Markets Wired

Texas-based energy company Par Petroleum Corporation will terminate its storage and throughput rights at a key gasoline terminal in Hawaii, to settle Federal Trade Commission charges that Par’s proposed $107 million acquisition of Koko’oha Investments, Inc.’s wholly-owned subsidiary Mid Pac Petroleum, LLC would likely be anticompetitive.

According to the FTC’s complaint, the proposed merger would reduce competition and lead to higher prices for bulk supply of Hawaii-grade gasoline blendstock, ultimately increasing the price of gasoline for Hawaii consumers. Only four firms – Par, Chevron Corporation, Mid Pac and Aloha Petroleum, Ltd. – provide Hawaii with bulk supply of Hawaii-grade gasoline blendstock, which is gasoline before it is blended with ethanol to make finished gasoline. Par and Chevron have refineries in Hawaii that produce the product, while Mid Pac and Aloha buy their bulk supply from Par and Chevron or else import product. These four firms also own or control access to all of the Hawaii terminals that store bulk volumes of Hawaii-grade gasoline blendstock.

Under a long-term storage and throughput agreement, Mid Pac currently shares access to Aloha’s Barbers Point terminal – the only commercial gasoline terminal in Hawaii that is not owned by a refiner and is used by both Mid Pac and Aloha to receive full shipments of imported gasoline blendstock. As a result of the proposed acquisition, Par would gain Mid Pac’s rights to Aloha’s Barbers Point terminal, which it does not need for importation because it produces its own blendstock, but which it could exercise in a manner that impairs Aloha’s use of its terminal.  If Par were to hamper Aloha’s import capability, it would weaken Aloha’s ability to negotiate lower bulk supply prices from Par and Chevron, and thus reduce Aloha’s ability to compete effectively in the bulk supply market.  Potential new competitors would be unable to deter or counteract the anticompetitive effects resulting from the acquisition, according to the complaint. 

The proposed consent agreement requires Par to terminate the Barbers Point terminal storage and throughput rights it acquires from Mid Pac within five days after the merger is completed. Par will retain rights to load a limited number of tanker trucks at the Barbers Point terminal, and must obtain prior FTC approval to modify these rights or enter into any new agreement at the Barbers Point terminal. More information about the market for bulk supply of Hawaii-grade gasoline blendstock, as well as the consent agreement, can be found in the analysis to aid public comment for this matter on the FTC’s website.

The Commission votes to accept the proposed consent order for public comment and to issue the Statement of the Commission were 4-1 and 4-0-1, respectively, with Commissioner Joshua D. Wright voting no on the proposed consent order, not participating in the Commission statement, and issuing a dissenting statement. The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through April 17, 2015, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice. 

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.  When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000 per day.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.