Court Opinion

ID: 9752713
Source: CourtListenerOpinion
Date Created: 2023-08-28 18:30:00.106483+00
Date Added: 2024-06-11T07:27:21.095602
License: Public Domain

Garrity, J.,

dissenting:

I respectfully dissent from the majority in this case.
The "warrant” for the regulatory authority, not found by the majority, to prohibit refiners from exercising practical control of management and operation of the service stations through indirect contractual requirements, lies in the very heart of the rationale and purpose of the divestiture statute. *599As stated by the Court of Appeals in Governor v. Exxon Corp., 279 Md. 410, 427, 370 A.2d 1102 (1977), aff'd, 437 U.S. 117 (1979), the legislative purpose was to ensure the continued existence of independent retail gasoline service station, dealers. The underlying rationale was that the continuation of independence would serve as a means of preserving competition and thereby prevent monopolistic control of gasoline marketing by a few large oil companies.
At public hearings on the bills, proponents of the divestiture law argued that the independence of gasoline dealers was threatened, that leases of independent dealers were being cancelled, that dealer-owned or operated stations were being discriminated against in the allocation of product and pricing policies, and that stations were being converted to company operation. The legislature heard testimony that "the major oil companies intended to control and monopolize retail marketing of gasoline by reducing and eliminating competition from independent dealers”. Governor v. Exxon Corp., supra.
Crown’s leasing arrangement typifies the illegal practical control that the legislature intended to prohibit as it clearly frustrates the goal of ensuring the continued existence of independent service station dealers.
Crown’s lease requires that all dealers spend at least 40 hours per week at their service station and that they operate the station for at least 90 per cent of the total time that they may spend upon any business enterprise. For example, if the dealer spends only eight hours a week in an unrelated venture, the 90 per cent requirement compels him to spend 72 hours at his station. Thus, the additional time requirement nullifies a dealer’s ability to participate meaningfully in a different business venture which would produce a viable source of income. See Day Enterprises, Inc. v. Crown Central Petroleum, 529 F.Supp. 1291 (D.Md. 1982). Crown readily admits that the effect of these provisions is to prevent the dealer from operating more than one station. The real purpose and obvious resultant effect of the combined "one station/40 hour/90 per cent scheme” is to maintain economic *600control over a retail service station dealer, the very evil which the legislature attempted to remedy.
The nub of the problem is that by virtue of such economic dominance caused by requiring the dealer to spend nearly all of his working time at the service station, the so-called "independent” dealer is limited to only one source of income — the sale of gasoline — which is under the control of his supplier. Such indirect economic dominance through a contractual scheme may be just as invidiously repugnant to independence as direct ownership.
As Mr. Arthur E. Price, the state’s expert witness explained, "Such a requirement would create a circumstance of economic dependence so great that the dealer would bé controlled as if he were an employee or a subsidiary”. In this way, the anticompetitive and unfair pricing practices utilized by producer or refiner controlled stations before the enactment of the divestiture law, could be continued.
It is evident that Crown’s standard lease is intended to ensure that it will retain complete economic dominance over its dealers. Through its superior bargaining power, Crown can destroy the dealer’s ability to exercise independent business judgment and to compete freely in the retail gasoline market.1
The standard for judging whether regulations are "necessary for the proper administration of’ the law under which they were promulgated, is to determine if they are "reasonable and consistent with the letter and policy of that law”. Baltimore v. William E. Koons, Inc., 270 Md. 231, 237, 310 A.2d 813 (1973); Farber’s, Inc. v. Comptroller, 266 Md. 44, 50-51, 298 A.2d 658 (1972).
I believe that the very essence of the divestiture law is the *601prohibition of control, either directly or indirectly, by producers and refiners over retail service station operators. In this area of very sensitive and vital public concern where it is most essential to maintain the stability and independence of gasoline service station dealers, the Comptroller should, in the execution of his legislative charge, prevent an otherwise independent entity from becoming economically dependent through a contractual relationship. I would conclude that the concept of "practical control” through economic dominance, as illustrated by the Comptroller’s fifth example, is clearly consistent with the legislative policy as it is designed to prevent producers and refiners from doing indirectly, by a contractual scheme, what they could not do directly.

. In its amicus brief, the Greater Washington/Maryland Service Station Association points out that the resultant injury to dealers is far from hypothetical. We are reminded that in Phillips v. Crown Central Petroleum Corporation, 602 F.2d 616 (4th Cir. 1979), cert. denied, 444 U.S. 941 (1980), the Court found that Crown had a history of manipulating its dealers’ retail prices to prevent price erosion at the wholesale level. The Court also reaffirmed the express finding by the trial court of Crown’s "proclivity for persistently disregarding the antitrust laws”.