FTC Testifies on Initiatives to Protect Competitive Markets in the U.S. Petroleum Industry

Commission is Committed to Shielding Consumers from Illegal Mergers or Conduct

For Release

Testifying today on behalf of the Federal Trade Commission before the U.S. House of Representatives’ Committee on Energy and Commerce, Associate General Counsel for Energy John Seesel detailed the FTC’s varied initiatives to protect competitive markets in the production, distribution, and sale of gasoline, and discussed in detail an important Commission study issued earlier this year on the factors affecting gas prices nationwide.

“No other industry’s performance is more deeply felt or carefully scrutinized,” Seesel said in opening the FTC’s testimony. “Gasoline prices are among the most visible prices in our complex economy. Consumers closely follow gasoline prices, and in recent months these prices have experienced dramatic increases.” The FTC, he said, “has been and remains vigilant” in its examination of anticompetitive conduct within the industry, with the most recent example being the dual consent orders reached with respect to Chevron Corp.’s acquisition of Unocal and the settlement of the Commission’s 2003 monopolization complaint against Unocal.

In addition, Seesel testified that in 2004, the FTC staff published a study reviewing mergers and structural changes in the U.S. petroleum industry. The study also provided an overview of antitrust enforcement actions the Commission has taken since 1981 – including 19 complaints filed against larger petroleum mergers. Also, the FTC actively monitors wholesale and retail prices of gasoline and diesel, Seesel stated, to protect consumers by identifying unusual movements in prices both at the wholesale and retail levels and investigating their causes when appropriate.

The testimony addresses the Committee’s inquiries in two areas. It first reviews the basic tools the FTC uses to promote competition in the petroleum industry, including challenging potentially anticompetitive mergers, prosecuting nonmerger antitrust violations, monitoring industry conduct to detect possible anticompetitive behavior, and researching developments in the petroleum sector. Next, it reviews what the Commission has learned from its conferences and research, as well as its review of recent gasoline price changes.

The testimony also provides a detailed explanation of the Commission’s recent report on the factors affecting the price of gasoline – a topic of even more relevance to consumers in the wake of price increases following Hurricane Katrina. The report analyzes the factors, including supply, demand, and competition, as well as federal, state, and local regulations, that drive gasoline prices, so policy-makers can evaluate and choose strategies likely to succeed in addressing high gasoline prices.

Finally, discussing the report in more detail, the testimony stresses: 1) the worldwide supply, demand, and competition for crude oil are the most important factors in the national average prices of gasoline in the United States, and 2) that gasoline supply, demand, and competition produced relatively low and stable prices from 1984 until 2004, despite substantial increases in U.S. gasoline consumption. It also discusses local regulations that may have an impact on retail gasoline prices, as well as how the development of hypermarkets – large retailers of general merchandise and grocery items, such as Wal-Mart and Safeway – has affected what consumers pay at the gas pump.

The testimony concludes by stating that “[t]he Federal Trade Commission has an aggressive program to enforce the antitrust laws in the petroleum industry. The Commission has taken action whenever a merger or nonmerger conduct has violated the law and threatened the welfare of consumers or competition in the industry. [The FTC] continues to study this industry in detail, to monitor wholesale and retail gasoline prices, and to search for instances of illegal mergers or anticompetitive conduct.”

The Commission vote authorizing the presentation of the testimony and its inclusion in the formal record was 4-0.

Copies of the Commission’s testimony are available on the FTC’s Web site at www.ftc.gov. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No. P052103)

Contact Information

Media Contact:
Mitchell J. Katz
Office of Public Affairs
202-326-2161