[Federal Register Volume 79, Number 216 (Friday, November 7, 2014)]
[Notices]
[Pages 66371-66377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26551]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
[Docket No. 9360]
Ferrellgas Partners, L.P.; Ferrellgas, L.P., Also Doing Business
as Blue Rhino; AmeriGas Partners, L.P., Also Doing Business as AmeriGas
Cylinder Exchange; and UGI Corporation; Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreements.
-----------------------------------------------------------------------
SUMMARY: The consent agreements in this matter settle alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis to Aid Public Comment describes both the
allegations in the administrative complaint issued by the Commission
and the terms of the consent orders--embodied in the consent
agreements--that would settle these allegations.
DATES: Comments must be received on or before December 2, 2014.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/amerigasbluerhinoconsent online or on
paper, by following the instructions in the Request for Comment part of
the SUPPLEMENTARY INFORMATION section below. Write ``In the Matter of
AmeriGas and Blue Rhino--Consent Agreement; Docket No. 9360'' on your
comment and file your comment online at https://ftcpublic.commentworks.com/ftc/amerigasbluerhinoconsent by following
the instructions on the web-based form. If you prefer to file your
comment on paper, write ``In the Matter of AmeriGas and Blue Rhino--
Consent Agreement; Docket No. 9360'' on your comment and on the
envelope, and mail it to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: Eric Edmondson, FTC Western Region,
San Francisco, (415-848-5179), 901 Market Street, Suite 570, San
Francisco, CA 94103.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 3.25(f), 16 CFR
3.25(f), notice is hereby given that the above-captioned consent
agreements containing consent orders to cease and desist, having been
filed with and accepted, subject to final approval, by the Commission,
have 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 agreements, and the allegations in the complaint. An electronic
copy of the full text of each consent agreement package can be obtained
from the FTC Home Page (for October 31, 2014), on the World Wide Web,
at http://www.ftc.gov/os/actions.shtm.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before December 2,
2014. Write ``In the Matter of AmeriGas and Blue Rhino--Consent
Agreement; Docket No. 9360'' 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
[[Page 66372]]
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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/amerigasbluerhinoconsent 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 ``In the Matter of
AmeriGas and Blue Rhino--Consent Agreement; Docket No. 9360'' on your
comment and on the envelope, and mail your comment to the following
address: Federal Trade Commission, Office of the Secretary, 600
Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580,
or deliver your comment to the following address: Federal Trade
Commission, Office of the Secretary, Constitution Center, 400 7th
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. 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 December 2, 2014. 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 Orders To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'' or ``FTC'') has
accepted, subject to final approval, agreements containing proposed
consent orders (``Consent Agreements'') resolving an administrative
complaint issued by the Commission on March 27, 2014. The FTC accepted
a consent agreement from Respondents AmeriGas Partners, L.P., also
doing business as AmeriGas Cylinder Exchange, and UGI Corporation
(collectively ``AmeriGas'') and a separate consent agreement from
``Blue Rhino'' Respondents Ferrellgas Partners, L.P. and Ferrellgas,
L.P., also doing business as Blue Rhino (collectively ``Blue Rhino'').
AmeriGas and Blue Rhino are referred to collectively herein as
``Respondents.'' The complaint charges that AmeriGas and Blue Rhino
violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45,
by colluding to push Walmart, a key customer, to accept a reduction in
the amount of propane in the propane exchange tanks each sold to
Walmart.
Under the terms of the Consent Agreements, AmeriGas and Blue Rhino
are prohibited from agreeing with any competitor in the propane tank
exchange business to modify fill levels or otherwise fix the prices of
exchange tanks, or to coordinate communications with customers. Each is
also required to maintain an antitrust compliance program.
The Commission believes that the terms of the proposed orders
contained in the Consent Agreements will resolve the competitive issues
described in the complaint. The Consent Agreements have been placed on
the public record for 30 days for receipt of comments from interested
members of the public. Comments received during this period will become
part of the public record. After 30 days, the Commission will review
the Consent Agreements and any comments received, and will decide
whether it should withdraw from the Consent Agreements or make final
the proposed orders contained in the Consent Agreements.
The purpose of this Analysis to Aid Public Comment is to invite and
facilitate public comment concerning the proposed orders. It is not
intended to constitute an official interpretation of the proposed
Consent Agreements and the accompanying proposed orders or in any way
to modify their terms.
The Consent Agreements are for settlement purposes only and do not
constitute an admission by either Respondent that it has violated the
law, or that the facts alleged in the complaint, other than the
jurisdictional facts, are true.
II. The Complaint
The following allegations are taken from the complaint and publicly
available information.
A. Background
Blue Rhino and AmeriGas control approximately 80 percent of the
market for propane exchange tanks. These tanks are portable, steel
tanks, prefilled with propane, primarily used for propane barbeque
grills and patio heaters. There are no widely used substitutes for
exchange tanks that provide a similar ease of use. Consumers typically
purchase these prefilled tanks at home improvement stores, hardware
stores, mass merchandisers, supermarkets, convenience stores, and gas
stations.
To compete effectively to serve national retailers, including mass
merchandisers such as Walmart, The Home Depot, and Lowe's, propane
exchange tank manufacturers must have access to refurbishing and
refilling facilities located throughout the United States.\2\ AmeriGas
and Blue Rhino are the only manufacturers who can supply exchange tanks
to large national retailers, except on a limited basis.
---------------------------------------------------------------------------
\2\ As described in the complaint, Respondents have entered into
a number of ``co-packing'' agreements, pursuant to which one of the
Respondents processes and refills propane exchange tanks for the
other Respondent at certain of their processing plants.
---------------------------------------------------------------------------
B. Challenged Conduct
In 2008, Blue Rhino and AmeriGas each decided to implement a price
increase by reducing the amount of propane in their exchange tanks from
17 pounds to 15 pounds, without a corresponding decrease in the
wholesale price. Blue Rhino publicly announced its fill reduction plan
on June 25, 2008. AmeriGas publicly announced its fill reduction plan
on July 10, 2008. The FTC's complaint does not allege that Respondents'
initial decision to reduce fill levels to 15 pounds was the result of
an agreement between the parties.
Walmart purchases tanks from both Blue Rhino and AmeriGas and
initially refused to accept the planned fill reduction. Blue Rhino and
AmeriGas understood they could not sustain the fill reduction unless it
was accepted by Walmart. Blue Rhino's customer Lowe's accepted the fill
reduction only on the condition that all of Blue Rhino's other
customers, including Walmart, also accept the fill reduction within a
short period of time. Faced with resistance from Walmart, Blue Rhino
and AmeriGas colluded by secretly agreeing that neither would deviate
from their proposal to reduce the fill level to Walmart.
On or about July 10, 2008, and continuing for three months
thereafter, Blue Rhino and AmeriGas sales executives communicated
repeatedly with each other regarding the status of their respective
efforts to persuade Walmart to accept the fill reduction. The secret
agreement between Blue Rhino and AmeriGas that neither would deviate
from their proposal to Walmart
[[Page 66373]]
when faced with resistance from Walmart, and their combined efforts to
push Walmart to promptly accept the fill reduction had the effect of
raising the price per pound of propane to Walmart and likely to the
ultimate consumers.
The Complaint alleges that this agreement violated Section 5 of the
FTC Act by unreasonably restraining trade and constituting an unfair
method of competition. The agreement alleged in the Complaint is per se
unlawful.\3\
---------------------------------------------------------------------------
\3\ See, e.g., United States v. Socony-Vacuum Oil Co., 310 U.S.
150, 223-24, n.59 (1940) (agreements among horizontal competitors to
buy surplus gasoline on spot market to prevent prices from falling
sharply held per se illegal, even though there was no agreement on
price to be maintained; agreements to raise, lower, stabilize, or
otherwise restrain price competition are summarily condemned as per
se illegal under Section 1 of the Sherman Act.); Catalano, Inc. v.
Target Sales, Inc., 446 U.S. 643 (1980) (per curiam) (agreement
among horizontal competitors to eliminate a form of short-term
credit was tantamount to an agreement to eliminate discounts and
held per se illegal as price fixing); Nat'l Macaroni Mfrs. Ass'n v.
FTC, 65 F.T.C. 583, 612 (1964), enforced, 345 F.2d 421 (7th Cir.
1965) (agreement between competitors to reduce the percentage of
more expensive and higher quality durum wheat and increase the
percentage of less expensive and lower quality farina wheat for
pasta held per se illegal).
---------------------------------------------------------------------------
III. The Proposed Orders
The proposed orders are designed to remedy the unlawful conduct
charged against the Respondents in the complaint and to prevent future
unlawful conduct. The proposed orders, although entered into separately
with AmeriGas and Blue Rhino, are identical in all material respects.
Paragraph II of the proposed orders contains two key prohibitions. The
first, contained in Paragraph II.A., bars Respondents from soliciting,
offering, participating in, or entering into any type of agreement with
any competitor in the propane exchange business to modify the fill
level, or maintain, stabilize, or otherwise fix the price of propane
exchange tanks. In addition, it prohibits Respondents from coordinating
communications to customers or competitors.
The second, contained in Paragraph II.B., prevents Respondents from
sharing competitively sensitive non-public information with competitors
except in identified circumstances. Respondents may exchange limited
information needed to negotiate and fulfill the terms of refilling
agreements. The proposed orders allow this information sharing because
transporting exchange tanks is a significant expense and co-packing
agreements may lower the cost of serving customers located farther away
from filling facilities.
The proposed orders also allow Respondents to share information
with competitors as part of legally supervised due diligence or to
participate in a joint venture. However, Respondents are prohibited
from sharing highly sensitive information, such as future pricing and
marketing plans, with employees whose duties include pricing, sales and
marketing of exchange tanks. Further, Respondents are permitted to
share confidential information with competitors to respond to health,
safety, emergency or regulatory matters. Finally, Respondents can
participate in industry-wide data exchange or market research so long
as a third party collects the data and only disseminates data that are
at least three months old and aggregated from a significant portion of
the propane exchange industry.
Paragraph III of the proposed orders requires that Respondents
establish and maintain antitrust compliance programs for their propane
tank exchange business in the United States and identifies the
requirements for that program. The remaining provisions of the proposed
orders contain reporting and compliance requirements commonly found in
FTC competition orders.
Pursuant to FTC policy regarding the term for competition orders,
the proposed orders will expire in 20 years.
By direction of the Commission, Commissioner Ohlhausen
dissenting, and Commissioner McSweeny not participating.
Donald S. Clark,
Secretary.
Statement of Chairwoman Edith Ramiez and Commissioner Julie Brill
The Commission is issuing for public comment two identical proposed
Orders that would resolve allegations that AmeriGas and Blue Rhino
entered into an unlawful agreement that neither would deviate from its
plan to reduce the amount of propane in prefilled propane exchange
tanks sold to Walmart. The Commission commenced administrative
litigation in this matter on March 27, 2014; AmeriGas and Blue Rhino
have now agreed to settle the case. The proposed Orders will prevent
the parties from engaging in collusive conduct with rivals in the
future. Each respondent is prohibited from agreeing with any competitor
in the propane tank exchange business to modify fill levels or
otherwise to fix the price of exchange tanks, or to exchange
competitively sensitive information. In addition, each respondent is
required to maintain an antitrust compliance program.
Propane exchange tanks are a staple in the backyards of American
consumers. The collusive agreement, as alleged, was facially
anticompetitive and had the effect of raising the price per pound of
propane exchange tanks to Walmart and likely ultimate consumers in
violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C.
Sec. 45. Our action today thus provides important relief to American
consumers and sends a clear signal to the marketplace that
anticompetitive collusion will not be tolerated.
AmeriGas and Blue Rhino are the two largest suppliers of propane
exchange tanks in the United States, together controlling approximately
80 percent of the market. No other competitor serves more than nine
percent of the market or is capable of serving large national
retailers, such as Walmart and Lowe's. As detailed in the Commission's
Complaint, in 2008, AmeriGas and Blue Rhino faced rapidly increasing
input costs. To offset these rising costs, AmeriGas and Blue Rhino each
decided to reduce the fill level in their propane exchange tanks from
17 to 15 pounds--without a corresponding price decrease. This
effectively increased the per unit price of the propane by 13 percent.
Walmart rejected proposals from both AmeriGas and Blue Rhino to
reduce the propane fill levels; Walmart's buyer viewed each proposal as
a price increase to which Walmart was not willing to agree. Although
Blue Rhino's largest customer, Lowe's, accepted the fill reduction, it
did so on the express condition that all of Blue Rhino's customers
(including Walmart) also accept the fill reduction promptly. Blue Rhino
and AmeriGas understood that they could not sustain the fill reduction
across the industry unless it was accepted by Walmart.
The Commission's Complaint does not allege that the Respondents'
initial decisions to reduce fill levels to 15 pounds were the result of
an agreement. However, the Complaint alleges that thereafter, in light
of Walmart's continued resistance to the reduction, and the risk that
other customers would also demand to return to 17-pound tanks, AmeriGas
and Blue Rhino agreed that neither would accede to pressure from
Walmart. Faced with this united front, Walmart capitulated to the
sellers' demand. This subsequent agreement to act in concert in
negotiations with Walmart is the basis for the Commission's challenge.
The investigation revealed ample evidence to provide us with a
reason to believe that AmeriGas and Blue Rhino entered into an unlawful
agreement.\1\
[[Page 66374]]
For example, AmeriGas and Blue Rhino executives spoke frequently in the
days leading up to Walmart's decision to accept the fill reductions,
and at one point a frustrated AmeriGas Director of National Accounts
suggested to Blue Rhino that it was time for them to issue an ultimatum
to Walmart.\2\ Blue Rhino's Vice President of Sales responded by urging
AmeriGas to ``hang in there'' as Blue Rhino continued to negotiate with
Walmart.\3\
---------------------------------------------------------------------------
\1\ In the Matter of Ferrellgas Partners, L.P., et al., FTC
Docket No. 9360, Complaint (Mar. 27, 2014), available at
www.ftc.gov/system/files/documents/cases/140401amerigascomplaint.pdf.
\2\ Complaint ] 50.
\3\ Id.
---------------------------------------------------------------------------
Reducing the volume of propane gas in a tank while keeping the
price constant is equivalent to a per unit price increase. Indeed, that
is how Walmart understood the fill reduction. The joint strategy
therefore entails a restriction on price competition and does not
present any new or novel theory of liability.\4\ It does not matter
that the Complaint does not allege that AmeriGas and Blue Rhino agreed
to keep their respective prices to Walmart constant, or that Walmart
may have been free to negotiate prices with the parties, as noted in
Commissioner Ohlhausen's dissent. The law is clear that price fixing
agreements ``may or may not be aimed at complete elimination of price
competition'' \5\ and are unlawful in either instance because of the
enormous threat they pose to the free market.\6\ There is also no
reasonable procompetitive justification for the alleged agreement,
particularly since it was directed to a significant customer whose
refusal to accept the proposal had the potential to cause the firms'
fill reduction plans to unravel. The agreement thus amounts to a per se
unlawful naked restraint on price competition.\7\ As Judge Posner
explained in In re Sulfuric Acid Antitrust Litigation, ``[t]he per se
rule is designed for cases in which experience has convinced the
judiciary that a particular type of business practice has no (or
trivial) redeeming benefits ever.'' \8\
---------------------------------------------------------------------------
\4\ Cf. Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 648
(1980) (per curiam) (agreement among horizontal competitors to
eliminate a form of short-term credit was tantamount to an agreement
to eliminate discounts and held per se illegal as price fixing even
though there was no agreement on actual price); U.S. v. Socony-
Vacuum Oil Co., 310 U.S. 150, 223-24, n.59 (1940) (agreements among
horizontal competitors to buy surplus gasoline on spot market to
prevent prices from falling sharply held per se illegal, even though
there was no agreement on price to be maintained).
\5\ Socony-Vacuum Oil, 310 U.S. at 224 n.59. See also F.T.C. v.
Superior Court Trial Lawyers Ass'n, 493 U.S. 411, 423 (1980) (noting
that constriction of supply is the essence of price-fixing, whether
it be accomplished by agreement upon a price, which will decrease
the quantity demanded, or by agreeing upon an output, which will
increase the price offered).
\6\ As noted in Socony-Vacuum, 310 U.S. at 224 n. 59:
``[w]hatever economic justification particular price-fixing
agreements may be thought to have, the law does not permit an
inquiry into their reasonableness. They are all banned because of
their actual or potential threat to the central nervous system of
the economy.'' See also NCAA v. Board Of Regents, 468 U.S. 85, 100
(1983) (``Horizontal price fixing and output limitation are
ordinarily condemned as a matter of law under an `illegal per se'
approach because the probability that these practices are
anticompetitive is so high; a per se rule is applied when `the
practice facially appears to be one that would always or almost
always tend to restrict competition and decrease output.' '' citing
Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441
U.S. 1, 19-20 (1979)).
\7\ See Fed. Trade Comm'n & Dep't of Justice, Antitrust
Guidelines for Collaborations Among Competitors (2000), available
at: http://www.ftc.gov/sites/default/files/documents/public_events/joint-venture-hearings-antitrust-guidelines-collaboration-among-competitors/ftcdojguidelines-2.pdf (``Certain types of agreements
are so likely to harm competition and to have no significant
procompetitive benefit that they do not warrant the time and expense
required for particularized inquiry into their effects. Once
identified, such agreements are challenged as per se unlawful.'').
\8\ 703 F.3d 1004, 1011-12 (7th Cir. 2012) (rejecting per se
treatment of agreements on the ground there were reasonable
procompetitive justifications for the alleged agreement); see also
National Macaroni Mfrs. Ass'n v. FTC, 65 F.T.C. 583, 612 (1964),
enforced, 345 F.2d 421 (7th Cir. 1965) (agreement between
competitors to reduce the percentage of more expensive and higher
quality durum wheat and increase the percentage of less expensive
and lower quality farina wheat for pasta held per se illegal).
---------------------------------------------------------------------------
Whether the initial decision to reduce fill levels was the result
of independent decision-making has no bearing on the unlawfulness of
the parties' subsequent agreement to maintain a united front with
respect to Walmart.\9\ In addition, Walmart's position as the ``largest
propane exchange tank retailer in the United States'' \10\ does not
protect it from coercion. Even a power buyer like Walmart is vulnerable
when its only two suppliers for a product have secretly agreed not to
deviate from a proposed price increase.
---------------------------------------------------------------------------
\9\ Cf. Sugar Institute v. United States, 297 U.S. 553, 601
(1936) (agreement to adhere to previously announced prices and terms
of sale held per se illegal, even though the previously announced
prices and terms were unilaterally determined).
\10\ Complaint ] 35.
---------------------------------------------------------------------------
We continue to believe that pursuing this case was in the public
interest. Contrary to Commissioner Ohlhausen's dissent, the private
settlements that Blue Rhino and AmeriGas entered into resulted in very
little benefit to consumers. While the settlement amounts in the
private litigation noted by Commissioner Ohlhausen may superficially
sound impressive, the vast majority of the actual funds distributed
covered Plaintiffs' attorneys' fees, cy pres payments and
administrative fees and expenses, with only a trivial amount disbursed
to consumers. The proposed Orders will benefit consumers by prohibiting
conduct that could lead to future agreements on price or other
competitive terms.
Dissenting Statement of Commissioner Maureen K. Ohlhausen
I voted against the issuance of the Part III complaint against
AmeriGas and Blue Rhino last March, and I now dissent from the consent
agreement proposed by the Commission. I write briefly to explain my
opposition to the majority's pursuit and now settlement of this novel,
unwarranted enforcement action.
Neither the theory advanced by the staff and ultimately adopted by
the Commission nor the evidence offered in support thereof convinced me
that there was reason to believe the parties had restrained competition
in violation of Section 5 of the FTC Act. In my view, the allegations
in this case--that the parties ``colluded by secretly agreeing to
maintain a united front to push their joint customer, Walmart, to
accept the [propane tank] fill reduction'' \1\--fit poorly, at best, in
the Section 1 case law. I am not aware of any Section 1 case that
involved an alleged agreement among competitors to coerce a single
customer to accept a decrease in product size that the competitors had
pursued independently and that in no way precluded independent
negotiation of the product's price between each competitor and the
customer. I simply ``have never seen or heard of an antitrust case
quite like this.'' \2\
---------------------------------------------------------------------------
\1\ In re Ferrellgas Partners, L.P., FTC Dkt. No. 9360,
Complaint, at 2 (Mar. 27, 2014), available at http://www.ftc.gov/system/files/documents/cases/140401amerigascomplaint.pdf.
\2\ In re Sulfuric Acid Antitrust Litig., 703 F.3d 1004, 1011
(7th Cir. 2012) (Posner, J.) (rejecting per se treatment for
agreements among competitors to shut down certain of their plants
and abide by exclusive territorial restrictions).
---------------------------------------------------------------------------
One of my several concerns at the time the complaint issued was
that the Walmart-as-lynchpin theory would effectively collapse into one
in which the Commission was challenging the independently decided fill
reduction.\3\ The Commission, however, obviously did not have
sufficient evidence to pursue that more direct case.
---------------------------------------------------------------------------
\3\ See, e.g., In re Ferrellgas Partners, L.P., FTC Dkt. No.
9360, Concurring Statement of Commissioner Joshua D. Wright, at 3
(Oct. 31, 2014) (referring to ``the collusion between AmeriGas and
Blue Rhino to reduce the amount of propane in tanks sold to
Walmart''); Roundtable Conference with Enforcement Officials,
Antitrust Source, June 2014, at 4 (``Just yesterday, we announced
that the Commission voted to issue an administrative complaint
against AmeriGas and Blue Rhino. . . . We have alleged that the two
rivals illegally coordinated on reducing the amount of propane in
the tanks that were sold to a key customer.'') (Chairwoman Ramirez).
---------------------------------------------------------------------------
Even more troubling, the majority's treatment of the alleged
conduct as per
[[Page 66375]]
se unlawful depends on an unfounded assertion that the parties agreed
to keep their prices fixed. Chairwoman Ramirez and Commissioner Brill
are certainly correct that ``[r]educing the volume of propane gas in a
tank while keeping the price constant is equivalent to a per unit price
increase.'' \4\ The problem for the majority's position is that the
complaint in this matter did not allege an agreement between AmeriGas
and Blue Rhino to keep their respective prices to Walmart constant.
There was no allegation in the complaint that the parties agreed in any
way on the pricing of the lesser-filled propane tanks. Walmart was free
to negotiate prices or any other price element with the parties. Yet,
there is no allegation that Walmart tried but was unable to re-
negotiate the price of the tanks with each of the parties. Thus,
neither the majority's assertion that the parties ``secretly agreed not
to deviate from a proposed price increase'' \5\ nor their
characterization of the alleged agreement as ``a per se unlawful naked
restraint on price competition'' \6\ find any support in the complaint
or the evidence presented to the Commission.
---------------------------------------------------------------------------
\4\ In re Ferrellgas Partners, L.P., FTC Dkt. No. 9360,
Statement of Chairwoman Edith Ramirez and Commissioner Julie Brill,
at 2 (Oct. 31, 2014). See also Concurring Statement of Commissioner
Joshua D. Wright, at 3 (``Here, it is self-evident that AmeriGas and
Blue Rhino's agreement to reduce the amount of propane in tanks sold
to Walmart has the economic effect of increasing the per unit price
if prices are held constant.'') (emphasis added).
\5\ Id. at 3 (emphasis added).
\6\ Id. at 2 (emphasis added).
---------------------------------------------------------------------------
Try as the majority may to fit this case into the per se category
of price and output restrictions among competitors, it simply does not
belong in that category. As a result, the cases and other support cited
by the majority--including Catalano, Sugar Institute, and commentary
addressing agreements on various elements of price--are inapposite.\7\
In fact, none of the cases cited by Commissioners Ramirez, Brill, and
Wright even remotely resembles the alleged facts in this case. The lack
of judicial experience with the unique conduct alleged in this case
further counsels against application of the per se rule, as well as any
abbreviated rule of reason treatment, for that matter.\8\
---------------------------------------------------------------------------
\7\ See Statement of Chairwoman Edith Ramirez and Commissioner
Julie Brill, at 2 & 3 nn.4 & 9 (citing, among other cases, Catalano,
Inc. v. Target Sales, Inc., 446 U.S. 643 (1980); Sugar Institute v.
United States, 297 U.S. 553 (1936)); Concurring Statement of
Commissioner Joshua D. Wright, at 3 n.14 (citing Catalano; and
citing Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ]2022a,
at 174 (3d ed. 2012), for the proposition that agreements to fix
various ``price elements'' are per se unlawful); id. at 2-3 n.13
(discussing ``bid-rigging or auction collusion'').
\8\ See, e.g., Timothy J. Muris & Brady P.P. Cummins, Tools of
Reason: Truncation through Judicial Experience and Economic
Learning, Antitrust, Summer 2014, at 46 (arguing that the antitrust
agencies should apply a truncated rule of reason analysis only ``to
restraints whose effect on competition is clear based on `judicial
experience and current economic learning' '') (quoting In re
Polygram Holding Inc., 136 F.T.C. 310, 344-45 (2003), aff'd sub nom.
Polygram Holding, Inc. v. FTC, 416 F.3d 29 (D.C. Cir. 2005)).
---------------------------------------------------------------------------
The majority's attempt to fit the alleged conduct into the per se
category--done in large part through a mischaracterization of the
allegations actually levied in the complaint--runs contrary to the now
decades-long evolution in antitrust doctrine away from per se treatment
of benign or even procompetitive business conduct, as well as the more
sophisticated economic analysis that animates modern antitrust law.\9\
The majority did not allege that the parties agreed on either their
propane output levels \10\ or the prices that they would charge Walmart
(or any other customer). In my view, that takes the alleged agreement
outside the scope of classic per se prohibitions of price and output
restrictions, including joint conduct aimed at a single customer, such
as bid rigging. At this point in the development of the antitrust laws,
if anything, we should be continuing to move categories of conduct out
of the per se category--not trying to squeeze conduct that we rarely
encounter into the otherwise shrinking per se box.\11\
---------------------------------------------------------------------------
\9\ See, e.g., Bruce H. Kobayashi & Timothy J. Muris, Chicago,
Post-Chicago, and Beyond: Time to Let Go of the 20th Century, 78
Antitrust L.J. 147, 152-53 (2012) (``One result of the incorporation
of economics into antitrust law has been the widespread rejection of
broad rules of per se illegality. Over three decades, the Supreme
Court abandoned most per se rules, leaving only naked horizontal
price fixing and market division, plus a modified per se rule for
tie-ins, under per se treatment.'') (footnotes omitted); Leah
Brannon & Douglas H. Ginsburg, Antitrust Decisions of the U.S.
Supreme Court, 1967 to 2007, 3 Competition Pol'y Int'l 1, 3 (2007)
(arguing ``that the U.S. Supreme Court . . . is methodically re-
working antitrust doctrine to bring it into alignment with modern
economic understanding'').
\10\ The majority alleged neither an agreement as to each
party's output level nor an agreement on reducing the amount of the
propane in each firm's tanks. While the former agreement, if
reached, would clearly be per se unlawful, the latter would not
necessarily be per se unlawful, in my view. The parties had
contracted to fill each other's propane tanks in certain areas of
the country where one of the firms did not have refilling and
refurbishing facilities. See Compl. ] 29. As a result, there would
have been an efficiency justification--the need for uniform fill
levels across the two suppliers--for any agreement on the fill
level, and such agreement, had one been reached, would have been
appropriately evaluated under the rule of reason. I take no position
here on the legality of that hypothetical agreement. Again, there
was no allegation in the complaint that the parties agreed on the
fill levels in their tanks.
\11\ I would have voted against this case, even if it had been
pursued under the rule of reason because the evidence did not
provide a reason to believe that the alleged conduct had an adverse
impact on competition in the market for propane exchange tanks.
---------------------------------------------------------------------------
Even assuming a valid theory under Section 1, the evidence
presented to the Commission failed to convince me that the parties had
reached an agreement to do anything. In my view, notwithstanding the
alleged communications between the parties relating to Walmart,\12\ the
evidence did not provide reason to believe the parties had reached an
agreement on how they would ``push'' Walmart, which, as the complaint
notes, is ``the largest propane exchange tank retailer in the United
States.'' \13\ The evidence simply did not support the allegations that
Walmart (the quintessential power buyer) was susceptible to pressure,
that the parties were actually coercing Walmart, that the fill
reductions pursued (separately) by the parties were going to unravel,
or that the parties would have returned to the higher fill levels--as
opposed to, for example, Walmart accepting the lower fill levels in
exchange for a lower price.
---------------------------------------------------------------------------
\12\ Commissioner Wright fairly notes that no antitrust
practitioner would counsel a client to engage in the direct
competitor communications that were alleged to have happened here.
See Concurring Statement of Commissioner Joshua D. Wright, at 2. One
might even consider bringing a standalone Section 5 case against
competitors that have engaged in the sharing of nonpublic,
competitively sensitive information. See, e.g., In re Bosley, Inc.,
FTC Dkt. No. C-4404, Complaint (June 5, 2013), available at http://www.ftc.gov/sites/default/files/documents/cases/2013/06/130605aderansregiscmpt.pdf. However, the (largely one-way)
communications at issue here are a far cry from the categories of
conduct that are properly deemed per se unlawful.
\13\ Compl. ] 35.
---------------------------------------------------------------------------
Further, even assuming a valid theory and sufficient evidence to
support a Section 1 violation (both of which were lacking), I was not
convinced that bringing this case was in the public interest. The
alleged conduct had occurred nearly six years before the complaint was
issued. More importantly, the respondents had settled private
litigation that included antitrust claims (as well as other, consumer
protection claims), with AmeriGas and Blue Rhino agreeing to pay up to
$10 million and $25 million, respectively, to settle the private
claims.\14\ As part of
[[Page 66376]]
that settlement, one of the parties, Blue Rhino, also agreed to provide
additional antitrust compliance training to relevant company personnel.
One can only assume that AmeriGas took comparable steps following the
settlement. In light of these considerations and others, scarce
Commission resources would have been better spent pursuing other, more
worthwhile matters.
---------------------------------------------------------------------------
\14\ See Plaintiffs' Motion for Preliminary Approval of Amended
Class Settlement, In re Pre-Filled Propane Tank Marketing and Sales
Practices Litig., MDL No. 2086, No. 4:09-cv-00465 (W.D. Mo. Apr. 29,
2010) (settlement with AmeriGas granted final approval on Oct. 4,
2010); Plaintiffs' Motion for Preliminary Approval of Class
Settlement, In re Pre-Filled Propane Tank Marketing and Sales
Practices Litig., MDL No. 2086, No. 4:09-md-2086 (W.D. Mo. Oct. 6,
2011) (settlement with Blue Rhino granted final approval on May 31,
2012).
---------------------------------------------------------------------------
Although the Commission may have discovered some smoke, there
clearly was no fire in this case--whether fueled by propane or
otherwise. In short, there was very weak evidence supporting what I saw
as, at best, a novel Section 1 case. I therefore did not have reason to
believe that the parties had committed a Section 1 violation. Nor did I
think that it was in the public interest to pursue this enforcement
action. For these reasons, I cannot vote for a consent agreement
grounded on the same theory and evidence that was presented to me when
the complaint originally issued.
Concurring Statement of Commissioner Joshua D. Wright
The Commission has voted to accept proposed Consent Agreements to
remedy allegations that AmeriGas and Blue Rhino restrained competition
by colluding to reduce the amount of propane in tanks sold to Walmart.
I voted in favor of issuing the Complaint and accepting the proposed
Consent Agreements because the evidence is sufficient to provide reason
to believe that AmeriGas and Blue Rhino engaged in conduct that is
unlawful under the antitrust laws and the proposed settlements will
improve consumer welfare by preventing the parties from engaging in
anticompetitive conduct in the future.\1\ I write separately to explain
my support for this enforcement action and the proposed settlements.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 45(b) (2012) (authorizing the Commission to
initiate an enforcement action when it has ``reason to believe'' a
party has engaged in an unfair method of competition).
---------------------------------------------------------------------------
The alleged conspiracy would establish a relatively straightforward
violation of the antitrust laws. In 2008, AmeriGas and Blue Rhino each
independently reduced the amount of propane contained in their tanks
from 17 pounds to 15 pounds.\2\ The fill reductions had the effect of a
13 percent increase in the price of propane because neither AmeriGas
nor Blue Rhino implemented a corresponding decrease in price.\3\ If the
story had ended there, with merely unilateral action and no agreement
between AmeriGas and Blue Rhino, there would be no violation of the
antitrust laws and the Commission would not have pursued an enforcement
action.
---------------------------------------------------------------------------
\2\ In re Ferrellgas Partners, L.P., FTC Docket No. 9360,
Complaint at ]] 1, 5, 32, 43 (Mar. 27, 2014), available at http://www.ftc.gov/system/files/documents/cases/140401amerigascomplaint.pdf.
\3\ Id. at ]] 1, 33.
---------------------------------------------------------------------------
However, the story did not end there. Walmart, the largest propane
exchange tank retailer in the United States, resisted the fill
reductions.\4\ Other retailers agreed to the fill reductions, but only
on the condition that Walmart also would accept the fill reductions
within a short period of time.\5\ Faced with resistance from Walmart,
Blue Rhino and AmeriGas encountered the very real prospect that their
fill reductions could unravel and the market would return to costlier
and thus less profitable 17-pound tanks. To avoid this result, AmeriGas
and Blue Rhino colluded in their negotiations with Walmart to ensure it
quickly accepted the fill reductions.\6\ That collusion provides the
basis for the Commission's complaint and proposed Consent Agreements.
---------------------------------------------------------------------------
\4\ Id. at ]] 1, 6, 38.
\5\ Id. at ]] 6, 41, 47.
\6\ Id. at ]] 1, 7, 48.
---------------------------------------------------------------------------
More specifically, AmeriGas and Blue Rhino executives spoke
frequently in the days and weeks leading up to Walmart's decision to
accept the fill reductions in order to coordinate their negotiations
and encourage one another not to give in to Walmart's opposition.\7\
For instance, AmeriGas and Blue Rhino executives worked together to
ensure that retailers near Walmart's headquarters in Bentonville,
Arkansas, only carried 15-pound tanks in hopes of convincing Walmart to
accept the fill reductions as the new industry standard.\8\ AmeriGas
and Blue Rhino executives also discussed the status of their
negotiations and coordinated emails using similar language to urge
Walmart to accept the fill reductions.\9\ Indeed, a frustrated
AmeriGas's Director of National Accounts at one point suggested to Blue
Rhino that it was time for them to issue an ultimatum to Walmart.\10\
Blue Rhino's Vice President of Sales responded by urging AmeriGas to
``hang in there'' as Blue Rhino continued to negotiate with
Walmart.\11\ Faced with unyielding demands from its two primary propane
suppliers and no viable outside option, Walmart finally conceded and
agreed to accept propane tanks filled to 15 pounds.\12\
---------------------------------------------------------------------------
\7\ Id. at ]] 42, 50.
\8\ Id. at ] 50.
\9\ Id. at ]] 50, 54, 55.
\10\ Id. at ] 50.
\11\ Id.
\12\ Id. at ]] 56.
---------------------------------------------------------------------------
No antitrust practitioner would counsel his or her client to engage
in the direct competitor communications and concerted actions that are
alleged to have occurred between Blue Rhino and AmeriGas. This is with
good reason: Such conduct is plainly anticompetitive and unlawful under
Section 1 of the Sherman Act.\13\ It is well understood that collusion
among suppliers regarding price, quantity, and other competitive terms
negotiated with purchasers can harm consumers by impeding the
competitive process.\14\ Here, it is self-evident that AmeriGas and
Blue Rhino's agreement to reduce the amount of propane in tanks sold to
Walmart has the economic effect of increasing the per unit price if
prices are held constant. The mere fact that AmeriGas and Blue Rhino's
agreement did not preclude the possibility that they would continue to
compete on price or other terms is of little consequence for antitrust
analysis. Indeed, if such competition were enough to absolve otherwise
anticompetitive concerted action, even a conspiracy to fix nominal
prices would be lawful so long as the colluding rivals
[[Page 66377]]
continued to compete on quality or quantity. Fortunately, antitrust law
requires a different and more economically sensible result.\15\
---------------------------------------------------------------------------
\13\ Collusion by suppliers in negotiations with a single
purchaser has long been accepted as a valid theory of harm under the
antitrust laws. Over a century ago, collusion in negotiations by
employees (i.e., suppliers of labor) with employers was challenged
successfully under the Sherman Act. See, e.g., Loewe v. Lawlor, 208
U.S. 274 (1908). The theory was so viable that Congress created a
new labor exemption by passing Sections 6 and 20 of the Clayton Act.
See 29 U.S.C. 52, 101-115 (2012). In its most egregious form,
collusion by suppliers in negotiations with a single purchaser can
be challenged as bid-rigging or auction collusion, the harms of
which are well documented in the economic literature and which
represent one of the most common violations prosecuted by the
Department of Justice's Antitrust Division. See, e.g., Robert C.
Marshall & Michael J. Meurer, The Economics of Auctions and Bidder
Collusion, in Game Theory and Business Applications 339 (Kalyan
Chatterjee & William F. Samuelson eds., 2001); Paul Klemperer, What
Really Matters in Auction Design, 16 J. Econ. Persp. 169, 169
(Winter 2002); Luke Froeb, Robert Koyak, & Gregory Werden, What is
the Effect of Bid-rigging on Prices?, 42 Economics Letters 419
(1993). It is therefore unclear why, if one concedes it would be
unlawful for AmeriGas and Blue Rhino to collude to reduce the amount
of propane in tanks sold to all purchasers, it also would not be
unlawful for the parties to collude in imposing such a fill
reduction on a single, unwilling purchaser.
\14\ See, e.g., Catalano, Inc. v. Target Sales, Inc., 446 U.S.
643 (1980) (per curiam) (agreement by competitors to terminate
certain credit terms held unlawful); Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law ] 2022a, at 174 (3d ed. 2012) (explaining
``the per se rule generally governs not only explicit price fixing
but agreements to fix a `price element,' which broadly includes
``any term of sale that can be regarded as affecting the price that
the customer must pay or any mechanism such as a formula by which
the price maybe computed'').
\15\ See, e.g., Areeda & Hovenkamp, supra note 14, ] 2022a, at
175 (``For example, firms could presumably agree to insist on cash
at the time of delivery but nevertheless compete vigorously on the
price they charge. But to make much of this fact distorts the
relative importance of the various terms of any transaction. The
explicit `price' of any good or service is a function not only of
the nominal price but also for the credit terms, applicable
discounts, rebates, terms of delivery, and the like. Firms might
also agree about the nominal price but continue to compete by
offering increasingly longer time periods before payment is due. The
fact that such competition continues to exist does not serve to make
the price-fixing agreement reasonable.'').
---------------------------------------------------------------------------
It also is worth noting that no one--including but not limited to
the parties--has presented a plausible efficiency justification that
might suggest the collusion between AmeriGas and Blue Rhino to reduce
the amount of propane in tanks sold to Walmart was somehow
procompetitive.\16\ This enforcement action therefore simply does not
implicate traditional concerns over false positives and the fear that
the Commission might inadvertently chill procompetitive behavior.\17\
In addition, while much has been written about the important shift away
from per se rules in favor of a more effects-based rule of reason
analysis under modern antitrust doctrine, the benefits of this shift
unsurprisingly accrue only where the challenged conduct potentially
offers some procompetitive benefits.\18\ Again, that is not the case
here. The record is devoid of evidence supporting a plausible
efficiency justification for the challenged agreement.
---------------------------------------------------------------------------
\16\ Although the argument that AmeriGas and Blue Rhino's co-
filling arrangement offers an efficiency justification for the
parties' concerted action against Walmart has some superficial
appeal, it can be dispensed with relatively easily. First, if we are
to take seriously the claim that identical propane fill levels are
necessary for the efficient operation of AmeriGas's and Blue Rhino's
businesses, we would expect the parties to have agreed on the
initial move from 17-pound to 15-pound tanks. They did not. In fact,
after a lengthy investigation, the Commission concluded the parties
independently reduced the amount of propane contained in their tanks
and only colluded in subsequent negotiations with Walmart. Second,
it would be a curious thing for two companies attempting to achieve
an efficiency benefit--one that would reduce the costs passed on to
purchasers--to seek to achieve that benefit by coordinating secretly
rather than explaining to purchasers the costs of maintaining
divergent fill-levels for their propane tanks.
\17\ See Frank H. Easterbrook, The Limits of Antitrust, 63 Tex.
L. Rev. 1, 15-17 (1984).
\18\ See, e.g., Joshua D. Wright, Comm'r, Fed. Trade Comm'n, The
Economics of Resale Price Maintenance & Implications for Competition
Law and Policy, Remarks before the British Institute of
International and Comparative Law (Apr. 9, 2014), available at
http://www.ftc.gov/system/files/documents/public_statements/302501/140409rpm.pdf.
---------------------------------------------------------------------------
Moreover, the Supreme Court's shift toward the rule of reason has
always left room for an appropriately truncated review for conduct that
is likely to harm competition and without efficiency justification. The
Court has made clear that attempting to place antitrust analysis into
fixed categories is overly simplistic.\19\ The Court has recognized
that ``there is often no bright line separating per se from Rule of
Reason analysis'' \20\ and that determining whether a ``challenged
restraint enhances competition'' requires ``an enquiry meet for the
case.'' \21\
---------------------------------------------------------------------------
\19\ See, e.g., Polygram Holding, Inc. v. FTC, 416 F.3d 29, 34-
35 (D.C. Cir. 2005) (explaining usefully how the ``Supreme Court's
approach to evaluating a section 1 claim has gone through a
transition over the last twenty-five years, from a categorical
approach to a more nuanced and case-specific inquiry'').
\20\ Cal. Dental Ass'n v. F.T.C., 526 U.S. 756, 779 (1999)
(quoting NCAA v. Board of Regents, 468 U.S. 85, 104 n.26 (1983)).
\21\ Id. at 779-81.
---------------------------------------------------------------------------
The alleged coordination between AmeriGas and Blue Rhino bears a
``close family resemblance'' to conduct long since ``convicted in the
court of consumer welfare'' based upon ``economic learning and market
experience'' that demonstrates such restraints are likely to harm
consumers.\22\ Where, as here, the two principal suppliers in an
industry have colluded in their negotiations with a major distributor
to impose contractual terms the distributor initially resisted, and
there are no plausible efficiency justifications suggesting the conduct
may have been procompetitive, that enquiry is appropriately brief.
Enforcement actions to prevent anticompetitive conduct with no
plausible efficiency are a wise use of agency resources and should be a
focus of the Commission's competition mission because they bring
immediate benefits for consumers with little risk of chilling
procompetitive conduct.
---------------------------------------------------------------------------
\22\ Polygram, 416 F.3d 29 at 36-37.
---------------------------------------------------------------------------
For all of these reasons, I voted in favor of issuing the Complaint
and accepting the proposed Consent Agreements in this matter.
[FR Doc. 2014-26551 Filed 11-6-14; 8:45 am]
BILLING CODE 6750-01-P