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June 2010    Download the Entire Issue (PDF) Available to the Public Vol. 25, No. 6   RSS Feed for Undercurrent Issues
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Price-Fixing Dive Shops on Catalina Island

undercover dive operator bests them

from the June, 2010 issue of Undercurrent   Subscribe Now

On small islands and remote locations, one must wonder whether dive shops collude to create a better financial deal for all parties involved, i.e,. fix prices. Well, it happened in California, as two dive shop owners on Santa Catalina island fixed the prices of their dive trips for at least four years. The Los Angeles County District Attorneys Office recently charged one of them, John W. Mello of Catalina Diver Supply, with an antitrust and unfair competition case -- using recordings made by another Catalina dive shop owner to nab him in the act.

Mello owned Catalina Diver Supply for 23 years until he sold it in 2008. But a few years before retiring, he conspired with another Catalina dive shop owner, Bob Kennedy of Scuba Luv, to hike up prices of their dive trips. Then the two tried to coerce the third Catalina dive shop owner, Rob Moore of Dive Catalina, to join them. In February 2008, Kennedy approached Moore with proposed prices for dive trips. He spoke openly about price fixing, saying that if Moore raised his prices, Kennedy and Mello would charge that same price.

Kennedy and Mello were the only suppliers of compressed air on Catalina, so when Moore refused to go along, the two other men closed ranks and tried to shut his business down by refusing to supply him with air. On the morning of March 18, 2008, Moore visited Kennedys Scuba Luv to get tanks filled. One of the employees told him: Bob says no more air for you. Later that day, Moore went to Mellos Catalina Diver Supply to fill his tanks there. Same situation. An employee told him: Sorry, its John [Mello]. No more air for you.

Moore then complained to the Los Angeles D.A.s office. Their attorneys turned Moore into their agent, setting him up with a recording device to tape statements by Mello or Kennedy about their pricefixing scheme. On March 20, Moore met with Mello to ask why he was being frozen out. Mello said, I wanted to go up on prices and if anything, I thought you wanted to . . . We gotta work together or it cant work at all. Bob [Kennedy] will go up on prices. He wants to work together. And I said the same thing.

When Moore asked why Mello was refusing him air, Mello said, I guess Bob said he didnt want to fill them, so I wont fill them either . . . Bob came up to me before and said, If you dont sell air, I wont. So I just said OK. Thats how it came about.

After gathering evidence that Mello and Kennedy had been fixing prices for at least three years, the D.A. charged Mello, and Kennedy as his co-conspirant, with unlawful competition. Kathleen Tuttle, deputy-incharge of the D.A. offices antitrust section, called it a textbook example of price fixing.

The case was settled out of court in February. Without admitting liability, Mello agreed to pay a total of $11,000: 4,000 in civil penalties, $5,000 in legal and investigative costs, and $2,000 in restitution to Ron Moore. Also, Mello agreed not to engage in any more price-fixing activity or unfair competition in the dive business, but hes not prohibited from working in it. As for Kennedy, his co-conspirator, he is still listed ons- Scuba Luvs website as the owner.

- - Vanessa Richardson

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