A victory in the David-versus-Goliath lawsuit brought against
Safeway by Hollister company Dassel
’s Petroleum, Inc. could change the way Safeway gas stations do
business across the state, including in Morgan Hill.
A victory in the David-versus-Goliath lawsuit brought against Safeway by Hollister company Dassel’s Petroleum, Inc. could change the way Safeway gas stations do business across the state, including in Morgan Hill.
But first, Dassel’s must prove Safeway is intentionally trying to injure the competition by selling gas for less than it buys it for, said San Francisco attorney Ralph Alldredge, who reviewed the court documents and is knowledgeable about the law involving predatory pricing. He recently argued and won a case dealing with predatory pricing and special discounts.
Proving that in court, however, depends on how well Dassel’s attorneys present the case to a jury and how compelling the evidence is, he said.
“The big issue is whether or not Safeway overcomes the presumption that they intended to injure their competition,” Alldredge said. “They’ve made the right allegations. If they prove the allegations, they should receive damages under California law.”
Alldredge says many large corporations use low gas prices to draw people into their stores with the intent to sell other products which would make a profit.
“It’s illegal if it’s threatening to the competition, if it’s running all the local gas stations out of business,” he said. “The reason why there’s a law against selling below cost is because it’s a very effective way of reducing the competition if they have more resources than the others have.”
Dassel’s filed a civil case in the San Benito County Superior Court last week claiming Safeway is using predatory gas pricing to drive local stations out of business, co-owner James Dassel has said.
Safeway spokeswoman Teena Massingill, who previously stated Safeway has a policy not to comment on pending litigation, did not return phone calls Friday.
Safeway is building a 12-pump gas station to accompany its new 54,799-square-foot Tennant Station store currently under construction at the corner of Tennant Avenue and Monterey Road. The new store is scheduled to open this summer.
Meanwhile, Dassel declined to speculate about long-term ramifications or statewide impacts of his lawsuit.
“I would be compromising our position by responding,” he said. “I don’t want to jeopardize our position or our legal position … by even suggesting where this could go.”
Ultimately, this is an unfair business practice lawsuit, which is a complicated area of the law, San Benito County District Attorney John Sarsfield said. Sarsfield speculated the suit will gain plaintiffs as it progresses and could spend years in the court system before a ruling. Because many small businesses are up against the “big-box” type outfits, the ramifications of Dassel’s suit could be significant, he said.
“One advantage of the big retailers is you can undercut local prices,” he said. “If Dassel’s succeeds, the implications for the Costcos and the Wal-Marts are pretty serious.”
Public feedback on the case could be mixed, because most people will be able to see both sides of the story, Sarsfield said.
“You want the small businesses to be on a level playing field. On the other hand, you want the cheap prices,” he said.
Suits filed by small companies against major corporations are rare in small towns like Hollister. They usually occur in large cities, Sarsfield said.
But since Safeway began selling gas in June 2002, seven local gas stations have been sold or have gone out of business, according to Dassel’s suit.
If Dassel’s wins the lawsuit by proving the grocery store is selling below cost, Safeway will have to increase its prices, Alldredge said. That’s not the case if Safeway is paying less for gas than other companies.
But Dassel’s co-owner Graham Mackie thinks he and Safeway are buying gas for the same price because both businesses purchase their gas from regional distribution facilities, where prices are decided by the oil refineries.
However, if Safeway is purchasing gas at the same price as Dassel’s and simply selling right at cost, Dassel’s would not have a case.
“They don’t have to make a profit,” Alldredge said. “They can sell right at the cost of buying gas and the cost of running the operation.”
