Ferrellgas Partners, L.P.; Ferrellgas, L.P., Also Doing Business as Blue Rhino; AmeriGas Partners, L.P., Also Doing Business as AmeriGas Cylinder Exchange; and UGI Corporation; Analysis To Aid Public Comment, 66371-66377 [2014-26551]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 79, Number 216 (Friday, November 7, 2014)]
[Notices]
[Pages 66371-66377]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26551]


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FEDERAL TRADE COMMISSION

[Docket No. 9360]


Ferrellgas Partners, L.P.; Ferrellgas, L.P., Also Doing Business 
as Blue Rhino; AmeriGas Partners, L.P., Also Doing Business as AmeriGas 
Cylinder Exchange; and UGI Corporation; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreements.

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SUMMARY: The consent agreements in this matter settle alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis to Aid Public Comment describes both the 
allegations in the administrative complaint issued by the Commission 
and the terms of the consent orders--embodied in the consent 
agreements--that would settle these allegations.

DATES: Comments must be received on or before December 2, 2014.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/amerigasbluerhinoconsent online or on 
paper, by following the instructions in the Request for Comment part of 
the SUPPLEMENTARY INFORMATION section below. Write ``In the Matter of 
AmeriGas and Blue Rhino--Consent Agreement; Docket No. 9360'' on your 
comment and file your comment online at https://ftcpublic.commentworks.com/ftc/amerigasbluerhinoconsent by following 
the instructions on the web-based form. If you prefer to file your 
comment on paper, write ``In the Matter of AmeriGas and Blue Rhino--
Consent Agreement; Docket No. 9360'' on your comment and on the 
envelope, and mail it to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite 
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Eric Edmondson, FTC Western Region, 
San Francisco, (415-848-5179), 901 Market Street, Suite 570, San 
Francisco, CA 94103.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 3.25(f), 16 CFR 
3.25(f), notice is hereby given that the above-captioned consent 
agreements containing consent orders to cease and desist, having been 
filed with and accepted, subject to final approval, by the Commission, 
have been placed on the public record for a period of thirty (30) days. 
The following Analysis to Aid Public Comment describes the terms of the 
consent agreements, and the allegations in the complaint. An electronic 
copy of the full text of each consent agreement package can be obtained 
from the FTC Home Page (for October 31, 2014), on the World Wide Web, 
at https://www.ftc.gov/os/actions.shtm.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before December 2, 
2014. Write ``In the Matter of AmeriGas and Blue Rhino--Consent 
Agreement; Docket No. 9360'' on your comment. Your comment--including 
your name and your state--will be placed on the public record of this 
proceeding, including, to the extent practicable, on the public 
Commission Web site, at https://www.ftc.gov/os/publiccomments.shtm. As a 
matter of discretion, the Commission tries to remove individuals' home 
contact information from comments before placing them on the Commission 
Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which . . . is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept

[[Page 66372]]

confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/amerigasbluerhinoconsent by following the instructions on the web-
based form. If this Notice appears at https://www.regulations.gov/#!home, you also may file a comment through that Web site.
    If you file your comment on paper, write ``In the Matter of 
AmeriGas and Blue Rhino--Consent Agreement; Docket No. 9360'' on your 
comment and on the envelope, and mail your comment to the following 
address: Federal Trade Commission, Office of the Secretary, 600 
Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580, 
or deliver your comment to the following address: Federal Trade 
Commission, Office of the Secretary, Constitution Center, 400 7th 
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. If 
possible, submit your paper comment to the Commission by courier or 
overnight service.
    Visit the Commission Web site at https://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before December 2, 2014. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at https://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'' or ``FTC'') has 
accepted, subject to final approval, agreements containing proposed 
consent orders (``Consent Agreements'') resolving an administrative 
complaint issued by the Commission on March 27, 2014. The FTC accepted 
a consent agreement from Respondents AmeriGas Partners, L.P., also 
doing business as AmeriGas Cylinder Exchange, and UGI Corporation 
(collectively ``AmeriGas'') and a separate consent agreement from 
``Blue Rhino'' Respondents Ferrellgas Partners, L.P. and Ferrellgas, 
L.P., also doing business as Blue Rhino (collectively ``Blue Rhino''). 
AmeriGas and Blue Rhino are referred to collectively herein as 
``Respondents.'' The complaint charges that AmeriGas and Blue Rhino 
violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, 
by colluding to push Walmart, a key customer, to accept a reduction in 
the amount of propane in the propane exchange tanks each sold to 
Walmart.
    Under the terms of the Consent Agreements, AmeriGas and Blue Rhino 
are prohibited from agreeing with any competitor in the propane tank 
exchange business to modify fill levels or otherwise fix the prices of 
exchange tanks, or to coordinate communications with customers. Each is 
also required to maintain an antitrust compliance program.
    The Commission believes that the terms of the proposed orders 
contained in the Consent Agreements will resolve the competitive issues 
described in the complaint. The Consent Agreements have been placed on 
the public record for 30 days for receipt of comments from interested 
members of the public. Comments received during this period will become 
part of the public record. After 30 days, the Commission will review 
the Consent Agreements and any comments received, and will decide 
whether it should withdraw from the Consent Agreements or make final 
the proposed orders contained in the Consent Agreements.
    The purpose of this Analysis to Aid Public Comment is to invite and 
facilitate public comment concerning the proposed orders. It is not 
intended to constitute an official interpretation of the proposed 
Consent Agreements and the accompanying proposed orders or in any way 
to modify their terms.
    The Consent Agreements are for settlement purposes only and do not 
constitute an admission by either Respondent that it has violated the 
law, or that the facts alleged in the complaint, other than the 
jurisdictional facts, are true.

II. The Complaint

    The following allegations are taken from the complaint and publicly 
available information.

A. Background

    Blue Rhino and AmeriGas control approximately 80 percent of the 
market for propane exchange tanks. These tanks are portable, steel 
tanks, prefilled with propane, primarily used for propane barbeque 
grills and patio heaters. There are no widely used substitutes for 
exchange tanks that provide a similar ease of use. Consumers typically 
purchase these prefilled tanks at home improvement stores, hardware 
stores, mass merchandisers, supermarkets, convenience stores, and gas 
stations.
    To compete effectively to serve national retailers, including mass 
merchandisers such as Walmart, The Home Depot, and Lowe's, propane 
exchange tank manufacturers must have access to refurbishing and 
refilling facilities located throughout the United States.\2\ AmeriGas 
and Blue Rhino are the only manufacturers who can supply exchange tanks 
to large national retailers, except on a limited basis.
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    \2\ As described in the complaint, Respondents have entered into 
a number of ``co-packing'' agreements, pursuant to which one of the 
Respondents processes and refills propane exchange tanks for the 
other Respondent at certain of their processing plants.
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B. Challenged Conduct

    In 2008, Blue Rhino and AmeriGas each decided to implement a price 
increase by reducing the amount of propane in their exchange tanks from 
17 pounds to 15 pounds, without a corresponding decrease in the 
wholesale price. Blue Rhino publicly announced its fill reduction plan 
on June 25, 2008. AmeriGas publicly announced its fill reduction plan 
on July 10, 2008. The FTC's complaint does not allege that Respondents' 
initial decision to reduce fill levels to 15 pounds was the result of 
an agreement between the parties.
    Walmart purchases tanks from both Blue Rhino and AmeriGas and 
initially refused to accept the planned fill reduction. Blue Rhino and 
AmeriGas understood they could not sustain the fill reduction unless it 
was accepted by Walmart. Blue Rhino's customer Lowe's accepted the fill 
reduction only on the condition that all of Blue Rhino's other 
customers, including Walmart, also accept the fill reduction within a 
short period of time. Faced with resistance from Walmart, Blue Rhino 
and AmeriGas colluded by secretly agreeing that neither would deviate 
from their proposal to reduce the fill level to Walmart.
    On or about July 10, 2008, and continuing for three months 
thereafter, Blue Rhino and AmeriGas sales executives communicated 
repeatedly with each other regarding the status of their respective 
efforts to persuade Walmart to accept the fill reduction. The secret 
agreement between Blue Rhino and AmeriGas that neither would deviate 
from their proposal to Walmart

[[Page 66373]]

when faced with resistance from Walmart, and their combined efforts to 
push Walmart to promptly accept the fill reduction had the effect of 
raising the price per pound of propane to Walmart and likely to the 
ultimate consumers.
    The Complaint alleges that this agreement violated Section 5 of the 
FTC Act by unreasonably restraining trade and constituting an unfair 
method of competition. The agreement alleged in the Complaint is per se 
unlawful.\3\
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    \3\ See, e.g., United States v. Socony-Vacuum Oil Co., 310 U.S. 
150, 223-24, n.59 (1940) (agreements among horizontal competitors to 
buy surplus gasoline on spot market to prevent prices from falling 
sharply held per se illegal, even though there was no agreement on 
price to be maintained; agreements to raise, lower, stabilize, or 
otherwise restrain price competition are summarily condemned as per 
se illegal under Section 1 of the Sherman Act.); Catalano, Inc. v. 
Target Sales, Inc., 446 U.S. 643 (1980) (per curiam) (agreement 
among horizontal competitors to eliminate a form of short-term 
credit was tantamount to an agreement to eliminate discounts and 
held per se illegal as price fixing); Nat'l Macaroni Mfrs. Ass'n v. 
FTC, 65 F.T.C. 583, 612 (1964), enforced, 345 F.2d 421 (7th Cir. 
1965) (agreement between competitors to reduce the percentage of 
more expensive and higher quality durum wheat and increase the 
percentage of less expensive and lower quality farina wheat for 
pasta held per se illegal).
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III. The Proposed Orders

    The proposed orders are designed to remedy the unlawful conduct 
charged against the Respondents in the complaint and to prevent future 
unlawful conduct. The proposed orders, although entered into separately 
with AmeriGas and Blue Rhino, are identical in all material respects. 
Paragraph II of the proposed orders contains two key prohibitions. The 
first, contained in Paragraph II.A., bars Respondents from soliciting, 
offering, participating in, or entering into any type of agreement with 
any competitor in the propane exchange business to modify the fill 
level, or maintain, stabilize, or otherwise fix the price of propane 
exchange tanks. In addition, it prohibits Respondents from coordinating 
communications to customers or competitors.
    The second, contained in Paragraph II.B., prevents Respondents from 
sharing competitively sensitive non-public information with competitors 
except in identified circumstances. Respondents may exchange limited 
information needed to negotiate and fulfill the terms of refilling 
agreements. The proposed orders allow this information sharing because 
transporting exchange tanks is a significant expense and co-packing 
agreements may lower the cost of serving customers located farther away 
from filling facilities.
    The proposed orders also allow Respondents to share information 
with competitors as part of legally supervised due diligence or to 
participate in a joint venture. However, Respondents are prohibited 
from sharing highly sensitive information, such as future pricing and 
marketing plans, with employees whose duties include pricing, sales and 
marketing of exchange tanks. Further, Respondents are permitted to 
share confidential information with competitors to respond to health, 
safety, emergency or regulatory matters. Finally, Respondents can 
participate in industry-wide data exchange or market research so long 
as a third party collects the data and only disseminates data that are 
at least three months old and aggregated from a significant portion of 
the propane exchange industry.
    Paragraph III of the proposed orders requires that Respondents 
establish and maintain antitrust compliance programs for their propane 
tank exchange business in the United States and identifies the 
requirements for that program. The remaining provisions of the proposed 
orders contain reporting and compliance requirements commonly found in 
FTC competition orders.
    Pursuant to FTC policy regarding the term for competition orders, 
the proposed orders will expire in 20 years.

    By direction of the Commission, Commissioner Ohlhausen 
dissenting, and Commissioner McSweeny not participating.
Donald S. Clark,
Secretary.

Statement of Chairwoman Edith Ramiez and Commissioner Julie Brill

    The Commission is issuing for public comment two identical proposed 
Orders that would resolve allegations that AmeriGas and Blue Rhino 
entered into an unlawful agreement that neither would deviate from its 
plan to reduce the amount of propane in prefilled propane exchange 
tanks sold to Walmart. The Commission commenced administrative 
litigation in this matter on March 27, 2014; AmeriGas and Blue Rhino 
have now agreed to settle the case. The proposed Orders will prevent 
the parties from engaging in collusive conduct with rivals in the 
future. Each respondent is prohibited from agreeing with any competitor 
in the propane tank exchange business to modify fill levels or 
otherwise to fix the price of exchange tanks, or to exchange 
competitively sensitive information. In addition, each respondent is 
required to maintain an antitrust compliance program.
    Propane exchange tanks are a staple in the backyards of American 
consumers. The collusive agreement, as alleged, was facially 
anticompetitive and had the effect of raising the price per pound of 
propane exchange tanks to Walmart and likely ultimate consumers in 
violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 
Sec.  45. Our action today thus provides important relief to American 
consumers and sends a clear signal to the marketplace that 
anticompetitive collusion will not be tolerated.
    AmeriGas and Blue Rhino are the two largest suppliers of propane 
exchange tanks in the United States, together controlling approximately 
80 percent of the market. No other competitor serves more than nine 
percent of the market or is capable of serving large national 
retailers, such as Walmart and Lowe's. As detailed in the Commission's 
Complaint, in 2008, AmeriGas and Blue Rhino faced rapidly increasing 
input costs. To offset these rising costs, AmeriGas and Blue Rhino each 
decided to reduce the fill level in their propane exchange tanks from 
17 to 15 pounds--without a corresponding price decrease. This 
effectively increased the per unit price of the propane by 13 percent.
    Walmart rejected proposals from both AmeriGas and Blue Rhino to 
reduce the propane fill levels; Walmart's buyer viewed each proposal as 
a price increase to which Walmart was not willing to agree. Although 
Blue Rhino's largest customer, Lowe's, accepted the fill reduction, it 
did so on the express condition that all of Blue Rhino's customers 
(including Walmart) also accept the fill reduction promptly. Blue Rhino 
and AmeriGas understood that they could not sustain the fill reduction 
across the industry unless it was accepted by Walmart.
    The Commission's Complaint does not allege that the Respondents' 
initial decisions to reduce fill levels to 15 pounds were the result of 
an agreement. However, the Complaint alleges that thereafter, in light 
of Walmart's continued resistance to the reduction, and the risk that 
other customers would also demand to return to 17-pound tanks, AmeriGas 
and Blue Rhino agreed that neither would accede to pressure from 
Walmart. Faced with this united front, Walmart capitulated to the 
sellers' demand. This subsequent agreement to act in concert in 
negotiations with Walmart is the basis for the Commission's challenge.
    The investigation revealed ample evidence to provide us with a 
reason to believe that AmeriGas and Blue Rhino entered into an unlawful 
agreement.\1\

[[Page 66374]]

For example, AmeriGas and Blue Rhino executives spoke frequently in the 
days leading up to Walmart's decision to accept the fill reductions, 
and at one point a frustrated AmeriGas Director of National Accounts 
suggested to Blue Rhino that it was time for them to issue an ultimatum 
to Walmart.\2\ Blue Rhino's Vice President of Sales responded by urging 
AmeriGas to ``hang in there'' as Blue Rhino continued to negotiate with 
Walmart.\3\
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    \1\ In the Matter of Ferrellgas Partners, L.P., et al., FTC 
Docket No. 9360, Complaint (Mar. 27, 2014), available at 
www.ftc.gov/system/files/documents/cases/140401amerigascomplaint.pdf.
    \2\ Complaint ] 50.
    \3\ Id.
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    Reducing the volume of propane gas in a tank while keeping the 
price constant is equivalent to a per unit price increase. Indeed, that 
is how Walmart understood the fill reduction. The joint strategy 
therefore entails a restriction on price competition and does not 
present any new or novel theory of liability.\4\ It does not matter 
that the Complaint does not allege that AmeriGas and Blue Rhino agreed 
to keep their respective prices to Walmart constant, or that Walmart 
may have been free to negotiate prices with the parties, as noted in 
Commissioner Ohlhausen's dissent. The law is clear that price fixing 
agreements ``may or may not be aimed at complete elimination of price 
competition'' \5\ and are unlawful in either instance because of the 
enormous threat they pose to the free market.\6\ There is also no 
reasonable procompetitive justification for the alleged agreement, 
particularly since it was directed to a significant customer whose 
refusal to accept the proposal had the potential to cause the firms' 
fill reduction plans to unravel. The agreement thus amounts to a per se 
unlawful naked restraint on price competition.\7\ As Judge Posner 
explained in In re Sulfuric Acid Antitrust Litigation, ``[t]he per se 
rule is designed for cases in which experience has convinced the 
judiciary that a particular type of business practice has no (or 
trivial) redeeming benefits ever.'' \8\
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    \4\ Cf. Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 648 
(1980) (per curiam) (agreement among horizontal competitors to 
eliminate a form of short-term credit was tantamount to an agreement 
to eliminate discounts and held per se illegal as price fixing even 
though there was no agreement on actual price); U.S. v. Socony-
Vacuum Oil Co., 310 U.S. 150, 223-24, n.59 (1940) (agreements among 
horizontal competitors to buy surplus gasoline on spot market to 
prevent prices from falling sharply held per se illegal, even though 
there was no agreement on price to be maintained).
    \5\ Socony-Vacuum Oil, 310 U.S. at 224 n.59. See also F.T.C. v. 
Superior Court Trial Lawyers Ass'n, 493 U.S. 411, 423 (1980) (noting 
that constriction of supply is the essence of price-fixing, whether 
it be accomplished by agreement upon a price, which will decrease 
the quantity demanded, or by agreeing upon an output, which will 
increase the price offered).
    \6\ As noted in Socony-Vacuum, 310 U.S. at 224 n. 59: 
``[w]hatever economic justification particular price-fixing 
agreements may be thought to have, the law does not permit an 
inquiry into their reasonableness. They are all banned because of 
their actual or potential threat to the central nervous system of 
the economy.'' See also NCAA v. Board Of Regents, 468 U.S. 85, 100 
(1983) (``Horizontal price fixing and output limitation are 
ordinarily condemned as a matter of law under an `illegal per se' 
approach because the probability that these practices are 
anticompetitive is so high; a per se rule is applied when `the 
practice facially appears to be one that would always or almost 
always tend to restrict competition and decrease output.' '' citing 
Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 
U.S. 1, 19-20 (1979)).
    \7\ See Fed. Trade Comm'n & Dep't of Justice, Antitrust 
Guidelines for Collaborations Among Competitors (2000), available 
at: https://www.ftc.gov/sites/default/files/documents/public_events/joint-venture-hearings-antitrust-guidelines-collaboration-among-competitors/ftcdojguidelines-2.pdf (``Certain types of agreements 
are so likely to harm competition and to have no significant 
procompetitive benefit that they do not warrant the time and expense 
required for particularized inquiry into their effects. Once 
identified, such agreements are challenged as per se unlawful.'').
    \8\ 703 F.3d 1004, 1011-12 (7th Cir. 2012) (rejecting per se 
treatment of agreements on the ground there were reasonable 
procompetitive justifications for the alleged agreement); see also 
National Macaroni Mfrs. Ass'n v. FTC, 65 F.T.C. 583, 612 (1964), 
enforced, 345 F.2d 421 (7th Cir. 1965) (agreement between 
competitors to reduce the percentage of more expensive and higher 
quality durum wheat and increase the percentage of less expensive 
and lower quality farina wheat for pasta held per se illegal).
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    Whether the initial decision to reduce fill levels was the result 
of independent decision-making has no bearing on the unlawfulness of 
the parties' subsequent agreement to maintain a united front with 
respect to Walmart.\9\ In addition, Walmart's position as the ``largest 
propane exchange tank retailer in the United States'' \10\ does not 
protect it from coercion. Even a power buyer like Walmart is vulnerable 
when its only two suppliers for a product have secretly agreed not to 
deviate from a proposed price increase.
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    \9\ Cf. Sugar Institute v. United States, 297 U.S. 553, 601 
(1936) (agreement to adhere to previously announced prices and terms 
of sale held per se illegal, even though the previously announced 
prices and terms were unilaterally determined).
    \10\ Complaint ] 35.
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    We continue to believe that pursuing this case was in the public 
interest. Contrary to Commissioner Ohlhausen's dissent, the private 
settlements that Blue Rhino and AmeriGas entered into resulted in very 
little benefit to consumers. While the settlement amounts in the 
private litigation noted by Commissioner Ohlhausen may superficially 
sound impressive, the vast majority of the actual funds distributed 
covered Plaintiffs' attorneys' fees, cy pres payments and 
administrative fees and expenses, with only a trivial amount disbursed 
to consumers. The proposed Orders will benefit consumers by prohibiting 
conduct that could lead to future agreements on price or other 
competitive terms.

Dissenting Statement of Commissioner Maureen K. Ohlhausen

    I voted against the issuance of the Part III complaint against 
AmeriGas and Blue Rhino last March, and I now dissent from the consent 
agreement proposed by the Commission. I write briefly to explain my 
opposition to the majority's pursuit and now settlement of this novel, 
unwarranted enforcement action.
    Neither the theory advanced by the staff and ultimately adopted by 
the Commission nor the evidence offered in support thereof convinced me 
that there was reason to believe the parties had restrained competition 
in violation of Section 5 of the FTC Act. In my view, the allegations 
in this case--that the parties ``colluded by secretly agreeing to 
maintain a united front to push their joint customer, Walmart, to 
accept the [propane tank] fill reduction'' \1\--fit poorly, at best, in 
the Section 1 case law. I am not aware of any Section 1 case that 
involved an alleged agreement among competitors to coerce a single 
customer to accept a decrease in product size that the competitors had 
pursued independently and that in no way precluded independent 
negotiation of the product's price between each competitor and the 
customer. I simply ``have never seen or heard of an antitrust case 
quite like this.'' \2\
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    \1\ In re Ferrellgas Partners, L.P., FTC Dkt. No. 9360, 
Complaint, at 2 (Mar. 27, 2014), available at https://www.ftc.gov/system/files/documents/cases/140401amerigascomplaint.pdf.
    \2\ In re Sulfuric Acid Antitrust Litig., 703 F.3d 1004, 1011 
(7th Cir. 2012) (Posner, J.) (rejecting per se treatment for 
agreements among competitors to shut down certain of their plants 
and abide by exclusive territorial restrictions).
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    One of my several concerns at the time the complaint issued was 
that the Walmart-as-lynchpin theory would effectively collapse into one 
in which the Commission was challenging the independently decided fill 
reduction.\3\ The Commission, however, obviously did not have 
sufficient evidence to pursue that more direct case.
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    \3\ See, e.g., In re Ferrellgas Partners, L.P., FTC Dkt. No. 
9360, Concurring Statement of Commissioner Joshua D. Wright, at 3 
(Oct. 31, 2014) (referring to ``the collusion between AmeriGas and 
Blue Rhino to reduce the amount of propane in tanks sold to 
Walmart''); Roundtable Conference with Enforcement Officials, 
Antitrust Source, June 2014, at 4 (``Just yesterday, we announced 
that the Commission voted to issue an administrative complaint 
against AmeriGas and Blue Rhino. . . . We have alleged that the two 
rivals illegally coordinated on reducing the amount of propane in 
the tanks that were sold to a key customer.'') (Chairwoman Ramirez).
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    Even more troubling, the majority's treatment of the alleged 
conduct as per

[[Page 66375]]

se unlawful depends on an unfounded assertion that the parties agreed 
to keep their prices fixed. Chairwoman Ramirez and Commissioner Brill 
are certainly correct that ``[r]educing the volume of propane gas in a 
tank while keeping the price constant is equivalent to a per unit price 
increase.'' \4\ The problem for the majority's position is that the 
complaint in this matter did not allege an agreement between AmeriGas 
and Blue Rhino to keep their respective prices to Walmart constant. 
There was no allegation in the complaint that the parties agreed in any 
way on the pricing of the lesser-filled propane tanks. Walmart was free 
to negotiate prices or any other price element with the parties. Yet, 
there is no allegation that Walmart tried but was unable to re-
negotiate the price of the tanks with each of the parties. Thus, 
neither the majority's assertion that the parties ``secretly agreed not 
to deviate from a proposed price increase'' \5\ nor their 
characterization of the alleged agreement as ``a per se unlawful naked 
restraint on price competition'' \6\ find any support in the complaint 
or the evidence presented to the Commission.
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    \4\ In re Ferrellgas Partners, L.P., FTC Dkt. No. 9360, 
Statement of Chairwoman Edith Ramirez and Commissioner Julie Brill, 
at 2 (Oct. 31, 2014). See also Concurring Statement of Commissioner 
Joshua D. Wright, at 3 (``Here, it is self-evident that AmeriGas and 
Blue Rhino's agreement to reduce the amount of propane in tanks sold 
to Walmart has the economic effect of increasing the per unit price 
if prices are held constant.'') (emphasis added).
    \5\ Id. at 3 (emphasis added).
    \6\ Id. at 2 (emphasis added).
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    Try as the majority may to fit this case into the per se category 
of price and output restrictions among competitors, it simply does not 
belong in that category. As a result, the cases and other support cited 
by the majority--including Catalano, Sugar Institute, and commentary 
addressing agreements on various elements of price--are inapposite.\7\ 
In fact, none of the cases cited by Commissioners Ramirez, Brill, and 
Wright even remotely resembles the alleged facts in this case. The lack 
of judicial experience with the unique conduct alleged in this case 
further counsels against application of the per se rule, as well as any 
abbreviated rule of reason treatment, for that matter.\8\
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    \7\ See Statement of Chairwoman Edith Ramirez and Commissioner 
Julie Brill, at 2 & 3 nn.4 & 9 (citing, among other cases, Catalano, 
Inc. v. Target Sales, Inc., 446 U.S. 643 (1980); Sugar Institute v. 
United States, 297 U.S. 553 (1936)); Concurring Statement of 
Commissioner Joshua D. Wright, at 3 n.14 (citing Catalano; and 
citing Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ]2022a, 
at 174 (3d ed. 2012), for the proposition that agreements to fix 
various ``price elements'' are per se unlawful); id. at 2-3 n.13 
(discussing ``bid-rigging or auction collusion'').
    \8\ See, e.g., Timothy J. Muris & Brady P.P. Cummins, Tools of 
Reason: Truncation through Judicial Experience and Economic 
Learning, Antitrust, Summer 2014, at 46 (arguing that the antitrust 
agencies should apply a truncated rule of reason analysis only ``to 
restraints whose effect on competition is clear based on `judicial 
experience and current economic learning' '') (quoting In re 
Polygram Holding Inc., 136 F.T.C. 310, 344-45 (2003), aff'd sub nom. 
Polygram Holding, Inc. v. FTC, 416 F.3d 29 (D.C. Cir. 2005)).
---------------------------------------------------------------------------

    The majority's attempt to fit the alleged conduct into the per se 
category--done in large part through a mischaracterization of the 
allegations actually levied in the complaint--runs contrary to the now 
decades-long evolution in antitrust doctrine away from per se treatment 
of benign or even procompetitive business conduct, as well as the more 
sophisticated economic analysis that animates modern antitrust law.\9\ 
The majority did not allege that the parties agreed on either their 
propane output levels \10\ or the prices that they would charge Walmart 
(or any other customer). In my view, that takes the alleged agreement 
outside the scope of classic per se prohibitions of price and output 
restrictions, including joint conduct aimed at a single customer, such 
as bid rigging. At this point in the development of the antitrust laws, 
if anything, we should be continuing to move categories of conduct out 
of the per se category--not trying to squeeze conduct that we rarely 
encounter into the otherwise shrinking per se box.\11\
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    \9\ See, e.g., Bruce H. Kobayashi & Timothy J. Muris, Chicago, 
Post-Chicago, and Beyond: Time to Let Go of the 20th Century, 78 
Antitrust L.J. 147, 152-53 (2012) (``One result of the incorporation 
of economics into antitrust law has been the widespread rejection of 
broad rules of per se illegality. Over three decades, the Supreme 
Court abandoned most per se rules, leaving only naked horizontal 
price fixing and market division, plus a modified per se rule for 
tie-ins, under per se treatment.'') (footnotes omitted); Leah 
Brannon & Douglas H. Ginsburg, Antitrust Decisions of the U.S. 
Supreme Court, 1967 to 2007, 3 Competition Pol'y Int'l 1, 3 (2007) 
(arguing ``that the U.S. Supreme Court . . . is methodically re-
working antitrust doctrine to bring it into alignment with modern 
economic understanding'').
    \10\ The majority alleged neither an agreement as to each 
party's output level nor an agreement on reducing the amount of the 
propane in each firm's tanks. While the former agreement, if 
reached, would clearly be per se unlawful, the latter would not 
necessarily be per se unlawful, in my view. The parties had 
contracted to fill each other's propane tanks in certain areas of 
the country where one of the firms did not have refilling and 
refurbishing facilities. See Compl. ] 29. As a result, there would 
have been an efficiency justification--the need for uniform fill 
levels across the two suppliers--for any agreement on the fill 
level, and such agreement, had one been reached, would have been 
appropriately evaluated under the rule of reason. I take no position 
here on the legality of that hypothetical agreement. Again, there 
was no allegation in the complaint that the parties agreed on the 
fill levels in their tanks.
    \11\ I would have voted against this case, even if it had been 
pursued under the rule of reason because the evidence did not 
provide a reason to believe that the alleged conduct had an adverse 
impact on competition in the market for propane exchange tanks.
---------------------------------------------------------------------------

    Even assuming a valid theory under Section 1, the evidence 
presented to the Commission failed to convince me that the parties had 
reached an agreement to do anything. In my view, notwithstanding the 
alleged communications between the parties relating to Walmart,\12\ the 
evidence did not provide reason to believe the parties had reached an 
agreement on how they would ``push'' Walmart, which, as the complaint 
notes, is ``the largest propane exchange tank retailer in the United 
States.'' \13\ The evidence simply did not support the allegations that 
Walmart (the quintessential power buyer) was susceptible to pressure, 
that the parties were actually coercing Walmart, that the fill 
reductions pursued (separately) by the parties were going to unravel, 
or that the parties would have returned to the higher fill levels--as 
opposed to, for example, Walmart accepting the lower fill levels in 
exchange for a lower price.
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    \12\ Commissioner Wright fairly notes that no antitrust 
practitioner would counsel a client to engage in the direct 
competitor communications that were alleged to have happened here. 
See Concurring Statement of Commissioner Joshua D. Wright, at 2. One 
might even consider bringing a standalone Section 5 case against 
competitors that have engaged in the sharing of nonpublic, 
competitively sensitive information. See, e.g., In re Bosley, Inc., 
FTC Dkt. No. C-4404, Complaint (June 5, 2013), available at https://www.ftc.gov/sites/default/files/documents/cases/2013/06/130605aderansregiscmpt.pdf. However, the (largely one-way) 
communications at issue here are a far cry from the categories of 
conduct that are properly deemed per se unlawful.
    \13\ Compl. ] 35.
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    Further, even assuming a valid theory and sufficient evidence to 
support a Section 1 violation (both of which were lacking), I was not 
convinced that bringing this case was in the public interest. The 
alleged conduct had occurred nearly six years before the complaint was 
issued. More importantly, the respondents had settled private 
litigation that included antitrust claims (as well as other, consumer 
protection claims), with AmeriGas and Blue Rhino agreeing to pay up to 
$10 million and $25 million, respectively, to settle the private 
claims.\14\ As part of

[[Page 66376]]

that settlement, one of the parties, Blue Rhino, also agreed to provide 
additional antitrust compliance training to relevant company personnel. 
One can only assume that AmeriGas took comparable steps following the 
settlement. In light of these considerations and others, scarce 
Commission resources would have been better spent pursuing other, more 
worthwhile matters.
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    \14\ See Plaintiffs' Motion for Preliminary Approval of Amended 
Class Settlement, In re Pre-Filled Propane Tank Marketing and Sales 
Practices Litig., MDL No. 2086, No. 4:09-cv-00465 (W.D. Mo. Apr. 29, 
2010) (settlement with AmeriGas granted final approval on Oct. 4, 
2010); Plaintiffs' Motion for Preliminary Approval of Class 
Settlement, In re Pre-Filled Propane Tank Marketing and Sales 
Practices Litig., MDL No. 2086, No. 4:09-md-2086 (W.D. Mo. Oct. 6, 
2011) (settlement with Blue Rhino granted final approval on May 31, 
2012).
---------------------------------------------------------------------------

    Although the Commission may have discovered some smoke, there 
clearly was no fire in this case--whether fueled by propane or 
otherwise. In short, there was very weak evidence supporting what I saw 
as, at best, a novel Section 1 case. I therefore did not have reason to 
believe that the parties had committed a Section 1 violation. Nor did I 
think that it was in the public interest to pursue this enforcement 
action. For these reasons, I cannot vote for a consent agreement 
grounded on the same theory and evidence that was presented to me when 
the complaint originally issued.

Concurring Statement of Commissioner Joshua D. Wright

    The Commission has voted to accept proposed Consent Agreements to 
remedy allegations that AmeriGas and Blue Rhino restrained competition 
by colluding to reduce the amount of propane in tanks sold to Walmart. 
I voted in favor of issuing the Complaint and accepting the proposed 
Consent Agreements because the evidence is sufficient to provide reason 
to believe that AmeriGas and Blue Rhino engaged in conduct that is 
unlawful under the antitrust laws and the proposed settlements will 
improve consumer welfare by preventing the parties from engaging in 
anticompetitive conduct in the future.\1\ I write separately to explain 
my support for this enforcement action and the proposed settlements.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 45(b) (2012) (authorizing the Commission to 
initiate an enforcement action when it has ``reason to believe'' a 
party has engaged in an unfair method of competition).
---------------------------------------------------------------------------

    The alleged conspiracy would establish a relatively straightforward 
violation of the antitrust laws. In 2008, AmeriGas and Blue Rhino each 
independently reduced the amount of propane contained in their tanks 
from 17 pounds to 15 pounds.\2\ The fill reductions had the effect of a 
13 percent increase in the price of propane because neither AmeriGas 
nor Blue Rhino implemented a corresponding decrease in price.\3\ If the 
story had ended there, with merely unilateral action and no agreement 
between AmeriGas and Blue Rhino, there would be no violation of the 
antitrust laws and the Commission would not have pursued an enforcement 
action.
---------------------------------------------------------------------------

    \2\ In re Ferrellgas Partners, L.P., FTC Docket No. 9360, 
Complaint at ]] 1, 5, 32, 43 (Mar. 27, 2014), available at https://www.ftc.gov/system/files/documents/cases/140401amerigascomplaint.pdf.
    \3\ Id. at ]] 1, 33.
---------------------------------------------------------------------------

    However, the story did not end there. Walmart, the largest propane 
exchange tank retailer in the United States, resisted the fill 
reductions.\4\ Other retailers agreed to the fill reductions, but only 
on the condition that Walmart also would accept the fill reductions 
within a short period of time.\5\ Faced with resistance from Walmart, 
Blue Rhino and AmeriGas encountered the very real prospect that their 
fill reductions could unravel and the market would return to costlier 
and thus less profitable 17-pound tanks. To avoid this result, AmeriGas 
and Blue Rhino colluded in their negotiations with Walmart to ensure it 
quickly accepted the fill reductions.\6\ That collusion provides the 
basis for the Commission's complaint and proposed Consent Agreements.
---------------------------------------------------------------------------

    \4\ Id. at ]] 1, 6, 38.
    \5\ Id. at ]] 6, 41, 47.
    \6\ Id. at ]] 1, 7, 48.
---------------------------------------------------------------------------

    More specifically, AmeriGas and Blue Rhino executives spoke 
frequently in the days and weeks leading up to Walmart's decision to 
accept the fill reductions in order to coordinate their negotiations 
and encourage one another not to give in to Walmart's opposition.\7\ 
For instance, AmeriGas and Blue Rhino executives worked together to 
ensure that retailers near Walmart's headquarters in Bentonville, 
Arkansas, only carried 15-pound tanks in hopes of convincing Walmart to 
accept the fill reductions as the new industry standard.\8\ AmeriGas 
and Blue Rhino executives also discussed the status of their 
negotiations and coordinated emails using similar language to urge 
Walmart to accept the fill reductions.\9\ Indeed, a frustrated 
AmeriGas's Director of National Accounts at one point suggested to Blue 
Rhino that it was time for them to issue an ultimatum to Walmart.\10\ 
Blue Rhino's Vice President of Sales responded by urging AmeriGas to 
``hang in there'' as Blue Rhino continued to negotiate with 
Walmart.\11\ Faced with unyielding demands from its two primary propane 
suppliers and no viable outside option, Walmart finally conceded and 
agreed to accept propane tanks filled to 15 pounds.\12\
---------------------------------------------------------------------------

    \7\ Id. at ]] 42, 50.
    \8\ Id. at ] 50.
    \9\ Id. at ]] 50, 54, 55.
    \10\ Id. at ] 50.
    \11\ Id.
    \12\ Id. at ]] 56.
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    No antitrust practitioner would counsel his or her client to engage 
in the direct competitor communications and concerted actions that are 
alleged to have occurred between Blue Rhino and AmeriGas. This is with 
good reason: Such conduct is plainly anticompetitive and unlawful under 
Section 1 of the Sherman Act.\13\ It is well understood that collusion 
among suppliers regarding price, quantity, and other competitive terms 
negotiated with purchasers can harm consumers by impeding the 
competitive process.\14\ Here, it is self-evident that AmeriGas and 
Blue Rhino's agreement to reduce the amount of propane in tanks sold to 
Walmart has the economic effect of increasing the per unit price if 
prices are held constant. The mere fact that AmeriGas and Blue Rhino's 
agreement did not preclude the possibility that they would continue to 
compete on price or other terms is of little consequence for antitrust 
analysis. Indeed, if such competition were enough to absolve otherwise 
anticompetitive concerted action, even a conspiracy to fix nominal 
prices would be lawful so long as the colluding rivals

[[Page 66377]]

continued to compete on quality or quantity. Fortunately, antitrust law 
requires a different and more economically sensible result.\15\
---------------------------------------------------------------------------

    \13\ Collusion by suppliers in negotiations with a single 
purchaser has long been accepted as a valid theory of harm under the 
antitrust laws. Over a century ago, collusion in negotiations by 
employees (i.e., suppliers of labor) with employers was challenged 
successfully under the Sherman Act. See, e.g., Loewe v. Lawlor, 208 
U.S. 274 (1908). The theory was so viable that Congress created a 
new labor exemption by passing Sections 6 and 20 of the Clayton Act. 
See 29 U.S.C. 52, 101-115 (2012). In its most egregious form, 
collusion by suppliers in negotiations with a single purchaser can 
be challenged as bid-rigging or auction collusion, the harms of 
which are well documented in the economic literature and which 
represent one of the most common violations prosecuted by the 
Department of Justice's Antitrust Division. See, e.g., Robert C. 
Marshall & Michael J. Meurer, The Economics of Auctions and Bidder 
Collusion, in Game Theory and Business Applications 339 (Kalyan 
Chatterjee & William F. Samuelson eds., 2001); Paul Klemperer, What 
Really Matters in Auction Design, 16 J. Econ. Persp. 169, 169 
(Winter 2002); Luke Froeb, Robert Koyak, & Gregory Werden, What is 
the Effect of Bid-rigging on Prices?, 42 Economics Letters 419 
(1993). It is therefore unclear why, if one concedes it would be 
unlawful for AmeriGas and Blue Rhino to collude to reduce the amount 
of propane in tanks sold to all purchasers, it also would not be 
unlawful for the parties to collude in imposing such a fill 
reduction on a single, unwilling purchaser.
    \14\ See, e.g., Catalano, Inc. v. Target Sales, Inc., 446 U.S. 
643 (1980) (per curiam) (agreement by competitors to terminate 
certain credit terms held unlawful); Phillip E. Areeda & Herbert 
Hovenkamp, Antitrust Law ] 2022a, at 174 (3d ed. 2012) (explaining 
``the per se rule generally governs not only explicit price fixing 
but agreements to fix a `price element,' which broadly includes 
``any term of sale that can be regarded as affecting the price that 
the customer must pay or any mechanism such as a formula by which 
the price maybe computed'').
    \15\ See, e.g., Areeda & Hovenkamp, supra note 14, ] 2022a, at 
175 (``For example, firms could presumably agree to insist on cash 
at the time of delivery but nevertheless compete vigorously on the 
price they charge. But to make much of this fact distorts the 
relative importance of the various terms of any transaction. The 
explicit `price' of any good or service is a function not only of 
the nominal price but also for the credit terms, applicable 
discounts, rebates, terms of delivery, and the like. Firms might 
also agree about the nominal price but continue to compete by 
offering increasingly longer time periods before payment is due. The 
fact that such competition continues to exist does not serve to make 
the price-fixing agreement reasonable.'').
---------------------------------------------------------------------------

    It also is worth noting that no one--including but not limited to 
the parties--has presented a plausible efficiency justification that 
might suggest the collusion between AmeriGas and Blue Rhino to reduce 
the amount of propane in tanks sold to Walmart was somehow 
procompetitive.\16\ This enforcement action therefore simply does not 
implicate traditional concerns over false positives and the fear that 
the Commission might inadvertently chill procompetitive behavior.\17\ 
In addition, while much has been written about the important shift away 
from per se rules in favor of a more effects-based rule of reason 
analysis under modern antitrust doctrine, the benefits of this shift 
unsurprisingly accrue only where the challenged conduct potentially 
offers some procompetitive benefits.\18\ Again, that is not the case 
here. The record is devoid of evidence supporting a plausible 
efficiency justification for the challenged agreement.
---------------------------------------------------------------------------

    \16\ Although the argument that AmeriGas and Blue Rhino's co-
filling arrangement offers an efficiency justification for the 
parties' concerted action against Walmart has some superficial 
appeal, it can be dispensed with relatively easily. First, if we are 
to take seriously the claim that identical propane fill levels are 
necessary for the efficient operation of AmeriGas's and Blue Rhino's 
businesses, we would expect the parties to have agreed on the 
initial move from 17-pound to 15-pound tanks. They did not. In fact, 
after a lengthy investigation, the Commission concluded the parties 
independently reduced the amount of propane contained in their tanks 
and only colluded in subsequent negotiations with Walmart. Second, 
it would be a curious thing for two companies attempting to achieve 
an efficiency benefit--one that would reduce the costs passed on to 
purchasers--to seek to achieve that benefit by coordinating secretly 
rather than explaining to purchasers the costs of maintaining 
divergent fill-levels for their propane tanks.
    \17\ See Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. 
L. Rev. 1, 15-17 (1984).
    \18\ See, e.g., Joshua D. Wright, Comm'r, Fed. Trade Comm'n, The 
Economics of Resale Price Maintenance & Implications for Competition 
Law and Policy, Remarks before the British Institute of 
International and Comparative Law (Apr. 9, 2014), available at 
https://www.ftc.gov/system/files/documents/public_statements/302501/140409rpm.pdf.
---------------------------------------------------------------------------

    Moreover, the Supreme Court's shift toward the rule of reason has 
always left room for an appropriately truncated review for conduct that 
is likely to harm competition and without efficiency justification. The 
Court has made clear that attempting to place antitrust analysis into 
fixed categories is overly simplistic.\19\ The Court has recognized 
that ``there is often no bright line separating per se from Rule of 
Reason analysis'' \20\ and that determining whether a ``challenged 
restraint enhances competition'' requires ``an enquiry meet for the 
case.'' \21\
---------------------------------------------------------------------------

    \19\ See, e.g., Polygram Holding, Inc. v. FTC, 416 F.3d 29, 34-
35 (D.C. Cir. 2005) (explaining usefully how the ``Supreme Court's 
approach to evaluating a section 1 claim has gone through a 
transition over the last twenty-five years, from a categorical 
approach to a more nuanced and case-specific inquiry'').
    \20\ Cal. Dental Ass'n v. F.T.C., 526 U.S. 756, 779 (1999) 
(quoting NCAA v. Board of Regents, 468 U.S. 85, 104 n.26 (1983)).
    \21\ Id. at 779-81.
---------------------------------------------------------------------------

    The alleged coordination between AmeriGas and Blue Rhino bears a 
``close family resemblance'' to conduct long since ``convicted in the 
court of consumer welfare'' based upon ``economic learning and market 
experience'' that demonstrates such restraints are likely to harm 
consumers.\22\ Where, as here, the two principal suppliers in an 
industry have colluded in their negotiations with a major distributor 
to impose contractual terms the distributor initially resisted, and 
there are no plausible efficiency justifications suggesting the conduct 
may have been procompetitive, that enquiry is appropriately brief. 
Enforcement actions to prevent anticompetitive conduct with no 
plausible efficiency are a wise use of agency resources and should be a 
focus of the Commission's competition mission because they bring 
immediate benefits for consumers with little risk of chilling 
procompetitive conduct.
---------------------------------------------------------------------------

    \22\ Polygram, 416 F.3d 29 at 36-37.
---------------------------------------------------------------------------

    For all of these reasons, I voted in favor of issuing the Complaint 
and accepting the proposed Consent Agreements in this matter.

[FR Doc. 2014-26551 Filed 11-6-14; 8:45 am]
BILLING CODE 6750-01-P