- The Washington Times - Tuesday, May 20, 2014

A D.C. judge has thrown out a lawsuit brought by the city’s attorney general that sought to break a gas station magnate’s control on prices, ruling the District does not have standing to bring such an action.

The decision will allow Capitol Petroleum Group owner Eyob “Joe” Mamo to keep in place “exclusive supply agreements” that require 27 independent operators who run gas stations he owns to purchase gasoline from his distribution company.

But the effort appears to be far from over.

Council member Mary M. Cheh, Ward 3 Democrat, said she is working with the attorney general’s office and plans to introduce legislation that would give the city standing to continue to press its claim.

“Ultimately this is about protecting the consumer to make sure they can get prices that are competitive,” Ms. Cheh said.

In the 24-page ruling this month that dismissed the city’s lawsuit, D.C. Superior Court Judge Craig Iscoe said city law governing the gasoline trade gives gas retailers the authority to press an unfair business claim, but it does not grant that authority to the mayor or attorney general.

The attorney general’s concern over the supply agreements in place stems back to 2009, when Mr. Mamo’s companies began taking over 31 D.C. gas stations bought from ExxonMobil, which had exclusively supplied gas to the stations. Mr. Mamo’s companies operate four of the stations, while 27 of them are operated independently.

With the purchase, ExxonMobil also transferred to Mr. Mamo’s companies its exclusive supply agreement with the stations, meaning he would be the only distributor from which they could buy their gas.

The arrangement left Mr. Mamo with the ability to set prices because the independent operators were unable to seek lower prices from other distributors. The 27 independently-owned Exxon gas stations represent about 25 percent of the District’s gas stations. Some stations owned by Mr. Mamo are well known in the city for above-average prices that have at times crested $5 per gallon of unleaded fuel.

In the lawsuit filed last year aiming to break up the agreements, Attorney General Irvin B. Nathan argued that the arrangement drove up the price of gas in the city by preventing competitive pricing.

But Judge Iscoe did not find the city’s arguments particularly convincing.

“The District fails to allege the potential effects of the marketing agreements to stifle competition or to include even supporting factual allegations that construct a market ripe for competition,” Judge Iscoe wrote. “The Complaint does not allege that the price of ExxonMobil’s fuel is too high at service stations, it does not allege that there is another dealer who would want to purchase motor fuel from a third-party supplier, and it does not allege that there exists a third-party supplier, which would sign contracts with retail dealers for lower prices.”

He continued, “In essence, the District complains of a lack of competition, but fails to allege that retail dealers desire such competition.”

Mr. Mamo said he was pleased with the judge’s ruling.

“With its dismissal, we can finally bring this issue to a close,” he said in a statement issued through a spokeswoman.

In addition to the Exxon stations, Mr. Mamo’s companies also supply gasoline to 34 other gas stations in the District, or 60 percent of the 107 gas stations in the city. His holdings also include a host of other stations around the D.C. area.

AAA Mid-Atlantic calculates that, as of Monday, the average cost for a gallon of unleaded gas in the District was $3.87 — well above the regional average of $3.64 a gallon.

“It’ some of the most expensive gas on the East Coast,” spokesman John B. Townsend II said, noting that the cause was the way distributors control the prices in the city.

Mr. Nathan has investigated Mr. Mamo’s company before, launching and later dropping a probe into possible antitrust violations, and didn’t sound likely to give up when faced with the latest legal hurdle.

“We are reviewing the decision and considering all avenues of relief, and we will continue to seek ways to end unlawful supply restrictions, increase competition, and bring down retail prices at the pump for consumers,” said Mr. Nathan’s spokesman, Ted Gest.

Ms. Cheh plans to introduce emergency legislation in June that would give the attorney general the authority to bring a legal claim against the company. If the bill is adopted, the hope is the attorney general could then refile the lawsuit and get a second round in court.