The US Federal Trade Commission aggressively used its authority during 2006 to keep US retail energy markets competitive, FTC Chairwoman Deborah Platt Majoras told a US Senate subcommittee Mar. 7.
An investigation kept Chevron Corp. from acquiring most of California’s largest remaining chain of independently owned retail gasoline outlets. The oil major and USA Petroleum on Nov. 17, 2006, terminated Chevron’s planned purchase of 122 of the independent gasoline retailer’s California outlets.
“The FTC was concluding its investigation of the proposed acquisition at the time, and USA Petroleum’s president acknowledged that the parties abandoned the transaction because of resistance from the FTC,” Majoras said in written testimony submitted to the Senate Judiciary Committee’s Antitrust, Competition, and Business and Consumer Rights Subcommittee.
She said FTC also required Texas Eastern Products Pipeline Co. LLC in November to sell its interests in a natural gas liquids storage facility at Mont Belvieu, Tex., to a buyer approved by the government competition regulator as a condition of clearing EPCO Inc.’s proposed $1.1 billion acquisition of TEPPCO’s gas liquids storage business.
On Feb. 23 the commission approved the proposed divestiture to Louis Dreyfus Energy Services LP.
The commission monitors retail gasoline and diesel fuel prices in 360 cities and wholesale prices in 20 major markets across the country to determine if a law enforcement investigation is warranted, Majoras said. “If FTC staff members detect unusual price movements in an area, they research the possible causes and consult, where appropriate, with state attorneys general, state energy agencies, and the federal Energy Information Administration. If evidence of anticompetitive conduct is found, the commission will open an investigation and pursue all appropriate law enforcement action,” she added.
Majoras noted that FTC found no evidence of illegal market manipulation of gasoline prices in the months following Hurricane Katrina’s landfall in 2005 but did find 15 examples of pricing at the refining, wholesale, or retail level that fit relevant federal legislation’s definition of price gouging. “Other factors, such as regional or local market trends, however, appeared to explain these firms’ prices in nearly all cases,” she said.
FTC in December issued its second annual report on US ethanol protection and the current market, which concluded that market concentration decreased by 21-35% during 2006, Majoras said.
The study also examined possible concentration effects resulting from agreements between ethanol producers and third-party marketers and estimated market concentration, using both capacity and production data, she said.
“The study concluded that the level of concentration in ethanol production would justify a presumption that a single firm, or a small group of firms, could wield sufficient market power to set or coordinate price or output levels. The report notes, however, that staff cannot rule out the possibility that future mergers within the industry may raise competitive concerns,” Majoras said.