A family-owned gas operation is picking a fight with retail
giant Safeway over what it calls predatory gas pricing.
A family-owned gas operation is picking a fight with retail giant Safeway over what it calls predatory gas pricing.
Dassel’s Petroleum, Inc., of Hollister, filed a civil case in San Benito County Superior Court on Tuesday against Safeway, claiming the large food and drug retailer is selling gas below cost at its station on Tres Pinos Road.”Safeway’s predatory practice is driving local gasoline stations out of business, and in the long run will give consumers less choice and ultimately result in higher prices for consumers,” co-owner James Dassel said.
Dassel’s and two wholesale companies supporting the suit say they are losing customers and hemorrhaging money as a result. Dassel’s losses at its retail station for the fiscal year ending June 2003 amounted to more than $108,000, and Dassel predicts similar losses for this year. In court records, the wholesalers said that after the local Safeway began selling gasoline, the gas stations they sell to reduced their orders or went out of business, which resulted in lost revenue.
“This is far from frivolous. We don’t take this lightly,” Dassel said. “We’ve done our homework and spent a lot of time on this.”
Dassel’s is seeking an injunction to stop the alleged price-cutting and damages exceeding $10,000. As for the exact amount of damages they’re seeking from the suit, Dassel refused to say.
“It would be presumptuous of us to project what we have in mind,” he said.
Safeway spokeswoman Teena Massingill would not discuss the suit, saying the company does not comment on pending litigation.Dassel’s has monitored Safeway’s prices almost from the moment the station began selling gas in late June of 2002.
“Consistently, their price has been below cost in our estimation,” said Graham Mackie, co-owner of Dassel’s Petroleum and Dassel’s brother-in-law. The price was $2.03 Thursday for unleaded gasoline at Safeway. Customers receive an additional 3 cents off the posted price by using their Safeway card.
“We don’t have the privilege of looking at their invoices, but they are so far below cost that it’s the only way possible,” Mackie said.
Dassel said his business and Safeway likely are paying the same prices for gasoline. Both purchase their gas from regional distribution facilities, or “racks,” whose prices are driven by the refineries.
“We’re the price taker, not the price maker,” Dassel said.
Dassel’s most recent cost survey in February indicated Safeway was selling gas at nearly 15 and a half cents below the Tesoro daily rack price, Mackie said.
Fifteen gas stations petitioned the city to stop Safeway from opening its own pumps when the project was in the planning phases, Mackie said. But Dassel’s chose not to sign. Since then, seven of those businesses have been sold or gone out of business, prompting Dassel and Mackie to sue.
Dassel’s also claims Safeway is using gasoline as a “loss leader,” a ploy used to sell one product at less than cost to encourage people to purchase other merchandise.
“That’s commonly done, but it’s illegal,” Mackie said.
“It’s predatory and it is hurting other folks when they do that, particularly a product that is a nonrenewable natural resource,” Dassel said.
Mackie refused to name the other three participants in the suit, however two appear in court documents – Toro Petroleum Inc. and Sturdy Oil, wholesalers based in Salinas. Mackie said their attorney Rinehart Law Offices in Los Gatos preferred to represent only one company. The other businesses submitted declarations in support of Dassel’s suit against Safeway. John Fanoe, president of Sturdy Oil, deferred all comment to Dassel’s.
Toro Petroleum said it lost money when several of its Hollister clients went out of business, according to court records. Sturdy Oil Company said its clients lowered the amount of gasoline they ordered, following the start of Safeway’s gasoline sales. They said their customers would have to lower their prices to below cost just to compete with Safeway.
Dassel’s has suffered a 21 percent loss in its annual gallons sold at its retail station, or card-lock unit, on Wright Road since the Safeway station began selling gasoline, according to court documents. At Dassel’s, users have a card they swipe to buy gas.Mayor Tony Bruscia, who was on the Planning Commission when the Safeway station was considered, is a fan of the grocery store’s gas prices.
“It’s nice to see Safeway’s prices being so cheap,” Bruscia said. “I buy gas there because it is.”
Safeway has 30 days from last Monday to issue its response. The case is under the review of Superior Court Judge Harry Tobias.
Earlier, representatives from Dassel’s asked the San Benito County District Attorney’s Office to bring an unfair business practice lawsuit against Safeway. District Attorney John Sarsfield said he told them the best agency for enforcement would be the Alameda District Attorney’s Office, because Safeway’s headquarters are in Pleasanton.
Dassel employs more than 50 people and serves eight Central California counties, with storage plants in several cities, including Hollister, Gilroy and Morgan Hill.
