Senators call for antitrust probe of oil companies

Source: Amanda Peterka, E&E reporter • Posted: Thursday, August 22, 2013

A bipartisan pair of senators is calling on federal regulators to launch an investigation into whether oil companies are engaging in anti-competitive practices aimed at blocking more ethanol from entering the market.

In a letter to the U.S. attorney general and the Federal Trade Commission yesterday, Sens. Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa) said they believe the oil companies’ activities may be in violation of the nation’s antitrust laws. They alleged that oil companies were preventing gas stations from selling gasoline containing 15 percent ethanol, as opposed to the 10 percent blend that’s historically been sold at most gas stations.

“We have heard allegations that the oil industry is mandating retailers to carry and sell premium gasoline, thereby blocking the use of the current retail infrastructure to sell renewable fuels,” the senators wrote in a letter addressed to U.S. Attorney General Eric Holder and FTC Chairwoman Edith Ramirez. “In one case, an oil company is alleged to be using its franchise agreements to preclude franchisees from offering higher level ethanol blends to their customers.”

Earlier this year, the Renewable Fuels Association called for a similar investigation by federal regulators, citing the same anti-competitive concerns. The trade group singled out Phillips 66, accused of threatening to terminate its contract with a Kansas gas station operator unless the franchise filled up one of its ethanol tanks with premium gasoline, a product that is no longer common in the marketplace (E&ENews PM, March 19).

While the senators do not single out an oil company by name, they say such activity likely violates at least two federal laws.

“By forcing a franchisee to carry premium gasoline as a condition of carrying regular gas, the oil company may be using its economic power over its franchisee to effect a tying arrangement in violation of the Sherman Act,” Klobuchar and Grassley said. “This conduct may also violate the Gasohol Competition Act of 1980, which prohibits discrimination or unreasonable limits against the sale of gasohol or other synthetic motor fuels.”

Grassley is the ranking member of the Senate Judiciary Committee, while Klobuchar leads the panel’s Subcommittee on Antitrust, Competition Policy and Consumer Rights.

A spokesman for the American Petroleum Institute, which has called this year for the repeal of the federal renewable fuel standard that mandates yearly increasing levels of ethanol use, said the oil and gas trade group was reviewing the letter.

Charles Drevna, president of American Fuel & Petrochemical Manufacturers, called the claims “all flash and no substance.”

“If the Justice Department or FTC decides to investigate anti-competitive behavior, I suggest it look into the RFS,” Drevna said in an email via a spokeswoman. “Also, I’d advise them to look into the ethanol lobby who convinced the Congress to turn its back on the free market and mandate the use of its product.”