Major oil firm accused of price manipulation in Philippines

A family-owned Filipino company accused major oil firm Chevron Philippines, Inc., of conspiring with its sister company to manipulate and control pump prices.
Petroleum Distributors and Services Corporation (PDSC), a retailer of fuel products for almost 50 years and also a Caltex dealer for more than 20 years, lodged a criminal suit against Chevron with the Philippine Department of Justice (DOJ).
Named respondents in the case were former directors and officers of Chevron and Chevron Services.
In a 20-page petition, PDSC wanted Chevron to be criminally held liable for allegedly creating and operating its own company-owned Caltex service stations called COCOs to engage in the retail business in Metro Manila.
The case, filed by PDSC Vice-President Robert Conrad Limcaco, is the first such case lodged by a local dealer against an oil company.
In 2003, Chevron organized another company, Chevron Services Philippines, Inc. (Chevron Services), and amended its corporate papers to include the authority to engage in retail and operate Caltex COCOs.
These Caltex service stations are located in the same areas where there are also existing Caltex stations that are operated by local dealers owned by Filipinos, such as PDSC.
In the papers submitted to the Securities and Exchange Commission (SEC), it was revealed that from 2003 to 2007, Chevron and Chevron Services were owned by the same foreign stockholders and run by the same individual directors and officers.
PDSC alleged that by having the ability to set the prices of fuel on the wholesale and retail end, Chevron created a scheme that enabled it to substantially influence the drop or increase of fuel prices through its COCOs.
Chevron allegedly prevented and restrained the course of free competition by giving preferential treatment to its COCOs in terms of pricing, to the detriment of local Caltex dealers, whose profit depends entirely on the price of fuel products supplied by Chevron.
At the same time, PDSC also alleged that since Chevron basically controlled the street prices of the COCOs, it could easily drop or increase the prices in one area, which local dealers, especially Caltex dealers, would be obligated to follow because Chevron does not allow its local dealers to determine its own pricing levels.
By creating and operating the COCOs, PDSC argued that Chevron’s officers and directors committed a violation of Article 186 of the Revised Penal Code, which prohibits monopolies and combinations in restraint of trade.
In the DOJ petition, PDSC contended that with Chevron acting as supplier and Chevron Services acting as the operator of gasoline stations and retailer of Caltex fuel and lubricants, Chevron was in a position to control the street prices of fuel products and unfairly compete with its own local Caltex dealers, to the disadvantage and detriment of consumers.
The PDSC petition emphasized that the law provides a higher penalty if the conspiracy to control prices affects any, “food substance, motor fuel or lubricants, or other articles of prime necessity.”
The petition also pointed out that the case against Chevron should be compared to a prior case involving John T. Gokongwei, in which the Supreme Court decided that the material consideration in determining the existence of monopolies and combinations in restraint of trade is, “not that prices are raised and competition actually excluded, but that power exists to raise prices or exclude competition when desired.”
(June 24, 2013)