Litigation News

FTC Resolves Aloha Petroleum Litigation

Aloha’s Agreement with Mid Pac Restores Competition That Would Have Been Lost in the Bulk Supply Gasoline Market in Hawaii

The Federal Trade Commission today announced that, because of changed circumstances, it has asked the Federal District Court for the District of Hawaii to dismiss the FTC’s complaint seeking an injunction to block Aloha Petroleum LTD.’s (Aloha) proposed $18 million acquisition of a half interest in an import-capable terminal and retail gasoline assets of Trustreet Properties, Inc. (Trustreet) on the island of Oahu, Hawaii. Following a unanimous decision, the Commission filed its motion after Aloha announced it would enter into a 20-year throughput agreement giving Mid Pac Petroleum LLC (Mid Pac) substantial rights to use the Barbers Point terminal. The agreement will restore competition threatened by the acquisition.

“This is a clear victory for consumers in Hawaii,” said Susan Creighton, Director of the FTC’s Bureau of Competition. “Through this agreement, Mid Pac will become a significant competitor in the marketing of bulk supply gasoline on Oahu.” Accordingly, she said, the Commission has decided not to pursue further litigation in this case.

The Throughput Agreement

Aloha’s 20-year throughput agreement with Mid Pac will essentially substitute Mid Pac for Trustreet as a bulk supply gasoline marketer in Hawaii. Mid Pac owns and operates several retail gasoline stations in Hawaii under the Union 76 brand. Mid Pac also supplies gasoline to several other Union 76 stations owned by third parties.

The Commission has carefully examined the terms of this agreement between Aloha and Mid Pac and believes it will restore competition that would have been lost if the Commission had not challenged the acquisition. The throughput agreement gives substantial rights to Mid Pac to use the Barbers Point terminal to import virtually unlimited quantities of gasoline into Hawaii.

Case Background

Aloha already owns a 50 percent interest in the Barbers Point petroleum importing terminal on Oahu and under the transaction as proposed would have acquired the other half interest from Trustreet. The Barbers Point terminal is the newest on the island and it can take full cargoes of gasoline, which is the most economical way to bring in low-cost bulk supply to Hawaii.

The FTC’s complaint alleged that the ability to import cargoes of gasoline is necessary to obtain a competitive bulk supply price from one of the two refiners on Oahu, Chevron Corporation and Tesoro Corporation. As co-owners of the Barbers Point Terminal, both Aloha and Trustreet therefore had the ability to market gasoline competitively in Hawaii. The only other terminal available for gasoline imports is the Shell terminal.

Consequently, the complaint stated that, if the acquisition were allowed to proceed, it would reduce the number of gasoline marketers with ownership of, or guaranteed access to, a refinery or an import-capable terminal from five to four. It would also reduce from three to two the number of bulk suppliers who have been willing to sell to unintegrated retailers. The acquisition would thus be likely to result in higher prices for bulk supply of gasoline.

State Cooperation and Assistance

The Commission appreciates the assistance of the Hawaii Attorney General’s Office in investigating and prosecuting this matter. Specifically, the Attorney General’s Office lent one of its staff to serve as a Special Deputy with the FTC, which made a substantial contribution to the quick and successful resolution of this case.

The vote authorizing the staff to withdraw the complaint was 3-0-1, with Chairman Deborah Platt Majoras recused.

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 ftc.gov/bc/compguide/index.htm.

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