Speedway not allowed to sell gas for super-cheap, NJ courts say
WOODBRIDGE — Speedway’s effort to sell gasoline at super-low prices hit another roadblock this week when state judges again rejected the retail giant’s constitutional challenge of New Jersey’s price controls.
Speedway was fined in 2016 by the Middlesex County Department of Weights and Measures when its Hopelawn gas station in Woodbridge sold gasoline below cost.
Since 1938, state law has required gas retailers to sell at a price that at least matches the retailer’s cost of buying the gasoline plus the gas station’s overhead expenses, such as rent and insurance. The same law also mandates that the per-gallon price is posted on each pump, that prices include taxes, and that companies cannot offer rebates or concessions on the posted price.
Gasoline price wars used to be common in New Jersey. Cut-throat price drops can be good for consumers — until the low prices put the weakest merchants out of business, allowing the remaining stores, no longer facing competition, to jack up prices.
In an appellate decision on Wednesday, a two-judge panel rejected Speedway’s arguments that the law violated the company’s civil rights and due process under the state and federal constitutions and law.
The judges said the gasoline price controls are a “necessary restraint on the market, and is in the public interest,” much in the same way that government regulates the price of milk.
“The Legislature determined that selling gasoline at below cost would cause disorder in the marketplace, particularly as to smaller retailers whose survival depends upon operating at a profit, and who cannot sustain an extended price war,” the judges said.
The judges also disagreed that the law’s reference to “net costs” and “expenses” is too vague, saying that the words are part of “common usage and understanding, particularly for a sophisticated business entity such as Speedway.”
Lawmakers amended the act in 1953 a year after the state Gasoline Study Commission found that fuel “has become a necessity in modern living” and recognized “the difficult and important position of the small businessman in an industry dominated by giants.”
The commission endorsed keeping the law to protect the public welfare against unfair business practices and recommended making it a misdemeanor for distributors to offer retailers rebates on gasoline.
The commission noted that company-owned-and-operated gas stations can “exert considerable influences on the posted retail prices” and sell gas at a loss “in sharp contrast to the individual dealer who is compelled to carry on his business at a profit in order to survive.”
Ohio-based Speedway is the nation’s second-largest owned-and-operated chain of gas stations with more than 2,700 locations, including 70 in New Jersey. It is owned by Ohio-based Marathon Petroleum, which produces and refines oil.
A spokeswoman for Marathon did not immediately return a request for comment Thursday afternoon.
In 2008, lawmakers began trying to chip away at the law but have been unsuccessful. Some of these bills would have made selling gas below cost illegal only if it were done with the intent to harm competition.
The New Jersey Gasoline Convenience Store & Automotive Association, a trade group representing gas stations, has fought such efforts and opposed the Speedway lawsuit against the state.
On Thursday, Speedway gas stations listed prices in the state ranging from $2.79 to $2.89 a gallon. The cheapest price in the state, according to New Jersey 101.5’s list, was $2.49 a gallon at Petro Hub in South Plainfield.
EDITOR'S NOTE: An earlier version of this article should have said that Marathon Petroleum is headquartered in Ohio.
Sergio Bichao is deputy digital editor at New Jersey 101.5. Send him news tips: Call 609-359-5348 or email email@example.com.