Gas Too Cheap? So Says a California Lawsuit

Six gas station owner/operators say Safeway is selling gasoline below cost to customers, which is illegal in California.

In a suit filed in Alameda County Court, the service station owners say that the Safeway store at 4495 First St., Livermore, offers a three-cent-per-gallon discount on gasoline and diesel fuel to its customers.

All the customer needs to get the discount is a Safeway Club Card, which is “available to anyone for the asking with no pre-qualifications,” according to the suit.

To make matters even worse – from the service stations' point of view – Safeway customers can qualify for an additional discount of as much as 10 cents per gallon by showing in-store receipts of food purchases that exceed given amounts.

The pump jockeys say they routinely survey what other gas stations are charging and that the Safeway store “has been the low price leader in the survey area by wide margins over other stations.”

The plaintiffs charge that Safeway is selling gas at less than its wholesale cost and that this causes sales at their stations to “decrease dramatically.” Sales at the independent stations' convenience stores are also affected, the suit charges.

It may come as news to consumers that it's illegal for a business to sell products too cheaply but the California Business & Professions Code provides that it “is unlawful for any person engaged in business … to sell any … product at less than the cost thereof to such vendor … for the purpose of injuring competitors or destroying competition.”

Not only that, but it is also unlawful in California for a merchant “to sell or use any product as a loss leader,” meaning that the retailer willingly loses money on a certain product but does so in order to attract more customers and sell them additional products.

The service station owners say their lost fuel sales amount to least $100,000. Their suit asks for an injunction to prohibit Safeway from helping consumers save money on gasoline. It also asks for treble damages, legal fees and other customary damage awards.