Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Propane exchange tank distributors allegedly conspired to fix tank fill levels, (Sep 30, 2014)

By Linda O’Brien, J.D., LL.M.

Propane exchange tank distributors engaged in a conspiracy to restrain trade by fixing the fill levels of propane exchange tanks without a corresponding reduction in prices that led to higher prices of propane sold in propane exchange tanks to purchasers, according to a complaint filed in the federal district court of Jefferson City (Route 49 Gas & Go, Inc. v. AmeriGas Propane, L.P., September 26, 2014).

FerrellGas Partners d/b/a Blue Rhino and UGI Corporation, parent of AmeriGas Partners d/b/a AmeriGas Cylinder Exchange are the largest operators of national propane distribution businesses, which includes filling, refilling, refurbishing, selling, and distributing exchangeable propane tanks. Propane exchange tanks are used to fuel outdoor gas grills, patio heaters, and outdoor fireplaces. The companies distribute their propane exchange tanks through retailers, including home improvement stores, hardware stores, supermarkets, convenience stores, and gas stations. Two of the largest retailers that sell propane exchange tanks to consumers are Walmart and Lowe’s.

Route 49 Gas & Go is a gas station and convenience store that purchased filled propane exchange tanks for resale to consumers. Surinder Kaur, Inc. is a corporation that purchased propane in propane exchange tanks directly from Blue Rhino and/or AmeriGas.

The complaint alleges that in 2008, to response to 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 price reduction. The reduction in the fill level in the exchange tanks had the effect of raising the price per pound of propane to retailers.

The implementation of the fill reduction by Blue Rhino and AmeriGas was met with stiff resistance from Walmart, a joint customer, which refused to accept the fill reduction as a disguised 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, the complaint charged.

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

The statute of limitations presents no bar to the plaintiffs’ claims against the defendants for their continuing conspiracy in restraint of trade. The defendants conducted their conspiracy in non-public confidential email messages and telephone calls and actively misled retailers in believing that they unilaterally had decided to decrease the fill level of their propane exchange tanks and cited technical complications with the fill level. The plaintiffs could not have known through the exercise of due diligence of the anticompetitive conduct until the FTC issued an administrative complaint against the defendants in March 2014 when evidence of their unlawful acts became available to the public, the complaint alleged.

The complaint states that the defendants continue to maintain the reduced fill levels despite the fact that propane prices have decreased substantially since 2008. In furtherance of their unlawful conspiracy in restraint of trade, the defendants overcharged the plaintiffs and continue to sell propane exchange tanks at supra-competitive prices. The plaintiffs paid more than they otherwise would have in a competitive market for propane contained in propane exchange tanks and face imminent threat of future injuries to their businesses in the form of overcharges.

The plaintiffs assert claims for restraint of trade in violation of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, 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-04265-NKL.

Attorneys: Thomas V. Bender (Walters Bender Strohbehn & Vaughn, P.C.), Robert G. Eisler, Linda P. Nussbaum, and Peter A. Barile, III (Grant & Eisenhofer P.A.), and Michael D. Shaffer (Shaffer & Gaier LLC) for Route 49 Gas & Go, Inc. and Surinder Kaur, Inc.

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

News: Antitrust MissouriNews