The world's two largest manufacturers of lead antiknock gasoline additives, Octel and Ethyl, have agreed to settle Federal Trade Commission charges that they violated the antitrust laws by arranging to close an Ethyl plant and have Ethyl obtain all of its future supply from Octel under an anticompetitive supply agreement. The agreement to settle the charges would require that The Associated Octel Company Ltd. (Octel) and its parent corporation, Great Lakes Chemical Corporation, modify price and volume provisions of its contract with Ethyl Corporation; bar consumer price disclosures between the companies; and provide prior notification of an acquisition of any assets used in the distribution of lead antiknock compounds in the United States, or the manufacture of lead antiknock compounds worldwide.
Octel is based in Ellsemere Port, England. Its parent company, Great Lakes, is headquartered in West Lafayette, Indiana. Ethyl's principal place of business is Richmond, Virginia.
According to the FTC complaint, between October 1993 and March 1994, Octel and Ethyl entered into an agreement whereby Ethyl agreed to stop manufacturing lead antiknock compounds and, in return, Octel agreed to supply Ethyl with a limited volume of lead antiknock compounds. The agency charged that this agreement, combined with particular portions of the resulting supply agreement, served to diminish competition between Ethyl and Octel. By tying the maximum amount of product Ethyl could receive to a percentage of Octel's total capacity, the supply agreement rendered Ethyl unable to increase output to defeat a possible Octel price increase. In addition, Ethyl's cost for the product was tied to the retail price Octel charged its customers. This allowed Octel to increase Ethyl's costs, and possibly Ethyl's price, by raising its own retail prices. Finally, another provision of the supply agreement, which required that Octel disclose its average retail price to Ethyl, made it easier for the firms to overcharge consumers because one firm knew what the other was charging, according to the FTC.
Under the proposed consent order, Octel, Great Lakes and Ethyl would settle the FTC charges by modifying their agreements to correct those problems. First, the restriction on supply amount would be lifted. Octel would be required to supply Ethyl with whatever quantity of lead antiknock compounds it requires to support or expand its customer base in the United States. "The elimination of the artificial cap on Ethyl's output should enhance Ethyl's incentives to price aggressively," the FTC said. Second, the proposed orders would eliminate the provisions of the agreement that tie Ethyl's price to purchase the compounds to Octel's retail prices. Third, the agreements would prohibit the companies from disclosing to one another the prices that they charge their customers. Finally, the agreements would require that the companies give the FTC notice before acquiring the assets of any firm engaged in the distribution of lead antiknock compounds in the United States, or the manufacture of lead antiknock compounds worldwide. Prior notice also would be required for agreements to sell lead antiknock compounds to competitors -- agreements which could potentially have the same anticompetitive effect that this one allegedly had.
The Commission vote to accept the consent agreement for a public comment period was 4-0, with Commissioner Mary L. Azcuenaga not participating. An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. 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 $11,000.
Copies of the complaint and proposed consent agreement are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC file No. 971 0004)