Section 5.

Section 5 provides a limitation on marketing activities. A major market shareholder, (i.e., one who is not a "small refiner" or an "independent refiner" as those terms are defined in the Emergency Petroleum Allocation Act (15 U.S.C. 752)) shall not, after the date of enactment of this Act, commence the operation of any distributorship or retail establishment with personnel under the control of the major market shareholder or entity controlled by such major market shareholder, if as a result of such commencement their would be an increase in the ratio computed in the following manner: The numerator of the ratio consists of a major market shareholder's retail establishments and distributorships operated with personnel controlled by the major market shareholder or entity controlled by the major market shareholder. The denominator is the total number of retail establishments and distributorships of that major market shareholder. The increase would be over the highest level computed in the same manner during the five years preceding April 1, 1975.

The legislation provides, however, that the ratio may be exceeded in the following situations: (1) the major market shareholder is unable to find a qualified franchisee to operate the retail establishment or distributorship within a reasonable period of time and the retail establishment or distributorship which the major market shareholder proposes to operate is not within the marketing area of an existing franchise of the major market shareholder, or (2) the retail establishment or distributorship which the major market shareholder proposes to operate may not be operated with personnel other than those who are under the control of the major market shareholder according to State law.

The effect of section 5 is illustrated by the following example. Company A is a major market shareholder under the definition in section 3(4). Company A proposes to open a service station with personnel who are under the direct control of the company, i.e., personnel employed in this facility would be salaried by Company A and received the various rights and privileges of employees of Company A. As of April 1, 1975, Company A had 2,000 retail establishments and distributorships in the United States in which the employees are employees of Company A, that is, they are salaried by Company A and the facility is not a franchise operation. As of April 1, 1975, Company A had a total of 10,000 retail establishments and distributorships in the United States which sell Company A brand petroleum products or petroleum products marketed by Company A under another name. The fraction thus referred to in the legislation is 2,000/10,000 or 15. Company A had not in the preceding five years had a ratio of Company op erated to total company retail establishments and distributorships ex ceeding 15. (If however, Company A's ratio had been larger than at any time during the five years preceding April 1, 1975, then that ratio would apply). Company A is thus precluded, after the date of enactment of this Act, from opening up the new retail establishment with personnel controlled by Company A or a subsidiary of Company A unless one of two conditions is met. If the facility which Company A proposes to open is located in an area in which, by reason of State law, company personnel must operate the facility, such as along certain

turnpikes, then Company A may proceed to commence operation of this retail establishment with company personnel in spite of its exceeding the highest fraction, computed in the above manner, which Company A had in the five years preceding April 1, 1975.

Alternatively, if Company A is proposing to commence operation of this retail establishment in a market area in which Company A had not previously done business or did not have in existence a franchisee, and Company A could not find a potential qualified franchisee within a reasonable period of time, then Company A could commence operation of this facility with personnel controlled directly by the Company. This situation might arise if Company A had not previously done much business in a particular area. For instance, Company A proposes to commence operation of the facility in the Washington, D.C. area. Company A has not previously operated many retail establishments in the Washington, D.C. area and persons who might otherwise be qualified to operate the facility as a franchise are reluctant to invest in view of the lack of company identification in the area. Although there are a few facilities with the Company A identification within the Washington, D.C. metropolitan area, no Company A franchise is within the market area to be served by the new service station. (The market area being the geographical region from which persons might reasonably be expected to drive in order to purchase products of Company A.) Thus, there being no Company A franchisee within the market area of the new facility, and there being no potentially qualified franchisee Company A may proceed to operate the new facility with personnel under the Company's direct control. Similar requirements would exist in the case in which Company A proposed to initiate operations of a distributorship through personnel controlled by the Company.

The provisions of section 5 would reduce the continuing expansion by major market shareholders into marketing activities through such means as "fighting" or "secondary" brands, and salaried manager systems, but would not preclude this method of operation.

Section 6.

Section 6 establishes the means by which civil actions are to be brought to enforce this Act. Section 6(a) relates to actions brought for conduct which is prohibited under section 4, Protection of Franchise Dealers. Subsection (a) provides that a retailer or distributor may maintain a civil action against a refiner or distributor who engaged in conduct prohibited by section 4 of this Act. A retailer may maintain such an action against the distributor whose products with respect to conduct prohibited under any provision of section 4, such retailer has sold or sells, directly or indirectly, under a petroleum products franchise. Furthermore, a distributor may maintain such an action against a refiner whose products he purchases or distributes or has purchased or has distributed with regard to conduct prohibited under section 4 of this Act.

Subsection (b) provides that a person injured by or likely to be injured by conduct prohibited by section 5 of this Act, Limitation on Marketing Activities, may maintain a civil action to enforce compliance with or to enjoin any violation of section 5 of this Act.

Section 6(c) and 6(d) prescribe the manner in which civil actions are to be brought and the responsibilities of the court with regard to

actions brought by those filing actions under sections 6(a) and 6(b). A civil action may be brought without regard to the amount in controversy in the district court of the United States for any judicial district in which the person against whom such action is brought resides, is found, or is doing business. An action may not be brought under this section unless it is commenced within 3 years after cancellation, failure to renew, termination, or modification of a petroleum products franchise, or within 3 years after the date on which the violation of section 5 of this Act last occurred.

It is intended that renewable petroleum products franchise agreements be considered as modified, and therefore subject to a civil action for violations of section 4, with each succeeding renewal. Thus, if a distributor or retailer has held a periodically renewable franchise for the past ten years, an action may be brought under this section for cancellation, failure to renew, or termination of the franchise if the franchise agreement has been modified, (i.e., renewed,) within three years of the failure to renew, terminate, or cancel.

Section 6(d) provides that the court shall grant such relief as is necessary to remedy the effects of conduct which the court finds to exist and which is prohibited under section 4 or 5 of this Act. The court may grant a variety of remedies, including, but not limited to, declaratory judgments, mandatory or prohibitive injunctive relief, interim equitable relief, and actual and exemplary damages in an amount equal to three times the damages suffered as a result of conduct in violation of section 4 or section 5 of this Act. In the case of actions based upon a failure to renew a petroleum products franchise, damages shall be limited to actual damages, including the value of the dealer's equity. In all cases, including failures to renew, the court may, unless the civil action is frivolous, direct that costs, including reasonable attorney and expert witness fees, be paid by the defendant.

Section 6(e) grants to the Attorney General of the United States authority to bring civil actions against any person who is engaged in or is about to engage in conduct which is prohibited by section 5, Limitation on Marketing Activities. (Such authority is in addition to, not as a substitute for, the rights granted other persons injured by or likely to be injured by the course of conduct prohibited by section 5 of this Act.) Actions brought by the Attorney General pursuant to this subsection shall be brought in the appropriate district court of the United States which shall have jurisdiction over such actions and which shall provide appropriate relief. The court may grant a temporary restraining order, or a preliminary or permanent injunction without bond, to enjoin conduct prohibited by section 5 of this Act in an action brought by the Attorney General.

Section 7.

Section 7 establishes the relationship of this Act to the antitrust laws. The antitrust laws are defined in subsection (b) as "An Act to protect trade and commerce against unlawful restraints and monopolies" approved July 2, 1890; "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes", approved October 15, 1914; the Federal Trade Commission Act; sections 73 and 74 of "An Act to reduce taxation, to provide revenue for the Government, and for other purposes", approved August 27, 1894;

and the Act of June 19, 1936; (15 U.S.C. 1 et seq.; 12 et seq.; 41 et seq.; 8 and 9; 13, 13a, 13b, and 21a; respectively).

Section 7(a) provides that nothing in this Act shall be deemed to convey to any individual, corporation, or other business organization immunity from criminal or civil liability, or to create defenses to actions under the antitrust laws. Section 7(c) states that no provisions of this Act shall be construed as limiting or in any way affecting any remedy or penalty which may result from any legal action or proceeding arising from any acts or practices which occurred prior to the date of enactment of this Act, outside the scope and purpose or not in compliance with the terms of this Act, or subsequent to the repeal of this Act. Thus, for example, this Act would in no way affect actions or complaints which might currently be in litigation between the United States and certain companies for violations of the antitrust laws, or actions which might be taken against violations of the antitrust laws, violations of which are not violations of this Act.

Section 8.

Section 8 is a separability section which provides that, should any provision of this Act or application of any provision of this Act to any person or circumstance be held invalid, the remainder of this Act or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.

CHANGES IN EXISTING LAW

The proposed legislation would make no changes in existing law.

ESTIMATED COSTS

In accordance with section 252 (a) of the Legislative Reorganization Act of 1970 (2 U.S.C: 190j), the Committee estimates that there would be no additional cost incurred by this Act. The Committee is not aware of any cost estimate by any Federal agency which is at variance with the Committee's estimate.

TEXT OF S. 323, AS REPORTED

A BILL To regulate commerce and to protect petroleum product dealers from unfair practices, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Fair Marketing of Petroleum Products Act".

DECLARATION OF POLICY

SEC. 2. Competition, nondiscriminatory practices, and equal access to supplies for all retailers and distributors are essential to the fair and efficient functioning of a free market economy. Gasoline and other petroleum products should be produced, distributed, and marketed in the manner most beneficial to the consumer. It is the policy of the Congress to assist consumers and marketers of petroleum products to achieve these goals.

DEFINITIONS

SEC. 3. As used in this Act, the term

(1) "commerce" means any trade, traffic, transportation, or exchange (A) between any State and any place outside of such State, or (B) which affects any trade, traffic, transportation, or exchange described in subparagraph (A) of this paragraph;

(2) "controlled" means having actual or legal power or influence over another person through any means other than a contractual relationship;

(3) "distributor" or "distributorship" means a person engaged in commerce in any State in the marketing of petroleum products through the sale, consignment, or distribution of such products to wholesale or retail outlets (whether or not such person owns, leases, or in any way controls such outlets) (A) under a petroleum products franchise; or (B) independent of a petroleum products franchise;

(4) "major market shareholder" means a refiner who is not an "independent refiner" or a "small refiner", as those terms are defined in section 3 of the Emergency Petroleum Allocation Act of 1973 (15 U.S.C.752);

(5) "petroleum products" means gasolines and diesel fuels for use in motor vehicles, distillates used as heating fuel, and kerosene; (6) "petroleum products franchise" means any agreement or

contract

(A) which grants to a specified retailer or distributor the authority to use a trademark, trade name, service mark, or other identifying symbol or name owned by a specified refiner or distributor who is also a party to such agreement or contract; or

(B) which grants such a retailer or distributor the authority to occupy premises owned, leased, or in any way controlled by a party to such agreement or contract,

for the purpose of engaging in the distribution or sale of petroleum products for purposes other than resale. The term shall also apply to the relationship by which a refiner or a distributor supplies a retailer with petroleum products, or by which a refiner supplies a distributor with petroleum products under regulations promulgated pursuant to the Emergency Petroleum Allocation Act (15 U.S.C. 751 et seq.), if a petroleum products franchise, as defined in this paragraph, was in effect between such retailer and such distributor (or such refiner), or between such distributor and such refiner, at any time during calendar year 1972;

(7) "refiner" means a person engaged in commerce in the refining of petroleum products;

(8) "retailer" or "retail establishment" means a person or place at which one is engaged in commerce in any State in the sale of any refined petroleum product for purposes other than resale (A) under a petroleum products franchise; or (B) independent of a petroleum products franchise; and

(9) "State" means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Canal Zone.