Case No. RR300-00295
April 7, 1999
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Motion for Reconsideration
Name of Petitioner: Gulf Oil Corporation/
F.O. Fletcher, Inc.
Date of Filing: June 29, 1998
Case Number: RR300-00295
This proceeding involves a Motion for Reconsideration filed by F.O. Fletcher, Inc. (Fletcher). Fletcher asks that we reconsider our prior Decision and Order in which we denied in part an Application for Refund that it filed in the Gulf Oil Corporation (Gulf) refund proceeding. Gulf Oil Corp./F.O. Fletcher, Inc., 27 DOE ¶ 85,004 (1998)(hereinafter Fletcher). The complete background of that refund application is set forth in Fletcher. The procedures for disbursing Gulf refunds were established in Gulf Oil Corporation, 16 DOE ¶ 85,381 (1987)(hereinafter Gulf). The regulations relevant to this proceeding are set forth at 10 C.F.R. Part 205, Subpart V.
I. Background
In Gulf we adopted a presumption that alleged Gulf overcharges attributable to the firms sales of refined petroleum products had been dispersed equally in all sales of those products made by Gulf during the relevant period, August 1973 through January 27, 1981. Based on this presumption, applicants for Gulf refunds generally receive a refund of $.00064 per gallon of covered Gulf product purchased. However, we provided that applicants could show that they were disproportionately overcharged and thereby be eligible for a refund based on a greater per gallon amount. We also established a presumption of injury for a refiner, reseller or retailer requesting a principal refund of $5,000 or less. We stated that these applicants must document the volume of their Gulf purchases to receive a refund, but do not need to show that they
absorbed Gulf alleged overcharges. Id., at 88,740-741. Moreover, we provided that an applicant seeking a refund greater than $5,000 could elect to receive a refund of 40 percent of its allocable share up to $50,000 (excluding interest), without demonstrating injury. Id.
However, we stated in Gulf that in order to receive a full volumetric refund above $5,000, a refiner, reseller or retailer applicant must demonstrate injury. That is, it must show that it did not pass through the overcharges to its own customers. As we stated in Gulf, this showing generally consists of two parts. First, the applicant must demonstrate that it had banks of unrecouped increased product costs in at least the amount of the refund during the period of controls. Second, the claimant must provide some other specific evidence that it did not pass through the alleged overcharge to its own customers. Id. at 88,740. Often, this showing is made through a demonstration that the applicant was placed at a competitive disadvantage as a result of the illegally high prices charged by its supplier.
II. Fletchers Refund Application and OHAs 1998 Decision
According to its original refund application, Fletcher, a reseller of motor gasoline, purchased a total of 35,931,376 gallons of Gulf motor gasoline. The firm claimed that it was disproportionately overcharged with respect to 30,780,616 gallons of Gulf gasoline that it purchased indirectly from Gulf through Tesoro Petroleum Corporation during the period January 1974 through January 1977. Specifically, it claimed an overcharge of $541,952. (1) Fletcher claimed that the injury it experienced in connection with those Gulf purchases fell between 74 percent and 90 percent of the $541,952 overcharge. In order to receive a refund at that level, Fletcher attempted to prove injury. It provided bank information, and evidence purportedly showing depressed margins and sales volumes. It also submitted a comparison of the prices it paid for Gulf/Tesoro product with prices of two other suppliers in its market area, Texaco Inc. and Phillips Petroleum Company. Fletcher alleged that Gulf/Tesoro prices were higher than Texaco and Phillips prices. Through this comparison, Fletcher attempted to establish that it could not pass through Gulf/Tesoro overcharges and still remain competitive in its market area.
In Fletcher we found that the firm was overcharged by more than the volumetric amount. We agreed that the firm had reasonably demonstrated an overcharge of $.01761 per gallon ($541,952/30,780,616 = $.01761). However, we did not find that the firm had shown a level of injury beyond the presumptive level. First, we did not find that the firm had sufficiently established that it had banks of unrecouped costs. In this regard, in calculating its banks, the firm claimed that it had a May 15, 1973 margin of $.041185 per gallon. It based this figure on a February 1974 Internal Revenue Service audit of the firm. The firm submitted a page from the audit, purportedly drafted by the IRS auditor, showing a margin of $.0398 for regular motor gasoline and $.04275 for premium motor gasoline. Letter of December 8, 1994, Exh. A.
We were not convinced by the $.041185 figure. Among our stated concerns was that we were not sure how Fletcher calculated $.041185 as its May 15, 1973 margin. We mentioned specifically that it was not clear if this margin was a weighted average margin. Since we were not convinced that the May 15, 1973 margin was reasonable, we could not conclude that the firm had adequately demonstrated that it had banks of unrecouped costs.
We were also not persuaded by the data that the firm furnished in connection with the second step of the injury showing. We were not convinced that the firms margins were depressed during the refund period, as compared to its historical margins. We noted that the firm had not submitted convincing historical margins from which we could determine that its margins during the refund period were reduced. As historical margins for the firm, Fletcher selected (i) $.037177, the average of its monthly margins in 1974; (ii) $.03965, its purported margin on September 1, 1971; and (iii) $.0398, its May 15, 1973 weighted average margin for regular gasoline, which we discussed above.
We did not find any of these margins reasonably established a historical margin for the firm. As a general rule, in selecting an appropriate margin for comparison purposes, a firm is expected to use a reasonable time frame such as one year. Marathon Petroleum Co. / Pilot Oil Corp. , 17 DOE ¶ 85,291 (1988)(hereinafter Pilot). It should also select a time frame that is not within the regulated period, but rather one that shows the firms operations during a more normal operating period for the firm. The period selected should be prior to the beginning of the controlled period, August 1973. Id. at 88,582.
We pointed out that Fletcher used a margin for the year 1974, which was during the controlled period and part of the very period during which it purchased from Gulf/Tesoro. Since this is a purportedly anomalous period for the firm, we suspected its reliability. The only other historical margin information Fletcher provided was for September 1, 1971, and May 15, 1973. Neither of these is acceptable. Margin data for a single day is not sufficiently representative. Id.
While we were not totally persuaded as to the usefulness of these three margins, $.037177, $.03965 and $.0398, we nevertheless performed an analysis using those figures as benchmarks.
We noted that Exhibit B of the December 8, 1994 Letter confirmed that Fletcher rarely attained those margin levels during the Tesoro refund period, January 1974 through January 1977. However, this Exhibit also showed that the firm did not achieve those margin levels even after it ceased purchasing Gulf product from Tesoro. In fact, it did not receive a margin level of at least $.037177 until March 1979. Exhibit B of December 8, 1994 Letter. Thus, more than two years after Fletcher stopped purchasing Gulf product through Tesoro, it had still not resumed selling product at its so- called historical margin. We were therefore not persuaded that Fletchers failure to achieve that margin was reasonably related to overcharges in connection with its Gulf/Tesoro purchases. We therefore rejected Fletchers position that its purportedly depressed margins during the refund period indicated that it had suffered an injury as a result of Gulf/Tesoro overcharges.
We also rejected Fletchers claim that its depressed sales volumes during the refund period demonstrated that it experienced injury as a result of the Gulf/Tesoro purchases. Specifically, we noted that the firm calculated an average monthly sales volume of 1,964,578 gallons. (2) Accepting that 1.9 million gallon figure as reasonable for purposes of our analysis, we nevertheless did not find that Fletchers sales volumes were depressed as a result of the Gulf/Tesoro purchases. During the 37-month Tesoro refund period, Fletchers sales dipped below the 1.9 million level only 7 times. One of those times was during November 1974, when it sold 1,867,209 gallons. We found this rather minimal reduction of less than 5 percent to be insignificant. In analyzing the remaining six months during which Fletcher sold less than 1.9 million gallons of gasoline, we noted that in no month did sales fall below 1,572,554 gallons. Thus, the reduction in volumes was hardly drastic. Moreover, the six months during which the reduced sales occurred were all in the period of December through February. January 29, 1998 Letter, Revised Exh. J. Fletcher admitted that there were seasonal fluctuations in its sales, and the winter months seem to be generally the months that generate lower gasoline sales for the firm. December 8, 1994 Letter at 6. See also Exh. B of December 8, 1994 Letter. Thus, we believed that the six months in which sales seemed to be somewhat reduced constituted normal sales fluctuations for the firm. They did not seem to be related to Gulf/Tesoro overcharges.
Moreover, in the 30 remaining months of the Tesoro refund period, Fletchers gasoline sales were almost always above the 2 million gallon level, and in 14 months of the Tesoro refund period sales ranged between 3 and 4 million gallons. This is significantly greater than the 1.9 million gallon average that Fletcher says represents a historical volume for the firm. Thus, we failed to see any harm to the firms sales resulting from the Gulf/Tesoro overcharges. Accordingly, we found that Fletcher had not made a showing of injury with this information.
As noted above, Fletcher also attempted to show it was competitively disadvantaged by its purchases of Gulf/Tesoro product, by comparing the prices it paid for Gulf/Tesoro gasoline with those of Phillips Petroleum Company and Texaco Inc. In cases in which a firm endeavors to establish that it was at a competitive disadvantage in its purchases, we compare the prices for product paid by a claimant to the overcharging firm with those paid by its competitors to their own suppliers. For comparative prices in nearly all cases we use the prices set forth in Platts Oil Price Handbook (Platts). In this case, instead of comparing Gulf/Tesoro prices to Platts prices, Fletcher used Texaco and Phillips prices for comparison purposes. Fletcher stated that in its market area, these two suppliers had a larger market share than Powerine Oil Company, which was the price source adopted in Platts for Fletchers market regions (Seattle/Tacoma and Portland/Vancouver).(3) We rejected this comparison, concluding that even if the Platts data represented a smaller sample, Fletcher had not shown that the information did not adequately reflect overall market prices in the relevant regions.
In sum, we found that Fletcher had not demonstrated that it experienced injury in its purchases from Gulf/Tesoro. Although we did not find the firms injury showing convincing, we did not believe that its injury information showed that the firm did not experience any injury. Accordingly, we granted the firm a refund of $50,000, based upon the mid-range presumption of injury, referred to above. The firm also received interest of $47,650 on that amount.
III. Fletchers Motion for Reconsideration
A. Standard of Review
On June 29, 1998, Fletcher filed the instant Motion for Reconsideration. There is no provision in 10 C.F.R. Part 205, Subpart V regarding the filing of this type of motion. As a general rule, we have been willing to consider such a motion if an applicant presents additional information which was unavailable at the time of its original filing, or a compelling reason why the prior Decision should be modified. Ryder Truck Rental, Inc., 22 DOE ¶ 85,091 (1992).
The judicial standard for consideration of such motions under Federal Rule of Civil Procedure 59(e) was recently set forth as follows in Consolidated Edison Company of New York, Inc. v. OLeary:
A motion for reconsideration is discretionary, and is generally not granted unless the movant presents either newly discovered evidence or errors of fact or law which need correction. Moreover, a motion for reconsideration should not be granted if a party is simply attempting to renew factual or legal arguments that it asserted in the original pleadings. Reconsideration is not simply an opportunity to reargue facts and theories upon which the court has already ruled. In fact, . . . a party must demonstrate an intervening change of controlling law, the availability of new evidence or the need to correct a clear error or prevent manifest injustice.
Consolidated Edison Company of New York, Inc. v. OLeary, No. 96- 2710, slip op. at 2 (D.D.C. Dec. 30, 1998).
We do not believe that Fletchers motion meets these standards. The information it has provided was available to it in the prior proceeding. Further, it seeks to reargue our original determination, and has not shown any significant error of fact or law that compels a change in our prior determination. We thus do not necessarily believe that Fletcher has met the procedural standards for granting a motion for reconsideration. However, in an effort to accord Fletcher a complete and unconditional review, we have thoroughly considered all the data and arguments in its Motion for Reconsideration, regardless of whether they meet the ordinary standards for such cases. As discussed in full below, after reviewing all of the data submitted in this case, we find once again that Fletcher has not reasonably demonstrated injury as a result of its Gulf/Tesoro purchases.
In its Motion, Fletcher asserts that it has pursued its claim against Gulf in a United States district court and received a judgment in its favor. It states that, had it not been precluded by the statute of limitations, the firm would have been made whole by the court. (4) Fletcher argues that we should therefore have an unusually high level of confidence that justice will be served by approving [its] full claim.
This assertion misses the point. Fletcher never received a judgment which is in any sense controlling here. The court only made a determination that Gulf overcharges were passed through Tesoro to Fletcher. The court made no determination as to whether Fletcher was injured by those overcharges. We certainly have confidence in our original determination that Fletcher was overcharged by Gulf/Tesoro. However, in Subpart V refund cases, we must have reasonable confidence that an applicant experienced injury as a result of alleged overcharges. 10 C.F.R. § 205.280.
As indicated in Fletcher, we were not convinced that the firm was harmed by those overcharges. It is that determination that Fletcher asks us to reconsider here. As discussed below, even after allowing the firm a full opportunity to re-explain its position, Fletcher has not provided us with sufficient evidence to persuade us that it was harmed beyond the presumptive level as a result of its Gulf/Tesoro purchases.
B. Fletchers Showing of Banks of Unrecouped Costs
As stated above, we found in Fletcher that the firm had not convincingly established its purported May 15, 1973 margin of $.041185, in connection with its demonstration of banks of unrecouped costs. Accordingly, we could not conclude that its bank calculations were reasonable.
In its motion, Fletcher argues again that the information it has submitted to establish its May 15 margin is reliable. As stated above, the corroboration for that margin was an IRS auditors work sheet labeled Allowable Mark up-Motor Gasoline. December 8, 1994 Letter, Exh. A. Once again, we have reviewed Exhibit A and find it wanting. A showing of banks should be based on a firm-wide May 15, 1973 margin. However, the exhibit does not indicate that it is a firm-wide margin, or state what class of Fletchers purchasers it applies to. It is thus not a particularly convincing showing of a firm-wide May 15, 1973 margin. Further, Exhibit A is a single page selected from what is presumably a larger audit. Taken out of context, we cannot fully assess its meaning and its usefulness in this case.
To support its position that the IRS May 15 margin is reliable, Fletcher has submitted some additional information with its Motion for Reconsideration. Exhibit 3 of the Motion is purportedly a letter written by Fletcher to the Federal Energy Administration (a predecessor to the DOE) summarizing the firms allowable markups. These markups do appear to agree with the IRS figures that Fletcher previously brought forward, but they hardly provide real support for its case here. As an initial matter, this letter is unsigned and undated. It merely sets forth Fletchers own assertions as to its understanding of its margins. We find the letter is entitled to little evidentiary weight on the issue of the reliability of the May 15, 1973 margin.
Moreover, the assertions in this letter do not resolve the problems that we have identified with Fletchers overall May 15, 1973 margin information. The letter sets forth markup computations for reseller customers on May 15, 1973. We are uncertain as to what this supposed reseller margin actually represents. We know from the record that the firm had a number of reseller classes of purchaser. Motion for Reconsideration, Exh 4. It is not clear, however, which of Fletchers reseller customers the letter is referring to. We cannot determine whether this May 15 margin constitutes a single margin to one particular class of reseller purchasers, or a margin for all of its reseller customers.
In any event, the $.041185 margin does not represent a firm-wide margin, which is the necessary data here. The record demonstrates that Fletcher had a number of classes of purchaser, including both resellers and other types of customers. Motion for Reconsideration, Exhs. 3, 4, 5. Exhibit 4 in particular shows a wide range of margins for regular motor gasoline, ranging from $.0252 to $.0742. These margins included all classes of purchaser, not just resellers. Fletcher admits that it has no basis for weighting these margins. Motion for Reconsideration at 5. (5)
Given these facts, we do not believe it is appropriate to accept the $.041185 reseller margin as a reasonable firm-wide margin. We therefore continue to believe that Fletcher has not adequately established a firm-wide May 15, 1973 margin in this case. Accordingly, we are not convinced as to Fletchers level of banked costs at the end of the period of price controls.
We turn next to Fletchers contentions regarding the second step of its injury showing.
C. Competitive Disadvantage Showing
As indicated above, Fletcher has attempted to show injury by comparing the prices it paid for Gulf/Tesoro product with those charged by Texaco and Phillips. It claims that the lower Texaco/Phillips prices show that Fletcher would have been unable to pass through the Gulf/Tesoro overcharges without becoming uncompetitive in its market area.
It is by now well-established that we will generally turn to Platts for comparative data in injury showing cases. E.g. Mobil Oil Corp./Carbo Industries, 17 DOE ¶ 85,759 (1988)(Carbo). Platts has the virtue of being a readily available, nationally accepted source of historical, regional pricing data on the petroleum industry. In fact, we have found it to be the most detailed and accurate source of the statistics we need on the issue of competitive disadvantage.
However, there are some limited exceptions to our practice of referring to Platts. In Carbo we stated that we would look at the prices charged by other suppliers when comparative price information was not available from a published source and the applicant had purchased from a broad enough range of suppliers to allow us to approximate an average market price. In Carbo we found that data from two Carbo suppliers was too limited and accordingly we referred to Platts to derive a measure of the firms competitive disadvantage. Carbo, 17 DOE at 89,436. We have also been willing to look to other sources for comparative data that appear to be more representative of the applicants actual market, if those sources are impartial sources of historical pricing data. E.g., Ozona Gas Processing Plant II/Odessa L.P.G. Transport Co., 12 DOE ¶ 85,050 at Note 3 (1984)(Ozona). See also Behm Family Corp. v. DOE, 3 Fed. Energy Guidelines ¶ 26,633 (Temp. Emer. Court Appeals 1990)(Behm).
Fletcher has not demonstrated any reason to depart from our long- established precedent of referring to Platts. In this case, there is comparative data available from our normal source, and Fletcher has not established that this data is unreliable. It argues that the Platts data is derived from only a single source, representing only 1 percent of the total relevant market. However, this does not necessarily establish that it is not representative of that market. This case is not the first in which a marketer seeks to depart from the use of a standardized, unbiased and generally reliable source of data in favor of a source which is chosen for other reasons, often to better serve the financial interest of the claimant. See, e.g., Behm, 3 Fed. Energy Guidelines at 27,102-03.
In attempting to show that this Platts data is not dependable, Fletcher also states that the Platts data for the Tacoma/Seattle and Portland/Vancouver areas is unlike data for other Platts regions. In this regard, Fletcher maintains that data for these areas ends in two zeros more often than other areas, and further, that the data for these locations is more alike than for any other neighboring locations tracked by Platts. Again, Fletcher fails to show such indicia, even if true, mean that the Platts data for these regions is not trustworthy. Other than asserting that this data is different from other Platts data, Fletcher fails to say in what way the Platts data is not reliable. Fletcher states that the Platts data should not be presumed to be of the same quality [as those for other cities]. It is suspect on its face. . . it was found to be undependable by the court and. . .Platts own employees viewed this data with skepticism. September 17, 1997 Letter at 4.
Fletchers arguments are strained and unconvincing. First, it seems to be asking us to accept that simply because the data looks somewhat different for these two regions than for other regions, it must be considered as inherently unreliable. We see no basis for such an inference. We see no obvious significance in its contention that a number of Platts price points end in zero. Since only one firm, Powerine, is part of the sample, it is only logical that many of the price points would end in zeros, since no averaging of prices of a number of firms is taking place. We see nothing inherently suspect in that regard.
With respect to Fletchers purported concern that the prices posted for Seattle/Tacoma and Portland/Vancouver are more alike than for other sets of neighboring locations, we again find no implicit reason to doubt their usefulness. In fact, Fletcher stated that Phillips, one of its own suppliers and one of the two comparison suppliers that it contends should be used in this case, did not post different prices in the Seattle/Tacoma and Portland/Vancouver markets. The prices in these two areas were always the same. Letter of August 2, 1996 at 2.
Fletcher has also not documented its assertion that the Platts data was found to be undependable by the court in F.O. Fletcher v. Gulf Oil Corp., even though we specifically requested such support. Letter of July 29, 1998 at 2. Fletcher states in response to that aspect of our letter that the court found Platts prices to be undependable. . . when it stated ?the gasoline prices in Platts for Seattle/Tacoma and Portland were based on spot purchases by a small refiner, Powerine. Letter of August 28, 1998 at 5. This statement hardly supports a conclusion that the prices were undependable.
We also do not give credence to Fletchers contention that Platts employees viewed the data in question with skepticism. Fletchers support for this broad assertion is set forth in a Memorandum of Conversation dated September 19, 1994, recounting a telephone conversation with Mr. Bruce Chalfant, the editor of Platts from 1973 through 1975. (6) According to this memorandum, Mr. Chalfant stated that the small staff at Platts sometimes wondered how much ?spin there was on the prices reported by individuals [who reported for locations such as Seattle/Tacoma], i.e. whether the price might be at the high or the low end of the market for some reason advantageous to the reporting company or peculiar to that companys situation. December 4, 1994 Letter, Exh. D. We cannot find that this second-hand report, offering rather speculative, hearsay views provides substantial evidence supporting Fletchers contentions as to the lack of reliability of Platts data. We certainly will not disregard that data based on this 20 year old generalized recollection, memorialized in an unsigned telephone memorandum.
Furthermore, we believe that over the long run, the Platts data, even for a single firm, should prove to be unbiased. Thus, even though the Platts data at issue here may not be useful for a single month, we believe that over the course of a number of years the data is reasonably dependable. Thus, we see no reason to reject Platts data and analyze this case in a manner different from our previously-announced comparative methodology. We believe that as long as Platts, an impartial source, is available, this is the most appropriate standard for a price comparison.
In any event, even if we were to disregard Platts because we found it to be unreliable, we would not be likely to substitute two suppliers selected by an applicant. See Carbo, 17 DOE at 89,436. Even if an applicant is able to establish that Platts is not an appropriate source, as noted above, this does not mean that it is free to survey its market area and select its own sources in order to formulate a price comparison. We would be much more likely to accept an impartial source, such as another objective survey. See Ozona Gas Processing Plant II/Odessa, 12 DOE ¶ 85,050 (1984). See also Behm v. DOE, 3 Fed. Energy Guidelines ¶ 26,633 (Temp. Emer. Court Appeals 1990).
The two suppliers mentioned by Fletcher for comparison purposes do not provide the broad range of suppliers that we referred to in Carbo. This Phillips/Texaco information also is not the type of impartial source data that was mentioned in Ozona and by the court in Behm. There is simply no convincing evidence in this case from which we could conclude that Platts is inherently unreliable and Fletchers sources are truly impartial. Fletcher has declined to submit data using Platts as a reference point. Letter of September 17, 1997. Accordingly, there is no substantial price comparison data included in the record of this proceeding.
D. Fletchers Historical Margin Data
As Fletcher points out, in Gulf we indicated that an injury showing might be made through a demonstration that an applicant was unable to achieve its historical margins in sales during the overcharge period. However, this does not mean, as Fletcher seems to think, that such a methodology will always be convincing. It is important to bear in mind that it is the applicant that has the burden of establishing that it is entitled to a refund. Behm, 3 Fed. Energy Guidelines at 27,103. The type of information and the depth of corroboration necessary will in some measure depend upon the size of the refund that the applicant is seeking. Thus, in a case in which an applicant is claiming a particularly large refund, it will be expected to submit documentation that is more convincing and more detailed than a case in which an applicant is requesting a comparatively modest sum.
The information that Fletcher has presented us in order to establish a historical margin now includes: (i) a document showing a Gulf bulk price of $.1470 per gallon to Tesoro for September 1, 1971 (December 8, 1994 Letter, Exh. G); (ii) a document purportedly showing a January 1, 1972 Gulf bulk price to Tesoro of $.1470 per gallon (Letter of August 28, 1998, Exh. 1)(7) and (iii) an invoice showing a May 14, 1973 Tesoro price to Fletcher of $.14335 per gallon for Gulf regular gasoline (Motion for Reconsideration Exh. 2).
This evidence is extremely limited and not especially relevant to our ultimate inquiry into whether Fletchers firm-wide margins were reduced. As discussed fully below, the Fletcher data (i) is comprised of bulk price information, rather than actual margins; (ii) covers an insufficient time period; (iii) suggests that there was no reasonable relationship between the purportedly reduced margins and the Gulf overcharges. Overall, Fletchers showing of allegedly decreased profit margins does not adequately support the unusually large refund it seeks. (8)
1. The Data Does Not Show Any Actual Margins
Upon scrutinizing the Fletcher evidence, we have determined that the firm has not in fact provided us with any direct historical margin data. The figures referred to above, $.1470 per gallon and $.14335 per gallon, are actually Gulf bulk prices, i.e., prices that Gulf charged either Tesoro or Fletcher itself.
Fletcher asks us to deduce from those Gulf bulk prices what its margin would have been. For example, the December 8, 1994 Letter, Exhibit G (dated September 1, 1971), is made up of a schedule of Gulfs jobber bulk prices for Tesoro. It shows a bulk price for regular gasoline on that day of $.1470 per gallon. Fletcher states that since it would have taken delivery at Portland, the applicable hauling allowance in 1971 would have been $.0074 so, for example, the net price to Fletcher (including Tesoros $.00375 markup) would have been $.14335 for regular. When this is compared to the suggested jobber DTW [dealer tankwagon price] of $.183, Fletchers margin on regular gasoline would have been $.03965. Motion for Reconsideration at 4 (emphasis added).
As is obvious from the above, Fletcher has not provided any margin information whatsoever that is directly related to its sales on September 1, 1971. It has submitted a schedule of Gulf/Tesoro bulk prices, a statement of the suggested dealer tankwagon (DTW) prices and has asked us to infer what the margin would have been for the firm. We find that this is extremely weak information and are not persuaded that it is sufficient in this case to establish a typical historical margin for the firm.
The other two pieces of evidence Fletcher has submitted to show its historical margins, are similarly unsatisfactory. The May 14, 1973 documentation only shows a Gulf price to Fletcher, and the January 1, 1972 document shows only a Gulf bulk price to Tesoro. Once again, instead of supplying direct historical margin data points, Fletcher asks us to infer historical margins for the firm from these two obviously limited pieces of information, which refer to Gulfs prices, but not to Fletchers margins. (9)
Overall, the bulk prices that Fletcher has provided are not persuasive evidence as to the firms margins. We just do not have enough confidence in that limited, inferential information to reach a reasoned conclusion regarding Fletchers actual historical margins.
2. The Bulk Price Data Covers an Inadequate Period
Even if we were to conclude that bulk price data in general were sufficient for our purposes here, there are additional reasons why this particular bulk price data is inadequate. We stressed in Fletcher that historical margin information should reflect margins for a sustained period, such as one year. Fletcher, 27 DOE at 88,022. Three days prices are clearly insufficient to satisfy this requirement.
In an effort to bolster this weak daily pricing information, Fletcher advances the following dubious line of reasoning. Fletcher asks that we infer that the bulk prices for these three days are representative of prices for the entire period from September 1, 1971 through May 14, 1973. Fletcher contends that the steadiness of the three prices themselves shows that there was overall stability in Gulfs prices from 1971 through May 14, 1973. Thus, Fletcher asks us to infer from three bulk prices that Gulfs prices were stable for a period of more than two and one half years.
Fletcher next asks us to make yet another inference: that the stability of Gulfs prices from September 1971 until May 14, 1973, is evidence that Fletchers margins would have been similarly stable. It maintains that the absence of any volatility in Gulfs prices is strong evidence that the market as a whole was stable and, therefore, that margins throughout the period would have been similarly unchanged. August 28, 1998 Letter at 3. Fletcher further states that its margins generally tracked the difference between Gulfs price through Tesoro and the Gulf DTW price through late 1973. (10) It therefore asks us to infer that its margins were stable for a period of several years. According to Fletcher, the inferred margins are all very close to the May 15, 1973 margin calculated by the IRS representative and discussed above. Accordingly, Fletcher argues that the May 15, 1973 margin calculated by the IRS represents the firms historical margin.
Fletchers so-called historical margin data is no more than a house of cards. It is built up of inference upon inference. Fletcher asks us to infer margins from three bulk prices; it asks us to infer that three daily bulk prices constitute Gulfs normal historical prices over a two and one-half year period; it asks us to infer that its margins normally tracked the difference between Gulf/Tesoro bulk prices and DTW prices.
To support its weak position that it experienced a reduction in its margins, the firm has supplied us with inadequate and irrelevant data. What Fletcher has yet to produce is the very type of evidence that we normally rely upon in these cases: direct evidence of the firms margins over a reasonably sustained period prior to the controlled period. (11)
To summarize our position with respect to Fletchers inferred margin data, we find that a large refund request based on reduced margins requires direct corroboration of historical margins. We do not think it is reasonable to base virtually an entire injury showing for a refund of this size on the multiple inferences Fletcher has suggested. It is neither complicated nor burdensome for the firm to provide evidence of historical margins using the traditional calculation, which consists of rather ordinary information readily obtainable and typically at the firms disposition: the difference between cost of goods sold and revenues received [net revenues] divided by the number of gallons involved. (12) We thus remain unconvinced by Fletchers attempted showing of its historical margins through the inferred margin methodology.(13) We also believe that Fletcher has continued to provide very limited data points, representing, at best, only one days prices, rather than a broad picture of actual margin points running smoothly for an extended period. It asks us not only to infer margins, but also to infer stability. It has provided only the most insubstantial information in support of its claim. (14) We find this entire indirect, inferential margin approach to be wholly ineffective.
3. Relationship Between Reduced Margins and Injury
We noted in Fletcher that the firm did not attain its purported historical margin level even after it ceased purchasing Gulf product from Tesoro. It did not achieve a margin level comparable to its purported historical levels until March 1979, more than two years after it stopped purchasing Gulf product through Tesoro. It therefore did not appear to us that there was a relationship between the allegedly reduced margins and the Gulf purchases. We were therefore not convinced that Fletcher was injured based on its claim of reduced profit margins, even using the rather weakly corroborated and unrepresentative margin data it selected.
In its Motion for Reconsideration, Fletcher contends that it is irrelevant whether depressed margins continued after the refund period. It states that no claimant seeking a disproportionate refund has ever been required to prove a causal relationship between the alleged overcharges and his injury. Instead, the relevant showing under our precedents is whether the claimant was unable to pass through any overcharges which may have occurred.
Fletcher misunderstands our precedent and our prior inquiries in injury showing cases. It is true that there is no general requirement that an applicant provide a separate demonstration of the relationship between its injury and the alleged overcharge. Ordinarily, such an inquiry is not necessary. In most cases, once satisfactory injury data is produced, the relationship between that data and the alleged overcharge is self-evident. Therefore, we do not need to give any formal or direct consideration to the relationship between the overcharge and the injury.
In this case, however, information submitted by Fletcher itself led us to question whether the firm actually experienced an injury related to the Gulf/Tesoro overcharges. As discussed below, it appears that the reduced margins, if they exist at all, could well be attributable to purchases other than the Gulf/Tesoro purchases. Consequently, that margin information would not support Fletchers claim that it was injured by the Gulf/Tesoro purchases. Once a concern of this type is raised by the record presented to us, we will certainly not ignore it. In fact, we have an obligation to probe it.
Our authority to consider whether the appropriate relationship has been shown between the overcharge and the injury has been judicially sanctioned in Atlantic Richfield Co. v. DOE, 3 Fed. Energy Guidelines ¶ 26,546 at 26,509 (D. Del. 1985). Moreover, in our prior cases we have indeed considered, where appropriate, whether there was a relationship between a lower profit margin and the alleged injury. For example, in Marathon Oil Co./Pilot Oil Corp., 20 DOE ¶ 85,236 (1990), we rejected Pilots claim that its reduced margins established that it experienced injury as a result of purchases from Marathon Oil Company. We found in particular that Pilot has not shown any relationship between any reduction in its profit margin that did take place and alleged Marathon overcharges. Id. at 88,535. In Marathon Oil Co./Red Diamond Oil Co., 19 DOE ¶ 85,543 (1989)(Red Diamond), we found that Red Diamond had submitted no evidence linking the drop in profit margins to Marathon prices. Thus, where appropriate, we have indeed considered whether there was a reasonable relationship between a reduced profit margin and the ability to pass through alleged overcharges.(15)
In the present case, Fletcher attempts to show injury in its Gulf/Tesoro resales, based on its own allegedly lower firm-wide margins. However, simply because a firms overall profit margin was lower does not mean that it was injured by the specific alleged overcharges. For example, the firm might have intended to alter its business strategy to sell greater volumes at a reduced profit margin. E.g., Red Diamond, 19 DOE at 88,981. There are other reasons why a firms overall profit margins may have been reduced. It may have been purchasing higher price product from other suppliers, and therefore have been unable to obtain its historical margin in connection with sales of that product.
The information submitted by Fletcher itself led us to question whether the purportedly lower margins bore any relationship to the alleged Gulf overcharges. Specifically, during the period January 1974 through January 1977, when Fletcher purchased Gulf/Tesoro motor gasoline, it also purchased significant volumes of gasoline from many other sources. December 8, 1994 Letter, Exh. B. It had at least 15 suppliers other than Gulf/Tesoro during this time. December 8, 1994 Letter, Exh E. In many months Gulf/Tesoro provided less than 50 percent of Fletchers total supplies in its various market areas. Id. In fact, overall, it appears that Gulf supplied only approximately one third of the total gallonage that Fletcher purchased during the period at issue here, January 1974 through January 1977. (16)
Since Fletcher had so many other suppliers, and since only a fraction of its total supply was provided by Gulf/Tesoro, even convincing data as to reduced firm-wide margins might not necessarily adequately support Fletchers claim of a Gulf/Tesoro injury. It is entirely possible that any reduction in its profit margin, even if we were to assume one occurred, was in some measure related to the prices it paid for gasoline from these other suppliers. Given the unusually large refund Fletcher is seeking here, the relative volume of its purchases from Gulf/Tesoro, and its many classes of purchaser, we fault Fletcher for not making a more convincing showing that the purportedly reduced profit margins were related to the alleged Gulf overcharges.
Fletcher points to several cases in which we have not asked for this type of showing, and simply relied on profit margin reduction. Marathon Petroleum Co./Township Oil Co., 21 DOE ¶ 85,047 (1991)($202,500 refund granted); Getty Oil Co./Western Petroleum Co., 18 DOE ¶ 86,074 (1989)($106,300 refund granted); Mobil Oil Co./McCall Oil and Chemical Corp., 18 DOE ¶ 85,983 (1989)($33,130 refund granted). Fletcher claims that these three claimants were known as large companies with several suppliers. Letter of August 28, 1998. We do not believe these cases necessarily mean that we cannot review the relationship between reduced profit margins and injury in the instant case. For example, the three cases cited by Fletcher all involved refund levels considerably lower than the approximately $500,000 requested here. Accordingly, we believe that a different level of scrutiny of the claim is well within reason. (17)
It is true, as Fletcher frequently reminds us, that we provided in Gulf that an injury showing might be made through demonstration of reduced margins. That method was one of several possible options. This certainly does not mean, however, that every case will lend itself to a fruitful analysis under the reduced margin methodology. A case in which an applicant has many suppliers and the supplier allegedly causing the injury provided only a small portion of the total supplies is an example of just such a situation.
To summarize this exhaustive, complex and highly detailed analysis of Fletchers attempt to show reduced margins, we find that the firm has simply not provided persuasive information to support its claim that it experienced reduced margins as a result of its Gulf/Tesoro purchases. The firm has relied on this approach to its own detriment. As we pointed out above, the data only shows Gulf bulk prices and does not establish any actual Fletcher historical margins. Therefore, Fletchers historical margin data is only inferential, at best. Moreover, the bulk price information relates to only a single class of purchaser, and therefore in any event does not allow us to infer a firm-wide margin. In addition, the information Fletcher advances here covers only several days, rather than a sustained period. Thus, this data is inadequate.
Further, Fletchers margins during the refund period are based on sales of product from many firms other than Gulf/Tesoro. In addition, the volumes of purchases from Gulf/Tesoro comprised only approximately one-third of Fletchers total purchases. Thus, it is virtually impossible to get a sense of the true effect of Gulfs alleged overcharges on Fletchers margins during the refund period.
Under these circumstances, it is evident that an attempt to show injury through reduced margins is not likely, standing alone, to produce sufficient support for Fletchers claim, even though this methodology was set out as a possible one in Gulf. Fletchers own selection of this method was ill-founded, and its dogged adherence to this approach has not served the firm well. The fragmentary and inferential profit margin information submitted in this case is simply not substantial enough to support a refund of approximately $500,000.
E. Fletchers Data Regarding Depressed Sales Volumes
As indicated above, Fletcher also attempted to establish injury through a showing of depressed sales volumes. However, we did not find in Fletcher that the firms sales volumes during the refund period were in fact reduced. Instead, the record showed that the firm had an annual sales cycle in which it had large sales volumes in the summer months and reduced volumes in winter months. Overall, we found that throughout the refund period, the firms sales of gasoline were usually greater than its 1973 monthly average sales volume of 1.9 million gallons.
The firm now asks us to review its monthly sales volume in a different way. (18) Specifically, Fletcher has supplied us with a Composite Analysis which shows margin, sales volume and net revenues on a single graph. Motion for Reconsideration, Exh. 6. Fletcher claims that by using a 12 month trailing average, the graph demonstrates that from January 1975 through January 1977 its margin was in steady decline, its sales volume remained relatively stable, and its net revenues were consistently declining. Fletcher claims that whatever increase in volumes occurred during the relevant period was more than offset by the loss of margin.
As we discussed above, the margin information provided by the firm is not persuasive. Accordingly, we find that the conclusions regarding Fletchers volumes as set out in this graph are not useful, since they are based on inadequate margin data. In fact, when viewed on its own, the volume information set forth in the graph suggests that Fletchers sales volumes, while fluctuating, generally increased somewhat during the refund period. This was the very finding that we made in Fletcher. 27 DOE at 88,023. We therefore see no further support for Fletchers allegation of injury set out in this volume-related material.
IV. Conclusion
As is evident from the above discussion, we find no reason to disturb or modify in any way our original determination. Without concrete evidence of harm, Fletcher has not proven an injury greater than the presumptive amount in connection with purchases of Gulf/Tesoro motor gasoline. See Siegel Oil Co. v. OLeary, No. 94- 1498 (D. D.C. March 25, 1999). Accordingly, its Motion for Reconsideration will be denied.
It Is Therefore Ordered That:
(1) The Motion for Reconsideration filed by F.O. Fletcher, Inc. (Case No. RR300-00295) be and hereby is denied.
(2) This is a final Order of the Department of Energy.
George B. Breznay
Director
Office of Hearings and Appeals
Date: April 7, 1999
(1)The firm requested a refund based on the volumetric presumption for the remaining 5.2 million gallons of Gulf product.
(2)To derive this average monthly volume, it divided its total 1973 volume of 23,574,940 gallons of gasoline by 12.
(3) Fletcher claims that Powerines market share was one percent, whereas the combined Texaco/Phillips market share was 16 percent in those regions.
(4)In F.O. Fletcher v. Gulf Oil Corp. , No. 77-849-PA (D. Ore. July 21, 1983), the court found that Gulf had overcharged Fletcher by $790,000. However, on appeal, the Temporary Emergency Court of Appeals reversed the lower courts award to Fletcher on the grounds that it was barred by the applicable statute of limitations, and because, as an indirect Gulf purchaser, Fletcher had no standing to sue. See Fletcher, 27 DOE at 88,020.
(5)In fact, Fletcher recognizes that a firm-wide margin is the data called for in a quick bank, such as the one it created for this proceeding. Motion for Reconsideration at 3.
(6)The memorandum, which does not give the date on which the conversation took place, is either unsigned, or else the portion of the memo showing the signature is not provided.
(7)The document itself is unclear and we cannot make a reasonable determination as to what dates this piece of information covers, but, for purposes of this decision, will accept Fletchers assertion that the data relates to January 1, 1972.
(8)Fletcher, the sole remaining Gulf refund applicant, seeks the largest refund ever to be granted to a Gulf reseller. Of the 18,982 refunds approved in the Gulf refund proceeding, only two resellers have ever been granted refunds greater than the $50,000 level, which Fletcher has already received. Gulf Oil Corp./Army & Air Force Exchange, 18 DOE ¶ 85,493 (1989)(principal refund of $234,438); Gulf Oil Corp./Navy Resale & Services Support Office, 18 DOE ¶ 85,576 (1989)(principal refund of $250,136). Due to the unusual nature of their operations, these two applicants were not expected to show injury.
(9)In addition, these bulk prices appear to relate only to one reseller class of purchaser. As discussed above, Fletcher had a number of classes of purchaser, and, apparently, even more than one class of reseller customer. Accordingly, any inferred margin to be derived from this bulk price information would not be useful in assessing a firm-wide historical margin. However, firm-wide margin information is needed here. Fletcher offers firm-wide margins during the refund period for comparison purposes. January 29, 1998 Letter, Exhs. H and I.
(10)To support this point, Fletcher has provided some information purporting to establish that its own prices tracked bulk prices. August 28, 1998 Letter at 3-5; August 28, 1998 Letter, Exh 3. Given our reluctance to accept Fletchers overall inferential methodology here, we will not review this information.
(11)We recognize that in our letter of June 29, 1998, we asked the firm to provide additional information regarding its inferred margin methodology. However, upon reviewing all the information provided, as well considering the overall soundness of Fletchers inferred margin approach, we determined that it did not provide adequate support for the level of injury it has claimed.
(12)Fletcher should be familiar with this methodology, which it seems to have used in preparing its banks. December 8, 1994 Letter, Exh. B.
(13)We recognize the firms assertion that virtually the only remaining records are those preserved from the control period. December 8, 1994 Letter at 5. However, the fact that it may no longer have appropriate data to support its position that its margins were reduced, does not mean that it is free to use indirect information of very limited evidentiary value to support this significant refund claim.
(14)In any event, Fletchers contention that the three daily price points confirm the reliability of the May 15, 1973 IRS margin, does not advance its position in this case. As we discussed in detail above, the May 15, 1973 margin itself is not useful here, because it does not reasonably establish a Fletcher firm-wide margin.
(15)Whether a claimant is seeking a refund based on the volumetric presumption of overcharge or based on a demonstration of disproportionate overcharge is irrelevant to our consideration of the relationship between overcharge and injury.
(16)During the period January 1974 through January 1977, Fletchers total purchase volume was 98,276,642 gallons of motor gasoline. Of that volume, the total Gulf/Tesoro purchases were 30,780,616 gallons. Letter of January 29, 1998, revised Exhibit H.
(17)Moreover, in Township, the information that we had before us did not indicate that the firm had other suppliers, much less suggest the relative volumes of product that they may have furnished to Township. In Western we did not have information showing the volume of product furnished by suppliers other than Getty. In McCall, a relatively small injury showing case ($33,130), and thus not a particularly apt comparison here, some contemporaneous evidence actually existed which linked the relatively high Mobil prices to McCalls inability to compete in its market area. McCall, 18 DOE at 89,616. Thus, in these cases there was no particular need to further explore the relationship between the reduced margins and injury.
(18)Fletcher advanced this analysis on January 29, 1998, shortly before the issuance of Fletcher. We did not fully review this new methodology in Fletcher.