Federal Register, Volume 82 Issue 126 (Monday, July 3, 2017)

[Federal Register Volume 82, Number 126 (Monday, July 3, 2017)]
[Notices]
[Pages 30864-30866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13912]

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FEDERAL TRADE COMMISSION

[File No. 161 0207]

Alimentation Couche-Tard Inc. and CST Brands, Inc.; Analysis To
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis to Aid Public Comment describes both the
allegations in the complaint and the terms of the consent orders--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before July 26, 2017.

ADDRESSES: Interested parties may file a comment 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
Alimentation Couche-Tard Inc., File No. 161-0207'' on your comment, and
file your comment online at https://ftcpublic.commentworks.com/ftc/act-cstconsent by following the instructions on the web-based form. If you
prefer to file your comment on paper, write ``In the Matter of
Alimentation Couche-Tard Inc., File No. 161-0207'' 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.

FOR FURTHER INFORMATION CONTACT: Nicholas Bush (202-326-2848), 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 26, 2017), on the World Wide Web, at
https://www.ftc.gov/news-events/commission-actions.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before July 26, 2017.
Write ``In the Matter of Alimentation Couche-Tard Inc., File No. 161-
0207'' 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 https://www.ftc.gov/policy/public-comments.
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/act-cstconsent 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 prefer to file your comment on paper, write ``In the Matter
of Alimentation Couche-Tard Inc., File No. 161-0207'' 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,

[[Page 30865]]

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.
Because your comment will be placed on the publicly accessible FTC
Web site at https://www.ftc.gov, you are solely responsible for making
sure that your comment does not include any sensitive or confidential
information. In particular, your comment should not include any
sensitive personal information, such as your or anyone else'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, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
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)--including in particular competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). 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). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted on the public FTC Web site--as legally required by FTC Rule
4.9(b)--we cannot redact or remove your comment from the FTC Web site,
unless you submit a confidentiality request that meets the requirements
for such treatment under FTC Rule 4.9(c), and the General Counsel
grants that request.
Visit the FTC Web site 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 26, 2017. For information on the Commission's privacy policy,
including routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

The Federal Trade Commission (``Commission'') has accepted for
public comment, subject to final approval, an Agreement Containing
Consent Orders (``Consent Agreement'') from Alimentation Couche-Tard
Inc. (``ACT'') and CST Brands, Inc. (``CST'') (collectively, the
``Respondents''). The Consent Agreement is designed to remedy the
anticompetitive effects that likely would result from ACT's proposed
acquisition of CST.
Under the terms of the proposed Consent Agreement, ACT must divest
to a Commission-approved buyer certain CST retail fuel outlets and
related assets in 70 local markets in 16 metropolitan statistical areas
(``MSAs''), and at the buyer's option, an ACT site in one local market.
The divestiture must be completed no later than 75 days after the
closing of ACT's acquisition of CST or 14 days after the Consent
Agreement is issued as final. The Commission and Respondents have
agreed to an Order to Maintain Assets that requires Respondents to
operate and maintain each divestiture outlet in the normal course of
business through the date the Commission-approved buyer acquires the
outlet.
The Commission has placed the proposed Consent Agreement on the
public record for 30 days to solicit comments from interested persons.
Comments received during this period will become part of the public
record. After 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 it
final.

II. The Respondents

Respondent ACT, a publicly traded company headquartered in Laval,
Quebec, Canada, operates convenience stores and retail fuel outlets
throughout the United States and the world. ACT's current U.S. network
consists of over 6,050 stores located in 41 states. Nearly 4,700
locations are company-operated, making ACT the largest convenience
store operator in terms of company-owned stores and the second-largest
chain overall in the country. Approximately 88 percent of ACT's
company-operated locations also sell fuel. ACT convenience store
locations operate primarily under the Circle K and Kangaroo Express
banners, while its retail fuel outlets operate under a variety of
company and third-party brands.
Respondent CST operates convenience stores and retail fuel outlets
in the United States and Canada. With 1,146 convenience stores and
retail fuel outlets in the United States, CST is one of the largest
chains in the country. CST's U.S. convenience stores operate primarily
under the Corner Store banner, while its retail fuel outlets operate
primarily under the Valero brand. CST also is the general partner and
operator of CrossAmerica Partners LP, a publicly traded master limited
partnership that offers wholesale fuels marketing, and owns and
operates convenience stores and retail fuel outlets.

III. The Proposed Acquisition

On August 21, 2016, ACT, through its wholly-owned subsidiary Circle
K Stores, Inc., entered into an agreement to acquire all outstanding
shares of CST for $4.4 billion, with CST surviving post-acquisition as
a wholly-owned subsidiary of Circle K Stores, Inc. (the
``Transaction''). The Transaction would cement ACT's position as one of
the largest operators of retail fuel outlets in the United States.
The Commission's Complaint alleges that the Transaction, 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, as
amended, 15 U.S.C. 45, by substantially lessening competition for the
retail sale of gasoline and diesel in 71 local markets across 16 MSAs.

IV. The Retail Sale of Gasoline and Diesel

The Commission's Complaint alleges that relevant product markets in
which to analyze the Transaction are the retail sale of gasoline and
the retail sale of diesel. Consumers require gasoline for their
gasoline-powered vehicles and can purchase gasoline only at retail fuel
outlets. Likewise, consumers require diesel for their diesel-powered
vehicles and can purchase diesel only at retail fuel outlets. The
retail sale of gasoline and the retail sale of diesel constitute
separate relevant markets because the two are not interchangeable--
vehicles that run on gasoline cannot run on diesel and vehicles that
run on diesel cannot run on gasoline.

[[Page 30866]]

The Commission's Complaint alleges the relevant geographic markets
in which to assess the competitive effects of the Transaction are 71
local markets within the following MSAs: Phoenix, Arizona; El Paso,
Texas; Tucson, Arizona; Colorado Springs, Colorado; Denver, Colorado;
Jacksonville, Florida; Albuquerque, New Mexico; Corpus Christi, Texas;
Austin, Texas; Shreveport, Louisiana; Albany, Georgia; Cleveland, Ohio;
Las Cruces, New Mexico; Savannah, Georgia; Sierra Vista, Arizona; and
Warner Robins, Georgia.
The geographic markets for the retail sale of gasoline are highly
localized, generally ranging from a few blocks to a few miles. None of
the relevant geographic markets exceeds three driving miles from an
overlapping retail fuel outlet. Fueling up on gasoline is rarely a
destination trip for a consumer and therefore consumers are likely to
frequent retail fuel outlets close to their planned routes. Each
particular geographic market is unique, with factors such as commuting
patterns, traffic flows, and outlet characteristics playing important
roles in determining the scope of the geographic market. The geographic
markets for the retail sale of diesel are similar to the corresponding
geographic markets for retail gasoline as diesel consumers exhibit the
same preferences and behaviors as gasoline consumers.
The Transaction would substantially increase the market
concentration in each of the 71 local markets, resulting in highly
concentrated markets. In ten local markets, the Transaction would
result in a monopoly. In 20 local markets, the Transaction would reduce
the number of independent market participants from three to two. In 41
local markets, the Transaction would reduce the number of independent
market participants from four to three.
The Transaction would substantially lessen competition for the
retail sale of gasoline and the retail sale of diesel in these local
markets. Retail fuel outlets compete on price, store format, product
offerings, and location, and pay close attention to competitors in
close proximity, on similar traffic flows, and with similar store
characteristics. The combined entity would be able to raise prices
unilaterally in markets where CST is ACT's only or closest competitor.
Absent the Transaction, CST and ACT would continue to compete head to
head in these local markets.
Moreover, the Transaction would increase the likelihood of
coordination in local markets where only three or two independent
market participants would remain. Two aspects of the retail fuel
industry make it vulnerable to coordination. First, retail fuel outlets
post their fuel prices on price signs that are visible from the street,
allowing competitors to observe each other's fuel prices without
difficulty. Second, retail fuel outlets regularly track their
competitors' fuel prices and change their own prices in response. These
repeated interactions give retail fuel outlets familiarity with how
their competitors price and how their competitors respond to their own
prices.
Entry into each relevant market would not be timely, likely, or
sufficient to deter or counteract the anticompetitive effects arising
from the Acquisition. Significant entry barriers include the
availability of attractive real estate, the time and cost associated
with constructing a new retail fuel outlet, and the time associated
with obtaining necessary permits and approvals.

V. The Proposed Consent Agreement

The proposed Consent Agreement remedies the Transaction's
anticompetitive effects by requiring ACT to divest certain CST retail
fuel outlets and related assets in 70 local markets, and an ACT site in
one local market at the buyer's option, to Empire Petroleum Partners
(``Empire''). Empire is a retail operator and wholesale fuel
distributor doing business in 26 states; its executive team has decades
of experience with some of the industry's largest players. The
Commission is satisfied that Empire is a qualified acquirer of the
divested assets.
The proposed Consent Agreement requires ACT to divest to Empire
CST's retail fuel outlets in 70 local markets. In the remaining local
market, located in Albany, Georgia, the ACT outlet was damaged by a
tornado in early 2017. To remedy potential competitive concerns in this
local market, the Consent Agreement requires ACT to give Empire the
option of acquiring the overlapping ACT site. If Empire declines the
option, the Consent Agreement prohibits ACT, for ten years, from
restricting the use of the property as a retail fuel outlet in any
future sale. The proposed Consent Agreement requires ACT to divest the
assets to Empire no later than 75 days after the Transaction closes or
14 days after the Commission issues the Consent Agreement as final.
The proposed Consent Agreement also requires that ACT provide
transitional assistance to Empire for one year, with an option for
Empire to extend the period for an additional year. Empire may extend
the period for a third year, but only with Commission approval. ACT and
Empire have entered into a Transition Services Agreement, whereby ACT
has agreed to allow Empire to continue using the CST brand names and
the store-specific licenses and permits during the transitional
assistance period. In addition, ACT has agreed to provide temporary
wholesale fuel supply to Empire on the same terms CST was receiving,
giving Empire time to negotiate its own wholesale supply contracts.
In addition to requiring outlet divestitures, the proposed Consent
Agreement also requires ACT to provide the Commission notice, for a
period of ten years, of certain acquisitions in the 71 local markets at
issue. Specifically, the Consent Agreement requires ACT to give the
Commission notice of future acquisitions of Commission-identified
retail fuel outlets located in the same local markets as the divested
assets.
The proposed Consent Agreement contains additional provisions
designed to ensure the adequacy of the proposed relief. For example,
Respondents have agreed to an Order to Maintain Assets that will be
issued at the time the proposed Consent Agreement is accepted for
public comment. The Order to Maintain Assets requires Respondents to
operate and maintain each divestiture outlet in the normal course of
business, through the date the store is ultimately divested to a buyer.
During this period, and until such time as Empire no longer requires
transitional assistance, the Order the Maintain Assets authorizes the
Commission to appoint an independent third party as a Monitor to
oversee the Respondents' compliance with the requirements of the
proposed Consent Agreement.
The Commission does not intend this analysis to constitute an
official interpretation of the proposed Consent Agreement or to modify
its terms in any way.

By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2017-13912 Filed 6-30-17; 8:45 am]
BILLING CODE 6750-01-P