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GetGo rivals cry foul over gas discounts

| Sunday, March 13, 2005

Anissa Johnson's first visit to a GetGo gas station convinced her to continue buying groceries from Giant Eagle.

That's because for every $50 Johnson spends at a Giant Eagle supermarket, she gets a 10-cent-per-gallon discount at a GetGo station.

"Every little bit counts," said Johnson, of Fawn, as she filled her tank recently at a GetGo station in New Kensington.

Many consumers are embracing the Pittsburgh-based grocery chain's move into discounted gas -- especially when prices are hovering around $2 a gallon. But some of GetGo's competitors contend that Giant Eagle may be illegally selling its fuel below cost.

The Petroleum Retailers and Auto Repair Association of Pittsburgh contends that the grocery chain is violating the Unfair Sales Act, a 1941 state law that prohibits selling merchandise "at cost or less than cost in order to attract patronage." The 350-member trade group wants to meet this week with state Attorney General Tom Corbett's office to discuss the issue.

"They're killing us. It's unbelievable," said Nancy Maricondi, the group's executive director. "Our members only work on a 5-cent margin at best. There's no way they can compete. If you're by a GetGo, you don't have a chance."

Giant Eagle launched its cross-promotion of grocery stores and gas pumps in July 2002, and there now are 42 GetGo stations adjacent to supermarkets and 21 stand-alone sites in Pennsylvania and Ohio. The GetGo brand is owned by Crossroads Convenience LLC, a joint venture of Giant Eagle and Guttman Enterprises, a subsidiary of Guttman Oil Co., of Belle Vernon.

Giant Eagle argues it's not selling gas below cost, only rewarding customers for their loyalty.

"GetGo is not offering the discount to any individuals other than those who have met all the purchase requirements," spokesman Brian Frey said.

Maricondi said GetGo's discounts threaten to put some of the petroleum group's members out of business. She knows the trade group's challenge will be unpopular.

"The public won't like it because they like the free gasoline," she said.

The Unfair Sales Act is typical of laws enacted in the mid-1930s and early '40s designed to protect small merchants from larger rivals, said Peter Gunst, of Baltimore, legal counsel for the Service Station Dealers of America, which is advising the petroleum group.

Giant Eagle could be "forced to stop what they're doing" if state prosecutors determine the supermarket chain violated the law, Gunst said.

Spokeswoman Barb Petito said the attorney general's office would review the petroleum group's complaints. Petito didn't know of any similar previous complaints.

"The only other gasoline issue that we have dealt with came after 9/11, when we looked into alleged price gouging," she said.

Rising prices have many consumers looking harder these days for the best price. Last week, the average price nationwide of regular-grade unleaded rose 7.1 cents to just under $2 a gallon, a U.S. Energy Department survey said.

Independent stations and gas marketers say they're trying to stay competitive.

"We have to sell gasoline practically for nothing, just to keep our volume," said Don Bowers, vice president and general manager of Mon Valley Petroleum in McKeesport.

Mon Valley operates 19 Buy n' Fly fueling stations and convenience stores in Western Pennsylvania and supplies fuel to 30 independent station owners.

Bowers estimates that the gas rebates cost Giant Eagle about $2 for every $50 a shopper spends on groceries.

"People don't understand that they're charging you more when you're inside the store," he said.

Rich Steckroth, manager of new business development for Sheetz Inc., of Altoona, called Giant Eagle a good competitor, "but we have a strong gasoline and food model and a strong customer base."

"They have fuel perks that appeal to a strong female demographic that plays off their grocery store volume," he said. "Our demographic is more male than female."

Sheetz has taken steps to enhance convenience, with a PayPass system that allows customers to pay bills less than $25 quickly by using a credit or debit card on a special terminal. Each of the 309 stores also is equipped to take cash payments at the pump.

Dan Pastor, vice president of fuels and convenience for Giant Eagle, said the idea of the GetGo joint venture was to diversify and move Giant Eagle into another business.

"We looked at this as an opportunity to leverage convenience and shopping destination. Customers have a need for both," he said.

The current GetGo program allows customers to redeem their discounts by June 30. Pastor said Giant Eagle likely will keep renewing the offers "as long as customers see value."

"We have aggressive development plans," he said. In all, 72 gas stations so far are under GetGo management -- 63 with the GetGo name, two acquired Shell gas stations and seven Crossroads convenience stores.

Giant Eagle may continue to acquire stations to fill in the gaps where the company doesn't have a GetGo close to a supermarket, Pastor said.

Giant Eagle operates a total of 219 stores in Pennsylvania, Ohio, West Virginia and Maryland, including 81 independently owned stores. The company employs about 38,000 people, including about 1,000 in the GetGo operation.

GetGo has its faults, some consumers say.

During a recent stop at a GetGo in Hempfield, customer Karyn Baughman, of North Huntingdon, said the discounts don't make up for higher prices in the grocery store.

"The only time I shop there is when they have a great special. I will not do my weekly shopping there," she said.

The Tribune-Review compared the prices of 20 common grocery items at Giant Eagle stores and two competing chains and found that Giant Eagle's total bill placed in the middle.

Still, Arch Hill, of Murrysville, is happy to have a GetGo station nearby in Monroeville.

"It's good because it saves me a little money," he said, "but I admit, I do shop at Giant Eagle and Shop 'n Save."

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