State investigates gas price war

Minneapolis Star Tribune/April 9, 2005

Anoka, Minn. – The state Commerce Department has 13 active investigations involving stations allegedly selling gasoline for less than Minnesota’s legal minimum price, spokesman Bruce Gordon said.

Since 2001, Minnesota has required that gasoline prices be set each day based on a formula that includes wholesale price, fees and taxes. Violators face civil penalties and may appeal to an administrative law judge.

The intent of the law was to prevent station owners from selling gas below cost and prevent large operators from squeezing smaller operators out of business, Gordon said.

However, he added: “Our experience is that there are some David-versus-Goliath complaints, but more David-versus-David.”

One of the investigations involves the Dr. R.C. Samanta Roy Institute of Science and Technology of Shawano, Wis., whose subsidiary Midwest Oil of Minnesota owns gas stations in Anoka, Albert Lea and St. Paul.

On Thursday, the company’s newly opened Exxon station at U.S. 10 and Cutters Grove Avenue in Anoka, which boasted “This Is My Station” on the marquee, advertised regular unleaded gas for $2.11. Minnesota’s legal minimum price that day was $2.05. However, the station also posted a sign saying, “ALL GAS DISCOUNT 10 CENTS PER GALLON,” in effect putting its price 4 cents below the legal minimum.

By Friday, prices at several stations in the area had fallen a dime or more from Thursday’s prices. The Exxon station’s posted price was $2.01.

“How do you possibly give that much money away?” asked Sid Haugtvedt, whose nearby Phillips 66 station advertised regular unleaded for $2.13 a gallon Thursday and $2.01 per gallon Friday.

A Superamerica also matched the $2.01 price, though without a discount. Next door, a Mobil was selling unleaded regular for $1.94, which owner Tom Wright said put him at the legal minimum but would have been 3 cents above the Exxon price after a 10-cent discount. Wright said he could only afford to sell at that price for three or four hours.

For the consumer, a 3-cents-per gallon difference on a 20-gallon purchase amounts to 60 cents.

Rebekah Brown, a Hastings lawyer who represents Midwest Oil, which she said is owned by Roy’s institute, said she had been assured by state officials that the station’s discounted price was legal and that neighboring stations were using similar pricing tactics to win business.

Wright and other station owners in Anoka said the Exxon station has been driving prices below the market rate for weeks.

Haugtvedt, who bought his station and car repair business a year ago, estimated that his sales are down about 30 percent. He said the three-month price war had hurt gas stations from Coon Rapids to Elk River.

He said he can’t figure out how Roy’s stations are making it or what their strategy is. “Are they trying to run people out of business?” he said.

Roy, president of the Science and Technology Institute, changed his name a few years ago. He was better known to Minnesotans in the 1970s and 1980s as Brother Rama Behera, a former Hindu who preached a unique fusion of Christianity and Judaism that rejects mainstream religion. The group has been variously known as Followers of the Lord Jesus or Disciples of the Lord Jesus.

At the time, newspapers widely reported the efforts of some parents to deprogram children who they claimed had been indoctrinated. In recent years, the Star Tribune of Minneapolis reports that several former members of the group have complained of mistreatment.

More recently, exasperated competitors in Wisconsin sued Roy’s institute, alleging that a gas station owned by the group in Shawano illegally undercut Wisconsin’s minimum price.

A Shawano County circuit judge found for Roy’s competitors in December. The decision is being appealed.

“Since then they have been following the market more closely, but they’re always on the edge,” said Frank Slattery, an Oshkosh attorney who handled the case for the station owners.