WHEN DISTRICT GAS prices spiked to over $4 per gallon in 2011, politicians found a scapegoat in Eyo b “Joe” Mamo, the wholesaler who supplies fuel to most, but not all, D.C. gas stations. Soaring prices reflected Mr. Mamo’s undue market power, not objective conditions such as the world price of crude oil, officials cried. Thus began an attempted crackdown on Mr. Mamo that included proposed legislation in the D.C. Council, an antitrust investigation by the Gray administration and a federal lawsuit by gas station operators.
Mr. Mamo won each battle, basically because no one could prove that his business methods cause high gas prices — much less that they are illegal. For all of his alleged market manipulation, a gallon of regular unleaded in D.C. is almost 25 cents cheaper now than a year ago, according to the American Automobile Association. Some mogul.
Nevertheless, D.C. officials are resuming their crusade against him. Last week, Attorney General Irvin B. Nathan filed a lawsuit in D.C. Superior Court seeking to overturn contracts between Mr. Mamo and a couple of dozen station operators that require the latter to purchase fuel exclusively from him. Supposedly these contracts violate D.C.’s Retail Service Stations Act; the city’s lawsuit, Mr. Nathan said, will “increase wholesale competition, and bring down retail prices at the pump.”
This is hard to square with Mr. Nathan’s decision not to file an antitrust suit against Mr. Mamo a year ago. After an exhaustive investigation, Mr. Nathan concluded that, “In some quarters of the city, there was an increase in prices, but in many other parts of the city, there was no increase in the gasoline prices, and in the parts of the city where there was an increase, those residents had other alternatives ... to go and get cheaper gasoline.”
It’s also not clear that Mr. Mamo’s contracts violate the relevant section of the Retail Service Stations Act, which bars exclusive deals — except when a distributor of branded gasoline, which is what Mr. Mamo is, wants to ensure that the retailers using his brand provide fuel of “reasonably similar quality.”
Responding to the lawsuit, Mr. Mamo defended what he said are “legitimate operating agreements that have been in place for years and that are similar to operating agreements and dealer arrangements in jurisdictions across the country.” This happens to be true: Mr. Mamo’s business model is consistent with other forms of “vertical control” that have long been a feature of the gasoline market — and that have a generally benign impact on efficiency and prices at the pump, according to a 2005 study by the University of California Energy Institute.
We don’t doubt that Mr. Mamo drives a hard bargain with station operators or that they would benefit from shopping among wholesalers. Nor do we doubt that both Mr. Mamo and his opponents have plenty of political clout and the will to exercise it.
What we do doubt — because neither the recent history of local gas prices nor the economic literature supports it — is that less leverage for Mr. Mamo would mean more for consumers. As likely, the station operators, not motorists, would pocket the benefits. Surely Mr. Nathan can find better uses for his limited resources than a lawsuit that won’t materially affect gas prices even in the unlikely event that it succeeds.