Staff Comments Filed on Wholesale and Retail Gasoline Price Regulation; Commission Issues Federal Register Notice on Review of Fuel Economy Guide

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Commission approval of staff comments: The FTC has approved the filing of comments by the staffs of the Bureau of Competition, Bureau of Economics, and Office of Policy Planning with Connecticut Representative Christopher Stone regarding the regulation of wholesale and retail gasoline prices within the state. As detailed in the comments, which can be found on the Commission’s Web site as a link to this press release, Rep. Stone has asked the FTC to comment on Connecticut Senate Bill 1136, which would mandate that retailers sell “gasoline based on the actual prices . . . paid for the gasoline located in underground storage tanks located on the premises of the retail gasoline station at which gasoline is sold,” and would explicitly forbid retailers from raising the retail price of gasoline “in anticipation of market based price increases.” The bill also would prohibit petroleum refiners or producers from charging retailers different wholesale prices based on the location of the retailer within the state – using zone pricing – or using any other pricing system that would prevent retail gasoline sellers from paying lower prices on an equal bases with other gasoline retailers in Connecticut.

According to the staff comments, the state bill, if adopted as law, is likely to have three adverse effects on consumers. First, it will interfere with the legitimate role of the price mechanism to allocate scare supplies of gasoline in times of severe shortages. Second, gasoline stations will choose to hold lower inventories on average, which will only make Connecticut more susceptible to supply shocks, and third, limiting retailers flexibility to raise prices will give them an incentive preemptively to charge higher margins than the otherwise would.

The comments also state that the bill’s prohibition on zone pricing also would harm consumers, as past investigations have revealed no evidence that the practice is used to coordinate wholesale prices, and that it can benefit consumers by creating incentives for refiners to add retail stations in less-competitive areas. Thus, by banning zone pricing, the bill has the potential to reduce entry into areas that are currently less-competitive than others. Finally, the comments explain that a ban on zone pricing is unnecessary because state and federal antitrust law already exists to address situations where it is likely to harm consumers. The Commission vote authorizing the staff to file the comments with State Representative Stone was 4-0, with Commissioner Jon Leibowitz not participating. (FTC File No. V070008; the staff contact is James Cooper, Office of Policy Planning, 202-326-3367.)

Commission approval of Federal Register notice: The Commission has approved the publication of a Federal Register notice regarding the agency’s regulatory review of its Guide Concerning Fuel Economy Advertising for New Automobiles (the Fuel Economy Guide). The Fuel Economy Guide was adopted in 1975 to prevent deceptive fuel economy advertising and to facilitate the use of fuel economy information in advertising. As detailed in the notice, which can be found as a link to this press release on the FTC’s Web site, the Commission is initiating a review of the Fuel Economy Guide as part of its continuing review of FTC rules and regulations. The Commission is seeking comments on, among other things, whether there is a continuing need for the Guide and, if so, what changes should be made to it, if any, in light of the recent EPA amendments to fuel economy labeling requirements for automobiles. Comments will be accepted through July 23, 2007.

The Commission vote approving publication of Federal Register notice was 5-0. (FTC File No. R711008; the staff contact is Hampton Newsome, Bureau of Consumer Protection, 202-326-2889.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

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