D.C. AG Investigating Capitol

Published in CSP Daily News

Mamo's gas station network under scrutiny for alleged antitrust violations

WASHINGTON -- The attorney general of the District of Columbia said Wednesday that his office is investigating the city's largest owner of gas stations for potential antitrust violations, reported The Washington Post.

Irvin B. Nathan said that his office is looking into allegations that Capitol Petroleum Group Inc. was engaging in practices that could be leading to inflated pump prices. The AG's office confirmed the investigation for CSP Daily News.

"Everyone knows that gasoline prices are high," Nathan said, "and we're going to do everything we [image-nocss] can to bring them down and be sure that it is a competitive market."Mamo issued the following statement, obtained by the Post, a day after Nathan disclosed the investigation:

"The high price of gasoline is of great concern to everyone; 25 years ago as a struggling young worker, I saw an opportunity to be an entrepreneur and took significant financial risks to invest in a growing market. I started CPG in D.C. and have been servicing D.C. motorists for more than two decades. And while I've been successful and now own several dozen gas stations in the area, I simply own them--I do not operate them and I do not set the price of gas at the pump."

He added, "Nearly 90% of the sites I own are managed by individual franchisees. As a distributor, I purchase gasoline from major refiners which I then deliver and sell to the local operators. CPG and other distributors are prohibited by law from determining the prices at which their service station operators sell gas to the public. My mar-up has decreased over the past year and is not the cause of the high pump prices which I simply don't control and which are set by each individual operator. In fact, the city makes more money on each gallon of gas than CPG does. The unfortunate reality is that the price of gas is inflated by the world market and multiple other factors, primarily crude oil costs, taxes, refining costs, and distribution and marketing. There is a gross misunderstanding about the difference between a gas station owner and a gas station operator, and about how a gallon of gasoline is actually priced.

He concluded, "I hope with education on the real issues at hand, we can put this matter to rest."Capitol Petroleum, based in Springfield, Va., is a regional behemoth, netting $778 million in revenue in 2010. It "owns, operates or supplies" 164 stations in the D.C. area and 71 stations in New York City.

Its primary owner, Eyob "Joe" Mamo, has built the company over nearly 25 years, buying up dozens of service stations in the region--particularly in the past three years. He owns 45 gas stations in the city limits, about half the District's total, and about one-fourth of the region's stations, according to the report.

Nathan said his investigation will probe whether Mamo's recent expansion of his station holdings represents an illegal monopoly under the District's local antitrust law, which is modeled on the federal statute. The investigation might also explore whether Mamo's dual role as a station owner and gasoline wholesaler represents an illegal restraint of trade.

Besides owning many stations, Mamo also owns a company, DAG Petroleum, a jobbership that resells gasoline from refiners to individual service stations.

Nathan's investigation comes about four years after the D.C. Council repealed a law it had passed in 2004 that prohibited jobbers from owning individual service stations, based on competition concerns, said the report.

Lobbyists hired by Mamo led the charge to overturn the law, it added. John L. Ray, a lawyer and former member of the D.C. Council who lobbied on Mamo's behalf, declined to comment to the newspaper on the probe. But he testified in 2007 that banning wholesalers from owning stations would raise gasoline prices, not lower them.

"Will it reduce the cost of gasoline to the driving public? Will it result in gas station operators providing better service to the driving public?" Ray asked at a hearing. "The available evidence clearly supports the opposite."

The Federal Trade Commission (FTC) agreed, submitting testimony suggesting that lifting the ban could lower pump prices. But council member Mary M. Cheh (D), who supported the repeal, said she "made a mistake. It looks like, with his control of however many stations [Mamo] has, that there may be some anti-competitive practices being engaged in," she said. "I welcome the investigation to see if that's the case."

Cheh said she is planning to introduce legislation to restore the prohibition on allowing jobbers to also own retail outlets, the report said.

Click hereto read previous CSP Daily News coverage of Mamo.