[Federal Register Volume 78, Number 121 (Monday, June 24, 2013)]
[Notices]
[Pages 37814-37817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-14923]
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FEDERAL TRADE COMMISSION
[File No. 131 0052]
Tesoro Corporation and Tesoro Logistics Operations LLC; Analysis
of Proposed Agreement Containing Consent Orders to Aid Public Comment
AGENCY: Federal Trade Commission.
[[Page 37815]]
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint and the terms of the consent order--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before July 19, 2013.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/tesorochevronconsent online or on paper,
by following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Tesoro/Chevron, File
No. 131 0052'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/tesorochevronconsent by following the
instructions on the web-based form. If you prefer to file your comment
on paper, mail or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Philip M. Esienstat (202-326-2769),
FTC, Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC
20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement, and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
from the FTC Home Page (for June 17, 2013), on the World Wide Web, at
http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from
the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue NW.,
Washington, DC 20580, either in person or by calling (202) 326-2222.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before July 19, 2013.
Write ``Tesoro/Chevron, File No. 131 0052'' on your comment. Your
comment--including your name and your state--will be placed on the
public record of this proceeding, including, to the extent practicable,
on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to
remove individuals' home contact information from comments before
placing them on the Commission Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/tesorochevronconsent by following the instructions on the web-based
form. If this Notice appears at http://www.regulations.gov/#!home, you
also may file a comment through that Web site.
If you file your comment on paper, write ``Tesoro/Chevron, File No.
131 0052'' on your comment and on the envelope, and mail or deliver it
to the following address: Federal Trade Commission, Office of the
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW.,
Washington, DC 20580. If possible, submit your paper comment to the
Commission by courier or overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before July 19, 2013. You can find more information,
including routine uses permitted by the Privacy Act, in the
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Order to Aid Public Comment
I. Introduction
The Federal Trade Commission (the ``Commission''), subject to its
final approval, has accepted for public comment an Agreement Containing
Consent Orders (``Consent Agreement'') with Tesoro Corporation and
Tesoro Logistics Operations LLC (``Respondents''). On December 6, 2012,
Respondents executed related Asset Sale and Purchase Agreements with
the Northwest Terminalling Company and Chevron Pipeline Company,
subsidiaries of Chevron Corporation, to acquire the Northwest Products
Pipeline system and Chevron's associated terminals, including a
terminal in Boise, Idaho, for a total of $355 million (the
``Acquisition''). Respondents already own and operate a terminal in
Boise, Idaho (the ``Tesoro Terminal'').
The Commission's Complaint alleges that Respondents have entered
into an acquisition agreement that constitutes a violation of Section 5
of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, and
which, if consummated, would violate Section 7 of the Clayton Act, as
amended, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission
Act, by substantially lessening competition in terminaling services for
light petroleum products in the Boise, Idaho Metropolitan Statistical
Area (``Boise MSA''). The Acquisition would reduce the competitive
options
[[Page 37816]]
for terminaling services in the Boise MSA from three to two, with
Respondents owning the two largest terminals. The proposed Consent
Agreement effectively remedies the Acquisition's possible
anticompetitive effects by requiring Respondents to divest its own
terminal in Boise, the Tesoro Terminal.
II. Respondents and Other Relevant Entities
A. Tesoro Corporation
Tesoro Corporation is a publically traded corporation principally
engaged in the refining and marketing of petroleum products in the
United States.
B. Tesoro Logistics Operations LLC
Tesoro Logistics Operations LLC, a limited liability company, is a
wholly owned subsidiary of Tesoro Logistics LP, a publically traded
limited partnership. Respondent Tesoro Corporation individually and
through its subsidiaries owns Tesoro Logistics GP, LLC, the general
partner of Tesoro Logistics LP. Tesoro Logistics GP, LLC manages the
operations and employs the personnel of Tesoro Logistics LP, and owns a
two percent general partner interest in the partnership. Tesoro
Corporation directly owns 37.6% of limited partner interest in Tesoro
Logistics LP.
Tesoro Logistics Operations LLC directly or indirectly owns a
number of petroleum products terminals, including the Tesoro Terminal
in Boise, Idaho, that receive light petroleum products off the
Northwest Pipeline. The Tesoro Terminal in Boise stores product it
receives off the pipeline and provides facilities to load the product
onto tank trucks for local distribution.
C. Chevron Corporation
Chevron Corporation (``Chevron'') is a publically traded
corporation principally engaged in fully integrated petroleum
operations in the United States, including the exploration, production,
manufacture, transportation, and sale of petroleum products. Chevron,
through Chevron Pipeline Company, owns and operates the Northwest
Pipeline, a 760-mile interstate common-carrier pipeline that transports
petroleum products from Salt Lake City to the states of Idaho, and
Washington. Chevron, through Northwest Terminalling Company owns
petroleum terminals along the Northwest Pipeline in Idaho and
Washington, including one in Boise, Idaho.
III. Distribution of Petroleum Products and Competitive Effects
Pipelines and terminals play a key role in the distribution of
refined light petroleum products, a product category that includes
gasoline, diesel fuel, and jet fuel. Pipelines are the least expensive
means of moving bulk quantities of light petroleum products across
land. The alternatives, rail transportation and truck transportation,
are not cost competitive when pipeline transportation is available.
Terminals provide a critical connection between bulk supply through
pipelines and local distribution of light petroleum products. The
efficient operation of pipelines requires continuous shipment of large
volumes of light petroleum products. Efficient local distribution
utilizes tank trucks to pick up product from the terminal and deliver
it to customers.
Terminals have specialized truck-loading facilities, known as
``truck racks,'' to transfer light petroleum products from storage
tanks to individual tank trucks. Terminal services provided to
suppliers of light petroleum products include storage, dispensing, and
ethanol and additive blending. Suppliers of light petroleum products
trying to reach a particular local market have no economically viable
alternative to terminals.
The Acquisition would reduce the competitive options for
terminaling services in Boise from three to two, with Tesoro owning the
two largest terminals. Currently, in the Boise MSA, there are three
terminals and one storage facility lacking truck racks. Tesoro,
Chevron, and United Oil Company each own and operate terminals. Holly
Energy Partners and Sinclair Corporation jointly own a storage facility
under the name Boise Petroleum. This facility cannot load light
petroleum products into tank trucks because it lacks a truck rack.
Companies storing light petroleum products at Boise Petroleum must move
the products to another terminal to load it onto tank trucks for
delivery to the Boise market.
Of the three terminals in Boise, the Tesoro Terminal and the
Chevron terminal together account for the most of the terminal
capacity. The United Oil terminal is the smallest terminal in Boise.
Tesoro's control of most of the terminal capacity in Boise may
substantially lessen competition in the relevant market. It increases
the likelihood that Tesoro would exercise market power unilaterally by
raising the terminaling fees or denying access to terminaling services
for light petroleum products in the Boise MSA.
IV. The Proposed Agreement Containing Consent Orders
Under the Proposed Agreement Containing Consent Orders, Respondents
have one hundred and eighty (180) days from the issuance of the
Decision and Order (``Order'') to divest the Tesoro Terminal, to a
Commission-approved buyer. Pursuant to the Order, Respondents may
complete the Acquisition of Chevron's Northwest Pipeline and associated
terminals immediately upon issuance of the Order. The required
divestiture of the Tesoro Terminal will maintain the level of
competition that existed in the market for terminaling services in the
Boise MSA prior to the Acquisition. The Order to Maintain Assets
(discussed in the next section) will protect the competitive status quo
until Respondents are able to find a suitable buyer of the Tesoro
Terminal.
The Order contains an ``open season'' provision. Respondents agree
to let any customer at the Chevron Boise terminal terminate its
contract without penalties for a period of six months after the
divestiture sale of the Tesoro Terminal. Respondents agree to notify
customers at the Chevron Boise terminal of their right to terminate
their existing contracts. These provisions will ensure that the new
owner of the Tesoro Terminal can compete for new business to replace
Respondents' current business at the Tesoro Terminal. Respondents are
the only customer of the Tesoro Terminal and they could move their
business to the Chevron Boise terminal when the divestiture is
completed.
The Order requires Respondents to provide transitional assistance
and support services to the buyer of the Tesoro Terminal. Respondents
must also license any key software and intellectual property to the
buyer. The Order allows the buyer to recruit Respondents' employees who
work at the Tesoro Terminal. For a period of two years after the
divestiture of the Tesoro Terminal, Respondents may not solicit the
employees that accept employment offers from the buyer, to rejoin
Respondents. The Order also limits Respondents' access to, and use of,
confidential business information pertaining to the Tesoro Terminal.
If Respondents fail to fully divest the Tesoro Terminal within the
one hundred and eighty (180) day time period, the Order grants the
Commission power to appoint a divestiture trustee to complete the
divestiture. The Commission may also
[[Page 37817]]
appoint a divestiture trustee, if it brings an action against
Respondents pursuant to Section 5(l) of the FTC Act. The Order also
governs the divestiture trustee's duties, privileges, and powers.
The Order requires Respondents, or the divestiture trustee, if
appointed, to file periodic reports detailing efforts to divest the
Tesoro Terminal and the status of that undertaking. Commission
representatives may gain reasonable access to Respondents' business
records related to compliance with the consent agreement. The Order
terminates ten (10) years after its issuance.
V. The Order to Maintain Assets
The Order to Maintain Assets seeks to preserve the Tesoro Terminal
as a viable, competitive, ongoing business, and to ensure that
Respondents do not access the confidential business information
belonging to this business. Respondents agree to preserve the Tesoro
Terminal in substantially the same condition existing at the time when
Respondents executed the Consent Agreement. Pursuant to the Order to
Maintain Assets, Respondents will provide the Tesoro Terminal with
sufficient financial and other resources to maintain current operation
levels and carry already planned capital and improvement projects.
The Order to Maintain Assets also empowers the Commission to
appoint a monitor to oversee Respondents' compliance with their
obligations under the Order. The Order to Maintain Assets outlines the
rights, duties, and responsibilities of the monitor, including access
to business records, hiring necessary consultants and attorneys, and
any other thing reasonably necessary to carry out their duties. The
Order to Maintain Assets further prohibits Respondents from interfering
with the monitor's obligations and requires them to indemnify the
monitor.
The monitor shall submit periodic reports to the Commission
concerning compliance with the Order to Maintain Assets. The Commission
may appoint a different monitor if the original monitor fails to carry
out his duties. The Order to Maintain Assets terminates either (1)
three days after the Commission withdraws its acceptance of the Consent
Agreement or (2) three days after the monitor completes its final
report required by Paragraph V.C.(ii) of this Order to Maintain Assets.
VI. Opportunity for Public Comment
The proposed Consent Agreement has been placed on the public record
for thirty (30) days for receipt of comments by interested persons. The
Commission has also issued its Complaint in this matter. Comments
received during this comment period will become part of the public
record. After thirty (30) days, the Commission will again review the
proposed Consent Agreement and the comments received and will decide
whether it should withdraw from the Consent Agreement, modify it, or
make final the proposed Order.
By accepting the proposed Consent Agreement subject to final
approval, the Commission anticipates that the competitive problems
alleged in the Complaint will be resolved. The purpose of this analysis
is to invite public comment on the proposed Order to aid the Commission
in its determination of whether it should make final the proposed Order
contained in the Agreement. This analysis is not intended to constitute
an official interpretation of the proposed Order, nor is it intended to
modify the terms of the proposed Order in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2013-14923 Filed 6-21-13; 8:45 am]
BILLING CODE 6750-01-P