FTC set to investigate complaints that oil industry is blocking wider use of ethanol

Author: Amy Volk | Posted: 8/23/2013

The Federal Trade Commission is investigating allegations that oil companies are using undue influence over retailers to prevent gas stations from offering E15 (15-percent ethanol) and higher ethanol blends to customers. News of the FTC inquiry comes after a letter Aug. 2 from Sens. Chuck Grassley (R-IA) and Amy Klobuchar (D-MN) asked the commission and the Justice Department "to investigate possible anticompetitive practices by oil companies that limit consumers access to homegrown renewable fuels."

The senators said the request was made in response to "recent concerns, which indicate that oil companies may be taking steps to undermine efforts to distribute renewable fuels - including higher level ethanol blends - that help boost energy security and lower the price of gas for consumers."
The letter was addressed to Attorney General Eric Holder and FTC Chairwoman Edith Ramirez.
In a letter from Ramirez released by the senators this week, the FTC official said her agency would "make every effort to identify, prevent and prosecute practices in petroleum and other markets that violate any statute or rule that the agency enforces."
Biofuel industry leaders claim oil companies attempting to preserve the market share of petroleum based fuels are imposing, among other obstacles, restrictions on franchise agreements that prevent gas station operators from carrying E15 and E85.
"The promise of renewable fuels is rapidly becoming a reality and introducing much needed competition to the transportation fuels sector," Klobuchar, who chairs Senate Antitrust Subcommittee, and Grassley, the ranking member of the Judiciary Committee, said in their letter. "Given the implication these alleged activities, if true, could have on competition in the marketplace, we urge you to investigate them and consider whether any action is necessary."
Specifically, the senators cite "allegations that the oil industry is mandating retailers to carry and sell premium gasoline, thereby blocking the use of the current retail infrastructure to sell renewable fuels. Station owners who wish to sell renewable fuel would bear the cost and logistical burden of having to install additional infrastructure to do so."
In one case cited by the senators, "an oil company is alleged to be using its franchise agreements to preclude franchisees from offering higher level ethanol blends to their customers. By forcing a franchisee to carry premium gasoline as a condition of carrying regular gas, the oil company may be using its economic power over its franchisee to effect a tying arrangement in violation of the Sherman Act."
The senators, who both represent states with big biofuel industries, also said the allegations may represent a violation of a 1980 statute that prohibits discrimination or unreasonable limits against the sale of "gasohol" or other synthetic motor fuels.
The letter is the latest in an ongoing battle between the biofuels and oil industries. Oil companies and refiners have urged Congress to repeal the federal Renewable Fuel Standard (RFS), which requires the blending of specified amounts of corn ethanol, biodiesel and other renewable fuels.
The American Petroleum Institute, which represents oil producers, said the allegations are an effort by the biofuel industry to distract Congress from fixing what the oil industry has said is a "broken" RFS. Oil refiners and producers say a steep drop in gasoline consumption and larger supplies of ethanol are resulting in a "blend" wall - an inability to absorb the ethanol supply - and driving up prices at the pump.
The ethanol industry cites a number of studies showing ethanol has kept the price of gasoline down in recent years.

Source: 25x'25