Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Tesoro Agrees to Petroleum Terminal Divestiture to Settle FTC Acquisition Challenge, (Jun 17, 2013)

By Tobias J. Gillett, J.D., LL.M.

Oil refiner Tesoro Corporation and its subsidiary Tesoro Logistics Operations LLC have agreed to divest a light petroleum products terminal in Boise, Idaho, to settle FTC charges that their $335 million acquisition of pipeline and terminal assets from Chevron Corporation would substantially lessen competition, the FTC announced today (In the Matter of Tesoro Corp., FTC File No. 131 0052, Docket No. C-4405).

Tesoro Corporation is a Texas-based refiner and marketer of petroleum products that owns several petroleum products terminals, including a terminal in Boise that receives light petroleum from the Northwest Products Pipeline, a 760-mile long interstate pipeline presently owned by Chevron. On December 6, 2012, Tesoro agreed to acquire the pipeline system and its adjacent terminals from Chevron, including a terminal located in Boise.

According to the FTC’s complaint, the transaction “would combine two of the three providers, and the two largest providers of refined products terminaling services in the relevant geographic market of Boise, Idaho.” Prior to the transaction, Tesoro and Chevron each owned a refined products terminal in Boise, and the companies competed to provide terminaling services in that region.

In the agency’s view, the transaction could substantially lessen competition in the relevant market “by eliminating direct and substantial competition between Respondent Tesoro and Chevron” and “by increasing the likelihood that Respondent Tesoro will exercise market power unilaterally,” thus potentially leading to higher prices for refined products terminaling services, or to a decrease in the quality or availability of those services. “Post-acquisition, entry or expansion into the relevant markets would not be timely, likely, and sufficient in scope to deter or negate the anticompetitive effects of the proposed acquisition,” the complaint stated.

Under the proposed consent order, Tesoro must sell its current Boise terminal to an FTC-approved buyer within six months of the order becoming final. Tesoro may complete its acquisition of Chevron’s assets immediately after the order issues. A separate order to maintain assets would require Tesoro to preserve its terminal “as a viable, competitive, and ongoing business” until it can be sold.

“The proposed order announced today is another example of the Federal Trade Commission’s work to protect competition in U.S. petroleum markets, which are critical to consumers,” said FTC Bureau of Competition Director Richard Feinstein. “The sale of Tesoro’s terminal will preserve the competitive conditions that exist today for terminal customers in Boise.”

Companies: Tesoro Corp.

News: Antitrust FederalTradeCommissionNews