By Jody Coultas, J.D.
The FTC has settled charges that Marathon Petroleum Corporation’s proposed acquisition of Express Mart would violate the Clayton Act and FTC Act by reducing the number of competitively constraining independent market participants. To address the FTC’s concerns, Marathon agreed to divest to competitor Sunoco retail gas stations in five New York markets, the FTC announced (In the Matter of Marathon Petroleum Corporation, FTC File No. 181 0152).
Marathon, through its wholly owned subsidiary Speedway, operates retail gasoline and diesel fuel stations in the United States. Express Mart is comprised of three affiliated entities, Express Mart Franchising Corp., Petr-All Petroleum Consulting Corporation, and REROB, LLC, which also sell gasoline and diesel fuel. On April 13, Marathon proposed to acquire, through Speedway, Express Mart’s New York retail outlets and other interests, including Express Mart Franchising Corp., Petr-All Petroleum Consulting Corporation, and REROB, LLC.
According to the complaint, the proposed acquisition would harm competition for both retail gasoline and retail diesel in five local markets in New York State: Farmington, Fayetteville, Johnson City, Rochester, and Whitney Point. In three of the five retail diesel markets, the proposed acquisition would result in a merger to monopoly. In the fourth, the proposed acquisition would reduce the number of significant competitors from three to two. In the fifth, the proposed acquisition would reduce the number of significant competitors from four to three.
The FTC was concerned that without certain divestitures, the acquisition would substantially lessen competition for the retail sale of gasoline and diesel in the five identified markets. Retail fuel outlets pay close attention to nearby competitors that share similar store characteristics and face similar traffic flow of potential customers. Thus, according to the FTC, Marathon could unilaterally raise prices in each of the five local markets, which would enhance the incentives for interdependent behavior in all five local markets.
Under the proposed consent order, Marathon would be required to divest to Sunoco retail fuel assets in Farmington, Fayetteville, Johnson City, Rochester, and Whitney Point within 90 days after the acquisition is completed. Marathon and Express Mart would be required to maintain the competitiveness of the divestiture assets during the divestiture process.
The agreement will be subject to public comment through November 26.
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