Predatory pricing? Raps vs oil execs sought

MANILA, Philippines - In what could be a test case for its strengthened powers to prosecute cases of oil cartelization, the Department of Justice (DOJ) has been asked to indict officials of oil giant Chevron Philippines Inc., producers of Caltex petroleum products, for alleged predatory pricing through its service stations in Metro Manila.

In a petition filed with the office of Secretary Leila de Lima last week, the Petroleum Distributors and Services Corp. (PDSC) accused Chevron of creating and operating its own service stations in the metropolis called Caltex Coco supposedly to manipulate and control pump prices of fuel products that tended to aggravate the domestic oil price crisis.

PDSC, a dealer of Caltex products for over 20 years, has been engaged in retailing fuel products for almost 50 years.

The complaint filed by PDSC vice president Robert Conrad Limcaco is the first such case lodged by a local gas dealer against a foreign oil giant. He said he hopes their case would lead to other cases against Chevron and other oil giants engaged in similar business malpractices.

Among those charged were former directors and officers of Chevron and Chevron Services: Timothy Leveille, Rebecca Alivio, Ramon Ortiz, Frumencio Deguito, Aner Anda, Randall Johnson, Steven Mulvaney, Armando Diaz, Carlito Lopez, Leo Vasco Dagamac, Glenn Lynch, Husain Shibly Latiff and Carol Bautista.

Price scheme

The PDSC alleged that Chevron has created a scheme that enabled it to substantially influence the drop or increase of fuel prices through its Coco stations by having the ability to set the prices of fuel on both ends, supply and retail.

Limcaco insisted that with Chevron acting as supplier, Chevron Services acting as operator of gasoline stations and retailer of Caltex fuel and lubricants, Chevron is placed in a position that effectively enabled it to control the street prices of fuel products, and unfairly compete with its own local Caltex dealers.

The PDSC said that since Chevron basically controlled the street prices of the Coco stations, it can 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.

The complaint was already dismissed by the Makati City prosecutor's office, which prompted PDSC to elevate the case to the DOJ through a petition for review.

The PDSC questioned the local fiscal's finding of lack of proof showing prices were actually controlled, arguing that it was enough to prove that there was an apparent arrangement and that steps were taken to further the purpose to prosecute the respondents under the law.

Paper trail?

Records show that Chevron was previously limited to supplying fuel products to its local dealers for sale to the buying public.

In 2003, however, it organized Chevron Services Philippines Inc. and amended its corporate papers so as to include the authority to engage in retail and operate Caltex Coco. These Caltex service stations are situated in the same areas where there are also existing Caltex stations, but are operated by local dealers owned by Filipinos, such as PDSC.

In the papers submitted to the Securities and Exchange Commission (SEC), it was discovered by that from 2003 to 2007, Chevron and Chevron Services are owned by the same foreign stockholders, and are run by the same individual directors and officers.

De Lima had announced earlier the DOJ would prioritize cases of alleged predatory pricing in businesses with the creation of its new Office for Competition through Executive Order 45 signed by President Aquino in 2011.