Safeway Being Sued For Charging Too Little For Gasoline

safe-fuel-el-dorado-01

I see the anti-dog eat dog rule is alive and well.

REDDING, Calif. — An owner of a handful of gas stations has filed suit against Safeway, claiming they sell their gasoline below cost.

James Dombrowski, the attorney representing the owner, told us that they submitted documents earlier this month to the Bay Area Judge hearing the case.
He said those documents show how Safeway’s club card discount program is selling gas below cost, which is illegal under the Unfair Practices Act.

Safeway’s club card discount program offers three cents off to holders of the Safeway Club Card. Each time you spend $100 in groceries, you get an additional ten cent discount.

Selling one item at a really low price, even at a loss, in order to attract traffic to a store so that they’ll hopefully buy other products is a common tactic in retail. It’s called a “loss leader.”

Basically, Safeway is selling gasoline at a loss (or at a very, very slim profit margin) in order to attract crowds to their store where they’ll hopefully leverage into profits through their purchase of other items. It’s a win-win all the way around. Consumers get a lower price for a product we all need and use, while Safeway gets more traffic to their stores.

Except for Safeway’s competitors who think this sort of marketing and price innovation is unfair. By which they mean, inconvenient for their bottom line.

This sort of thing is actually pretty common. Back in 2004 I wrote about a dozen or so gas stations that got fined by the State of Minnesota for failing to make a minimum of $0.08 profit on every gallon of gasoline they sold.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • mikemc1970

    Walmart does the same thing, but you don’t have to buy anything in the store. You just need a Walmart credit card (Visa/MC) or put the money for the gas on a Walmart gift card first. It doesn’t do me any good though, I have an older car and I don’t want any ethanol in it, because ethanol damages the seals.

    • http://sayanythingblog.com Rob

      I remember a while back there was news that Walmart was going to be selling gas at some of its new stores here in ND, and of course the existing gas retailers revolted. I think we actually have some sort of law that keeps Walmart from selling gas here, which is ridiculous.

      As if we need to be protected from low prices.

      • Rick Olson

        No, Rob, that is not correct.  Walmart and Sam’s Clubs for that matter, are permitted to sell gasoline at their stores in North Dakota.  There are fuel islands at the Sam’s Clubs in Bismarck, Fargo and Grand Forks.  If you are a member of Sam’s Club, you swipe your membership card at the pump, followed by your debit card, credit card, Sam’s Club gift card or Walmart gift card (cash and checks are not accepted at the fuel islands) and get a 5 cents per gallon discount. 

        In fact, if memory serves, the North Dakota Legislature had to pass a law which allows gas stations to sell gas for less than cost in order to accommodate Walmart, Sam’s Club, etc.  Accordingly, there is no law in North Dakota that prevents Walmart from selling gasoline.  Actually, at Walmarts that have gas stations, the stations are actually operated by a third party company.  Murphy Oil Corp.   http://www.murphyoilcorp.com/  While at the Sam’s Clubs, the gasoline pumps are operated by Sam’s Club.

        The new Costco that is coming to West Fargo will also be selling gasoline.

        • http://sayanythingblog.com Rob

          Yeah, I don’t remember the actual issue, but I thought there was a distinction Sam’s Club and Walmart.

          I thought Sam’s Club was ok, because it was a membership-based organization, but Walmart wasn’t because no membership was required.

          But i could be getting it all wrong.

          • ellinas1

            You are unable to admit error.
            Why is that?

          • Econwarrior

            You are unable to stop lying.  Why is that?

          • ellinas1

            Because you are a lying bitch, bitch.

          • Econwarrior

            When you lie, I smack you with the truth, and you can’t stop lying.  Why is that?

          • ellinas1

            Because the only thing you smack with your lips is my dick, bitch.
            But you knew that, and just wanted to hear it again.

          • Neiman

            You denied saying things like this under another thread, so what I want to know is this: 1. Why are YOU so preoccupied with receiving oral sex from 108? You mention it a lot and have even invited others, why are you so preoccupied with gay sex? (2) You pretend some Christianity and while occasionally using such language does not disqualify one from being a Christian, do you think this is a good Christian image?

          • Econwarrior

            Like all liberals, he finds the truth to be offensive, and can only respond by spewing homosexual filth.  It’s a defense mechanism for a compulsive liar.

          • Bat One

            Why are YOU so preoccupied with receiving oral sex from 108? 

            Wishful thinking!

          • Spartacus

             The Greeks have a long and rich history as sailors spending a lot of time at sea without female companionship, is anyone really surprised with his obsession?

          • ellinas1

            Heh!

          • ellinas1

            Where do you see an invitation?
            Where oh, where is that damn invitation? Invitation here?
            Invitation there? My God!  No invitation anywhere.

          • Econwarrior

            When smacked with the truth, the homosexual liar responds by vomiting up the contents of its deranged mind.
            Why is that?

  • Bat One

    Kroger has a similar program tied to their Kroger Club Card.  The gasoline hook-up is with Shell, and independent Shell retailers are legally obliged to honor the agreement, which costs them roughly $.08 for every $.10 in discount.  Neither Kroger nor Shell reimburses the retailers.  So I would assume the retailer who is suing is one forced to be involved via a similar arrangement with Safeway.

    OTOH, for those who take advantage of this sort of deal in the Obama-war-on-hydrocarbons economy, go to the store and buy a store gift card for $100.  Then use that gift card to pay for your own groceries.  You’ll wind up with $200 of credit toward your next gasoline purchase discount.

    • http://sayanythingblog.com Rob

      Kroger has a similar program tied to their Kroger Club Card. The gasoline hook-up is with Shell, and independent Shell retailers are legally obliged to honor the agreement, which costs them roughly $.08 for every $.10 in discount. Neither Kroger nor Shell reimburses the retailers. So I would assume the retailer who is suing is one forced to be involved via a similar arrangement with Safeway.

      If that’s the case, then it’s an issue to be settled between Kroger’s, Shell and Shell’s other customers. There shouldn’t be a law requiring minimum profit margin.

      • Bat One

        No indeed there shouldn’t.  But when bureaucrats take to shutting down kids’ lemonade stands, what can you expect.  Liberals simply despise the idea that anything, including commerce, can take place without their supervision.

  • Ndconservative2011

    During the 2005 ND Legislative session a bill was introduced which would have set a “minimum” amount of markup for fuel sold in North Dakota.  The bill was called the Walmart bill.  Galoline retailers were worried that Walmart would undercut them by selling fuel at a lower than wholesale price and put them out of business.  It was soundly defeated as legislators felt that they were not in the business to set profits.
    OOPS – wait a second ! !  Drugstores are protected in North Dakota.  Walmart and other big box stores cannot compete with the local drug stores being all drug stores must have a 51% or higher ownership by the store operator.
    I guess the legislature does pick and choose winners and losers in North Dakota.

    • Rick Olson

      Exactly.  The legislators know how to pick their battles.  You all know where I stand with the protectionism that drugstores in North Dakota have. 

  • http://Sayanythingblog.com The Whistler

    If you can’t compete, Boo, effing who! 

    Why should the consumers pay extra so someone doesn’t have to match the competition?  

    • http://sayanythingblog.com Rob

      Exactly.

  • WOOF

    Capitalism hates competition, in its DNA.
    Once completion is eliminated by selling below cost
    the monopolist / oligarchs take advantage of
    choice less consumers.

    • 1369

      Almost as bad as the commies that were (?) running eastern europe.  People standing in line for bread, clothing etc. and settling for what was there, not what they needed or wanted.

    • http://sayanythingblog.com Rob

      So capitalism is a person now?

      Individual business owners may hate competition, but capitalism thrives on it.

      • WOOF

        More like a virus.
        If you don’t control it you’ll become sick and weak.

        • mikemc1970

          Spoken like a true Marxist.

          • Econwarrior

            That sort of delusion is why Marxism always fails.  Shortages and rationing are the result of marxist economic policies.

          • WOOF

            While Marxist mismanagement may creates shortages,  Capitalist often restrict supply and artificially drive up price.

            A diamond is forever.

          • http://sayanythingblog.com Rob

            In a truly free market, you cannot restrict supply to drive up prices, because your competitor will undersell you.

          • Econwarrior

            More precisely, the increased price will attract more suppliers to the increased profits, thus increasing supply and restoring balance between supply and demand.

          • two_amber_lamps

             http://cdnimg.visualizeus.com/thumbs/5f/db/economy,fisters,fisting,america,gulagosphere,obama,progressive-5fdba710d41715ebe012dcbc4c6c2fbd_h.jpg

          • Econwarrior

            Wrong again; it’s the left wingers who always attempt to control supply.  It’s the fascist way.

        • Bat One

          Capitalism is “like a virus” ???

    • http://Sayanythingblog.com The Whistler

      Admittedly there are too many business people that look to the government to make it easier for them to do business. 

      The big problem I have is that too often the government gives it to them.  And more often than not it’s the liberals that are the ones giving away the favors to the detriment of the rest of us.  Not always, there are too many Republicans in politics that do as well. 

      • http://sayanythingblog.com Rob

        Admittedly there are too many business people that look to the government to make it easier for them to do business.

        The big problem I have is that too often the government gives it to them.

        That’s it exactly. Big business corruption is almost always enabled by cronyism with big government. They go hand-in-hand. The left thinks they’re fighting big business with big government and they’re not.

        • http://Sayanythingblog.com The Whistler

           What always gets me is how so many people blame the person getting favors from the government without any blame going on the politician or government officials.  The politicians have a public trust, the private party is understandably going to only consider their self interest. 

          Almost all of the problem is on the public side. 

    • Econwarrior

      More lies from the economic ignoramus.  The free enterprise system thrives on competition; it’s  the punk obama’s fascism that hates competition.

  • mikemc1970

    There is a company around here called Quick Trip (it’s a regional chain I believe) that sells gas for a few cents higher than most other stations in town and they are always busy. Why? because what they are selling is actually convenience. They always have 10 to 12 pump islands. There is never any driving around and around looking for an open pump. They have about 20 different kinds of fountain drinks, made fresh daily sandwiches as well as other fresh food, and a large selection of coffees. You never have to wait in line more than 30 or 40 seconds, because they always have enough people on hand to run the registers. The bathrooms are always clean, you never need a key to open them, because they are on the inside of the store, and they always have plenty of paper towels. You don’t need the cheapest gas to make a successful gas station, you just need a successful business model, that gets people in the door. Strong competition isn’t always about having the cheapest prices.

  • Geoff

    This amazes me. I hear bitching when too much profits r made and now we hear bitching for not making enough profits. It’s their business they should be able to sell gas at $20/gallon or $1/gallon.

  • moors710

    The convenience store is the profit center for most gas stations. Gas is nearly a break even proposition for anybody (as bulk goods they have little profit).  Selling at a loss is a little hard for the smaller stores, but it is not unknown.

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