Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Consumers allege propane exchange tank distributors engaged in conspiracy to fix tank fill levels, (Jun 3, 2014)

By Linda O’Brien, J.D., LL.M.

Propane exchange tank distributors engaged in a conspiracy to fix the “fill levels” of propane exchange tanks without a corresponding reduction in wholesale prices, which effectively raised the price of propane sold to consumers, according to a complaint filed in the federal district court of Topeka (Ortiz v. FerrellGas Partners, L.P., May 30, 2014).

FerrellGas Partners d/b/a Blue Rhino and UGI Corporation, parent of AmeriGas Partners d/b/a AmeriGas Cylinder Exchange, are the leading operators of national propane distribution businesses, which includes filling, refilling, refurbishing, selling, and distributing propane exchangeable portable cylinder tanks. The companies distribute their propane exchange tanks through retailers, including grocery stores, convenience stores, and gas stations. Two of the largest retailers are Walmart and Lowe’s. Mario Ortiz, Stephen Morrison, and Steven Tseffos are consumers who purchased propane exchange tanks sold by Blue Rhino and/or AmeriGas.

The complaint alleges that in 2008, to recoup increased input costs, the defendants participated in a conspiracy to implement a price increase in exchangeable portable cylinder tanks containing propane gas by reducing the amount of propane in their exchange tanks from 17 pounds to 15 pounds, without a corresponding reduction in the wholesale price. The reduction in the fill level in the exchange tanks had the effect of raising the price per pound of propane to consumers.

The implementation of the fill reduction by Blue Rhino and AmeriGas was met with stiff resistance from Walmart, which refused to accept the fill reduction as effectively a price increase. Due to Walmart’s market power and ability to purchase from either Blue Rhino or AmeriGas, neither company could unilaterally implement the fill reduction without risk of losing Walmart’s business. Lowe’s, a Blue Rhino customer, accepted the fill reduction only if all of Blue Rhino’s customers, including Walmart, also accepted the fill reduction, the complaint charged.

According to the complaint, Blue Rhino and AmeriGas secretly and illegally colluded to maintain a united front to push Walmart, their joint customer, to accept the fill reduction. For a period of several months, sales executives from the two propane companies allegedly communicated, by telephone and email, the status of their discussions with Walmart and agreed to work together to take the steps necessary to push Walmart to promptly accept the fill reduction. After other retailers accepted the fill reduction, Walmart agreed to accept propane exchange tanks filled to 15 pounds from both Blue Rhino and AmeriGas.

There were no legitimate, procompetitive efficiencies that justified the conduct of the defendants or outweighed its anticompetitive effects, the plaintiffs charged. The concerted action had the purpose and effect of increasing the effective wholesale prices which Blue Rhino and AmeriGas sold propane exchange tanks to retailers and other customers in the United States. This conduct allegedly restrained price competition and led to higher prices for sales of propane exchange tanks. As a result, consumers effectively paid more than they otherwise would have for propane contained in propane exchange tanks.

The plaintiffs assert claims for violations of Section 1 of the Sherman Act and state antitrust laws. The action seeks declaratory and injunctive relief, compensatory and treble damages, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 2:14-cv-02257-DDC-KGG.

Attorneys: Norman E. Siegel (Stueve Siegel Hanson LLP), Steve W. Berman and Robert B. Carey (Hagens Berman Sobol Shapiro LLP), and Stuart M. Paynter (The Paynter Law Firm PLLC) for Mario Ortiz, Stephen Morrison, and Steven Tseffos.

Companies: FerrellGas Partners, L.P.; FerrellGas, L.P.; AmeriGas Partners, L.P.; UGI Corporation

News: Antitrust KansasNews