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Legislative Memo

BILL:

A.6942-B

Support

SUBJECT:

Oil Producers/Refiners Retail Divorcement Legislation

 

DATE:

June 18, 2001

 

The Business Council of New York state, a broad-based statewide membership organization of almost 4,000 companies, chamber of commerce and trade organization has reviewed the aforementioned legislation and opposes its enactment.

This legislation would amend the New York State General Business Law and limit the rights of petroleum refiners and producers to directly operate service stations that they own and have constructed. Under the bill, a petroleum refiner seeking to locate a company-operated service station would be required to gain the written consent of any franchised petroleum operation within 2.5 miles of the proposed site. A.6942 would give franchise dealers the ability to oppose the location of future company-operated stations and limit the number of stations managed and owned by petroleum producers.

Consumers will be those most disadvantaged if this legislation is approved. The price of gasoline is determined, in part, by the amount of choice and access to fuel providers that consumers have available to them. Service stations owned and managed by petroleum producers provide alternatives to products and prices offered by franchised service stations. This legislation would illogically restrict that type of consumer choice and impose limits on a free market system while threatening a significant catalyst for competitive, lower costs.

Studies, including a report by the Maryland State Department of Fiscal Services, have concluded that prices typically rise following a legislative or regulatory mandate of market divorcement as proposed in A.6942. Moreover, company owned stations provide a vehicle for the testing and introduction of new services and products into the market. Franchised service stations often cannot afford to take such risks with product testing. If the operating ability of company owned stations is restricted, the types and kinds of services available to consumers will, in turn, be limited.

Passage of this bill would circumvent the property rights and freedoms of motor fuel producers and refiners. Such a violation is troublesome, not only in this particular scenario, but also when it may appear to be precedent setting for other types of business practices and industries.

For the reasons articulated above, The Business Council must oppose this legislation and strongly urges its defeat.