Pat Roxborough, Staff ReporterWESTERN BUREAU -
COMPETITION FOR market share in the petroleum industry has made the Jamaican Gasolene Retailers Association (JGRA) more anxious than ever for legislation to protect their members' interests.
But the wait has proven too long for some individual retailers who have had to give up their businesses.
"Since this year we have about 15 members that have left the business," said JGRA President Lloyd Brown last week. "At least two have indicated their intention to give up because they simply feel they cannot make it. Another three have been relegated to glorified employees of the multinational oil marketing companies, in that they are paid a commission for selling fuels owned by the companies."
If passed, the legislation would stop multinational marketing companies like Shell W.I. Limited from operating service stations in direct competition with its local dealers. The legislation would also place restrictions on the amount by which the marketing companies could raise the rent it charges its tenants and force the companies to offer longer contracts of tenure to their tenants.
"We need this legislation immediately, for any one of these multinationals can put the local dealers out of business if they want to," Mr. Brown said. "The petroleum industry is pivotal to the economy and as such the need to monitor it is critical. This is done in other countries like the United States, Australia and England."
But Nicholas Shorthose, chairman of Shell W.I., one of the three multinational oil marketing companies operating in Jamaica, said restrictive legislation would reduce choice and competition.
"Since the Government lifted controls in the petroleum industry, the number of participants in Jamaica's retail sector has moved from four to nine. The deregulation of the market has led to a greater variety in products and services as well as a greater choice in location and price for the customer," he said.
In a more detailed response to the JGRA's concerns, Mr. Shorthose argued that the fact that Shell owns more than 50 stations out of a network of 67 sites, means that the company maintains the property, buildings and equipment including the cost of repairs, insurance and taxes.
"In addition, the company provides training, market research, sales promotion and advertising support. It extends to dealers the opportunity to operate these sites which represents a very lucrative offer. The dealer makes no capital investment in the business," he argued.
But Mr. Brown said the dealers were not coping well.
"They are suffering I know that they are caught between a rock and a hard place in that volumes are declining with the advent of the marketing companies operating both as wholesaler and retailer," he said. "That goes for both foreign as well as local companies."
He also expressed concern that the marketing companies could muscle the local dealers out of business and then get together and cartelise the industry. However, Mr. Shorthose said that was not possible.
"The market forces wouldn't allow us to and even if we had an imperfect market, we still have to adhere to international laws against price-fixing as well as the laws of Fair Trading Commission (FTC)," he said.
Mr. Brown said, however, that the issue is much more complicated than that.
"The existing FTC does not address the crucial concerns. We proved that years ago when six dealers were put out of business and the Fair Trading Commission proved inadequate," he explained. "In fact, it was Geraldine Foster, the then executive director of the Fair Trading Commission, that pointed out the deficiencies in the local law and began to educate us on the legislative framework that existed in other countries."
