The District’s attorney general said Wednesday that his office is investigating the city’s largest owner of gas stations for potential antitrust violations.
Attorney General Irvin B. Nathan said that his office is looking into allegations that Capitol Petroleum Group was engaging in practices that could be leading to inflated pump prices.
“Everyone knows that gasoline prices are high,” Nathan said, “and we’re going to do everything we can to bring them down and be sure that it is a competitive market.”
Capitol Petroleum, based in Springfield, is a regional behemoth, netting $778 million in revenue in 2010, according to its Web site. 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. A February Washington City Paper profile of Mamo said the Ethiopian immigrant owned 45 gas stations in the city limits, about half the District’s total, and about one-fourth of the region’s stations.
Nathan said his investigation will probe whether Mamo’s recent expansion of his service 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 gas wholesaler represents an illegal restraint of trade.
Besides owning many stations, Mamo also owns a company, DAG Petroleum, that resells gasoline from refiners to individual service stations — a “jobber,” in industry parlance. Nathan’s investigation comes about four years after the D.C. Council repealed a law it had passed in 2004 that prohibited jobbers from owning individual service stations, based on competition concerns.
Lobbyists hired by Mamo led the charge to overturn the law. John L. Ray, a lawyer and former member of the D.C. Council who lobbied on Mamo’s behalf, declined to comment on the probe. But he testified in 2007 that banning wholesalers from owning stations would raise gas 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 agreed, submitting testimony suggesting that lifting the ban could lower pump prices.
But council member Mary M. Cheh (D-Ward 3), 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 operator of one District service station, who spoke on the condition of anonymity because he does not want to jeopardize his relationship with the supplier, said that under his lease with Mamo, he has no choice but to buy gas from DAG at the price it sets.
Mamo is a frequent donor to city political campaigns. According to campaign finance records, Mamo, his family members and his companies have donated more than $40,000 to D.C. candidates in the past decade — including $12,000 to former mayor Adrian M. Fenty’s reelection campaign.
The investigation was disclosed Wednesday at a news conference held by the man who beat Fenty, Vincent C. Gray (D). While Gray was council chairman, lobbyist Bruce D. Bereano, who is a close friend of Gray’s, lobbied on behalf of independent station owners in favor of keeping the ban on retail ownership by jobbers. But Bereano said he was not aware of the investigation and has not discussed the matter with Gray since the 2007 law was passed.
He, too, said he welcomed the investigation. “It’s good old John D. Rockefeller coming home,” Bereano said of Mamo, comparing him to the Standard Oil mogul, whose vertical monopoly was busted under federal antitrust laws in 1911.
Nathan declined to discuss details of the investigation but said his office will conduct interviews and issue demands for information on CPG’s business practices. Should a court find violations, he said, it could order the company to refrain from certain practices or sell some of its stations.
Mamo did not respond to several requests for comment.
In Maryland, Attorney General Douglas F. Gansler (D) said Wednesday that he is investigating what he called a “sudden and dramatic” increase in gas prices at a number of Maryland stations supplied by Gaithersburg-based Empire Petroleum Holdings. In a letter to the company’s president Wednesday, Gansler gave the gas supplier one week to turn over documents related to the purchase and sale of gasoline the company has distributed in the past month.
Gansler’s letter came in response to phone calls he said his office received from customers and gas station owners concerned about price increases of about 25 cents a gallon.
“Such a significant price increase in such a short amount of time is deeply concerning to this office,” wrote Gansler, whose office is charged with ensuring fair market competition and protecting consumers.
An attorney for Empire Petroleum — which supplies stations in 11 states, including 12 in Maryland — said the company was being unfairly targeted and that Gansler’s office does not understand its business model.
“We don’t make any price decisions. If they have an issue, they have to go to the oil companies,” said Travis Booth, general counsel for Empire.