Antitrust Law Daily Wrap Up, ANTITRUST NEWS: U.S. ethanol industry remains unconcentrated despite HHI increase, FTC finds, (Dec 5, 2014)
By Greg Hammond, J.D.
The FTC has released its 2014 Report on Ethanol Market Concentration, presenting the Commission’s concentration analysis of the ethanol production industry for this year. Although concentration levels have risen slightly from 2013, the market remains unconcentrated, the report discloses.
Each year, the Commission is required to perform a market concentration analysis of the ethanol production industry in the United States, pursuant to the Energy Policy Act of 2005. To ensure there is sufficient competition and to avoid price-setting and other anticompetitive behavior, the FTC conducts its analysis using the Herfindahl-Hirschman Index (HHI).
According to the report, the 2014 HHI for domestic fuel ethanol concentration ranged from 333 to 693, when concentration was based on capacity, and from 343 to 743, when concentration was based on production. These numbers are slightly higher than in 2013, in which domestic fuel ethanol concentration ranged from 290 to 586, when concentration was based on capacity, and from 328 to 687, when concentration was based on production. Nevertheless, the Commission notes that the industry is still less concentrated today than when the first ethanol market concentration report was released in 2005.
“The level of concentration and the large number of market participants in the U.S. ethanol production industry suggest that exercise of market power to set prices or coordination on price or output levels is unlikely,” the report states. “At this level of concentration, a single ethanol producer or marketer lacks market power. Successful anticompetitive coordination would require agreement among a very large number of producers and thus would be unlikely. Imports and the possibility of entry would also act as a serious impediment to exercise of market power by any group of domestic firms.”
News: Antitrust FederalTradeCommissionNews