The Federal Trade Commission today announced it will not continue with administrative litigation challenging Western Refining, Inc.’s acquisition of Giant Industries, Inc. The vote to dismiss the administrative complaint was 3-2, with the Commission majority issuing a statement explaining its reasons for dismissal, and Commissioners Pamela Jones Harbour and J. Thomas Rosch issuing a separate dissenting statement. The statements are available on the FTC’s Web site as a link to this press release.
The Commission voted to challenge the proposed acquisition in April 2007, filing complaints before both a federal district court and an FTC administrative law judge. The case subsequently was heard before the U.S. District Court for the District of New Mexico, which denied the Commission’s motion for a preliminary injunction. The Commission then filed a motion for an injunction pending appeal in the U.S. Court of Appeals, which denied the motion. On June 7, 2007, the matter was withdrawn from administrative litigation in order to permit the Commission to assess the public interest in further proceedings.
The Commission based its decision to discontinue administrative litigation on application of the criteria set forth in the agency’s Policy Statement Regarding Administrative Merger Litigation Following the Denial of a Preliminary Injunction. These criteria are: (1) the factual findings and legal conclusions of the district court or any appellate court; (2) any new evidence developed during the course of the preliminary injunction proceeding; (3) whether the transaction raises important issues of fact, law, or merger policy that need resolution in administrative proceedings; (4) an overall assessment of the costs and benefits of further proceedings; and (5) any other matter that bears on whether it would be in the public interest to proceed with the merger challenge.
The statement notes the Commission’s strong disagreement with the district court’s view of the facts of this case and with many of its legal conclusions. After weighing all relevant factors, however, the Commission concluded that “continuing to pursue the case would not be in the public interest.” For example, according to the statement, “it does not appear that the record before the district court was deficient in any serious respect . . . and it does not appear that the Commission was prevented from presenting any important evidence regarding the potential impact of the merger.” In addition, new facts that came to light during discovery leading to the preliminary injunction hearing suggest opportunities for new bulk suppliers to deliver gasoline to the Albuquerque area, thereby increasing competition and lowering gasoline prices in Northern New Mexico. The Commission further concluded that the transaction does not raise important issues of fact, law, or merger policy that need resolution in administrative proceedings.
According to the Commission statement, “The use of FTC resources is always an important consideration in determining whether to continue in administrative litigation. . . [W]e believe that an administrative proceeding would require substantially more resources, which should instead be reallocated to new competition matters, including in particular other gasoline matters.”
Commissioners Harbour and Rosch dissented from the decision to dismiss the administrative complaint. In their separate statement, they noted the significant factual and legal errors with the district court’s opinion dismissing the motion for a preliminary injunction. Those errors and the “paramount importance of ‘getting it right’ when gasoline refinery mergers are at issue” warranted a full plenary trial in their opinion. A full trial on the merits would have allowed a fuller analysis of complaint counsel’s allegations that Giant Industries had a unique ability and incentive to increase gasoline supply to Northern New Mexico, and that such increased supply would have resulted in lower gasoline prices in northern New Mexico – a market that has long experienced some of the higher gasoline prices in the continental United States. The district court’s opinion, issued only six weeks after the filing of the Commission’s complaint, failed to fully address these issues, the dissenting statement said. Specifically, the statement said, “We do not consider a preliminary injunction hearing to be any substitute for a plenary trial in this respect.”
The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.