Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Propane exchange tank distributors charged with conspiracy to fix tank fill levels, (Jul 9, 2014)

By Linda O’Brien, J.D., LL.M.

Propane exchange tank distributors engaged in a conspiracy to reduce the fill levels of propane exchange tanks without a corresponding reduction in price, leading to higher prices paid by purchasers of propane exchange tanks, according to a complaint filed in the federal district court of Philadelphia (Arrow Hardware, LLC v. AmeriGas Partners, L.P., July 7, 2014).

FerrellGas Partners, d/b/a Blue Rhino, and UGI Corporation, parent of AmeriGas Partners d/b/a AmeriGas Cylinder Exchange, are engaged in the marketing and distribution of propane and propane related supply services, which includes filling, refilling, refurbishing, selling, and distributing propane exchangeable tanks. The companies distribute their propane exchange tanks through retailers, including home improvement stores, hardware stores, mass merchandisers, supermarkets, convenience stores, and gas stations. Propane exchange tanks are portable steel tanks that are prefilled with propane and used for supplying fuel to barbeque grills and patio heaters. Arrow Hardware is a hardware store that directly purchased propane exchange tanks sold by Blue Rhino and AmeriGas for resale to customers.

The complaint alleges that in 2008, to increase profitability, the defendants considered a plan to reduce the amount of propane in their exchange tanks from 17 pounds to 15 pounds. The defendants knew that they would be competitively disadvantaged if they unilaterally reduced the fill level in the exchange tanks without a corresponding reduction in price.

The implementation of the fill reduction by Blue Rhino and AmeriGas was met with resistance from Walmart, one of the companies’ largest retail customers. Walmart refused to accept the fill reduction as effectively a price increase. Lowe’s, another large retail 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 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 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. 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 complaint charged. As a result of the defendants’ unlawful conduct, Arrow was injured in its business and property because it paid more for propane exchange tanks than it would have paid absent collusion.

Any applicable statute of limitations was partially tolled by prior litigation filed against the defendants relating to their unlawful conspiracy. Before the prior antitrust claims were filed, Arrow did not know and could not have known through the exercise of due diligence of the defendants’ anticompetitive conduct. The defendants conducted their conspiracy in confidential emails and telephone calls and actively misled purchasers into believing that the propane exchange tank market was highly competitive through filings with the Securities and Exchange Commission, the complaint alleged.

The plaintiff asserts claims for violations of Section 1 of the Sherman Act. The action seeks declaratory 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-04132-ER.

Attorneys: Bryan L. Clobes (Cafferty Clobes Merwether & Sprengel LLP) and Harris L. Pogust (Pogust, Braslow & Millrood LLC) for Arrow Hardware, LLC.

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

News: Antitrust PennsylvaniaNews