making it almost impossible for stations to convert to "gas-and-go."
Vic Rasheed, executive director of the Service Station Association of America, says that this left full-service stations in Maryland in a stronger position than their counterparts in most areas of the country. Since the zoning laws were passed, the proportion of totally self-service operations has remained at about one-third of the approximately 2,000 gasoline stations in Maryland and the District.
The Montgomery court battle, dealer association officials say, reflects a larger war that extends beyond the county and is being fought among major refineries over distribution tactics, windfall-profit taxes and credit card sales. Ejtemai, who buys his gas from Atlantic Richfield Co.(ARCO), and Chung who runs a Scot station and buys from British Petroleum (BP), pay much less than the plaintiffs for a variety of reasons, including the fact that neither BP nor ARCO accept credit cards.
Ejtemai says the reasons his business flourishes while full-service stations are struggling is simple. He has the cheapest supplier, and has pared his costs to the point where he has just one attendant, paid about $3.50 an hour, on duty.
Traditional gas station owners "aren't normally good businessmen; they go from being gas jockeys to owners," says Ejtemai, who bought his station in 1979. Wearing a jacket and tie instead of the traditional grease-stained dungarees, Ejtemai came to his job armed with a graduate degree in business administration from George Washington University.
"They have their own thoughts and ideas, but I am of a different school," Ejtemai says. "If they are making money they should be happy. If they aren't, they shouldn't be in business."
Across the street, William Robert Lee, a plaintiff, started keeping his full-service Shell station open 24 hours a day two years ago, as a result of Ejtemai's competition. "You would think I'd have some increase in sales by increasing the hours and offering a wider service," Lee told Judge Sanders during a court hearing last February. "In fact, during that period of time I had loss of sales of approximately a half-million dollars . . . .
"I haven't had any choice but to try to keep the price as competitive as possible and get as close to him as possible. But no matter where I leave my price, he goes down . . . . I've got myself down to a 2 1/2- to three-cent profit on self-serve gasoline." That is about a quarter of the profit he used to make, Lee said.
Lee, who said other service stations have contributed to the plaintiffs' legal costs, bought his station four years ago after 16 years as a retailer for the Government Printing Office.
While business was slow at his gas pumps on a recent afternoon, many of Lee's 17 employes were busy working underneath cars in the garage bays. Lee, 39, knew many of his customers by name. He consulted with one about front-end vibrations, discussed another customer's brake-linings with an employe, and sent an employe to tow a car stalled in the middle of Connecticut Avenue.
"In the long range," Lee says, "while the consumer is being helped at pennies a gallon, he's being hurt if he loses repair facilities, and if he gets to the point where everything is gas-and-go."
Robert Headlee, another plaintiff, owned a Shell station on Viers Mill Road until Chung started a price war that forced him out of business in December 1981.
Headlee said his salary fell from more than $100,000 in 1979 to $25,000 in 1981, when he sold his business and moved to Columbia. Another plaintiff, Herbert Patterson, who owns a full-serve Amoco station on nearby University Boulevard, testified last February that his salary fell from about $74,000 in 1980 to about $26,000 last year. The fourth plaintiff, Eric Lee Brockdorff, who has run an Amoco station on Aspen Hill Road the last 18 years, said his gas sales have fallen but his salary has increased "moderately" during 1981 and 1982.
Ejtemai's income has gone in the opposite direction. He reported an income of $14,000 on his 1981 tax returns. That went up to $39,700 in 1982, and Ejtemai says he is now making about $50,000 a year. Last year Chung reported an income of $20,000.
Fitzgibbons, Chung's attorney, says his client "made only a fraction of what the plaintiffs were making. He lives a different life-style. He doesn't need to make a lot of money."
"The nature of any business changes and that's what's happening to the retail gas business," he adds. "In order to compete, you have to change the way you do things."