21434 Federal Register / Vol. 65, No. 78 / Friday, April 21, 2000 / Notices

MATTERS TO BE CONSIDERED: 

1. Personnel actions (appointments,

promotions, assignments,

reassignments, and salary actions)

involving individual Federal Reserve

System employees.

2. Any matters carried forward from a

previously announced meeting.

CONTACT PERSON FOR MORE INFORMATION:

Lynn S. Fox, Assistant to the Board;

202–452–3204.

SUPPLEMENTARY INFORMATION: You may

call 202–452–3206 beginning at

approximately 5 p.m. two business days

before the meeting for a recorded

announcement of bank and bank

holding company applications

scheduled for the meeting; or you may

contact the Board’s Web site at http://

www.federalreserve.gov for an

electronic announcement that not only

lists applications, but also indicates

procedural and other information about

the meeting.

Dated: April 19, 2000.

Robert deV. Frierson,

Associate Secretary of the Board.

[FR Doc. 00–10078 Filed 4–19–00; 10:32 am]

BILLING CODE 6210–01–P

FEDERAL TRADE COMMISSION

[File No. 991 0192]

BP Amoco p.l.c., et al.; Analysis to Aid

Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

SUMMARY: The consent agreement in this

matter settles alleged violations of

federal law prohibiting unfair or

deceptive acts or practices or unfair

methods of competition. The attached

Analysis to Aid Public Comment

describes both the allegations in the

draft complaint that accompanies the

consent agreement and the terms of the

consent order—embodied in the consent

agreement—that would settle these

allegations.

DATES: Comments must be received on

or before May 15, 2000.

ADDRESSES: Comments should be

directed to: FTC/Office of the Secretary,

Room 159, 600 Pennsylvania Ave., NW,

Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Richard Parker or Phillip Broyles, FTC/

H–374, 600 Pennsylvania Ave., NW,

Washington, DC 20580. (202) 326–2574

or 326–2805.

SUPPLEMENTARY INFORMATION: Pursuant

to Section 6(f) of the Federal Trade

Commission Act, 38 Stat. 721, 15 U.S.C.

46 and Section 2.34 of the Commission’s

Rules of Practice (16 CFR 2.34), notice

is hereby given that the above-captioned

consent agreement containing a consent

order to cease and desist, having been

filed with and accepted, subject to final

approval, by the Commission, has 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

agreement, and the allegations in the

complaint. An electronic copy of the

full text of the consent agreement

package can be obtained from the FTC

Home Page (for April 13, 2000), on the

World Wide Web, at ‘‘http://

www.ftc.gov.ftc.formal.htm.’’ A paper

copy can be obtained from the FTC

Public Reference Room, Room H–130,

600 Pennsylvania Avenue, NW,

Washington, DC 20580, either in person

or by calling (202) 326–3627.

Public comment is invited. Comments

should be directed to: FTC/Office of the

Secretary, Room 159, 600 Pennsylvania

Ave., NW, Washington, DC 20580. Two

paper copies of each comment should

be filed, and should be accompanied, if

possible, by a 31⁄2 inch diskette

containing an electronic copy of the

comment. Such comments or views will

be considered by the Commission and

will be available for inspection and

copying at its principal office in

accordance with Section 4.9(b)(6)(ii) of

the Commission’s Rules of Practice (16

CFR 4.9(b)(6)(ii)).

Analysis of the Proposed Consent Order

and Draft Complaint to Aid Public

Comment

I. Introduction

The Federal Trade Commission

(‘‘Commission’’) has accepted for public

comment from BP Amoco p.l.c. (‘‘BP

Amoco’’) and Atlantic Richfield

Company (‘‘ARCO’’) (collectively,

‘‘Proposed Respondents’’) an Agreement

Containing Consent Orders (‘‘Proposed

Consent Order’’). The Proposed

Respondents have also reviewed a draft

complaint that the Commission

contemplates issuing. The Commission

and BP Amoco and ARCO have also

agreed to an Order to Hold Separate and

Maintain Assets (‘‘Hold Separate

Order’’) that requires the Proposed

Respondents to hold separate and

maintain certain divested assets. The

Proposed Consent Order is designed to

remedy the likely anticompetitive

effects arising from BP Amoco’s

proposed acquisition of ARCO.

II. The Parties and the Transaction

BP Amoco is a United Kingdom

corporation with headquarters in

London, England. It is the world’s third

largest oil company, with total

worldwide revenues of more than $91

billion in 1999. BP Amoco is engaged in

exploration, development, and

production of crude oil on the Alaskan

North Slope (‘‘ANS crude oil’’), which

it sells to refineries on the West Coast

of the United States, Hawaii, and

Alaska, and in markets abroad. It also

owns capacity on the Trans-Alaska

Pipeline System (‘‘TAPS’’) and

leasehold interests in Jones Act tankers.

These specialized tankers are used by

BP Amoco to transport ANS crude oil

from the North Slope production fields

to its refinery customers.

ARCO is a Delaware corporation with

headquarters in Los Angeles, California.

In 1999, ARCO had total revenues of

more than $12 billion. ARCO is also

engaged in the exploration,

development, and production of ANS

crude. ARCO also owns capacity on

TAPS, and it owns its own Jones Act

tankers, which it uses to transport ANS

crude oil to the West Coast. ARCO also

owns and operates two refineries on the

West Coast that refine ANS crude oil.

BP Amoco and ARCO were the

pioneers in developing the Alaska North

Slope, and today are the two most

important oil companies doing business

there. They account for more than half

of all ANS crude oil discovered over the

last decade, and currently produce

about 74% of all ANS crude oil. BP

Amoco and ARCO are the only two

operators of ANS crude oil fields, they

each own more proven ANS crude oil

reserves than any other oil company,

they have the largest leaseholds of

exploration and production acres, and

they have drilled the largest number of

exploration wells on the North Slope.

Individually, each has won more

exploration tracts than any other

company in the last decade.

The Alaska North Slope is a major oilproducing region of the United States.

ANS crude oil is used to supply

refineries in Alaska, Hawaii, the West

Coast of the United States, and Asia.

Approximately 90% of all ANS crude

oil is refined on the United States West

Coast, and approximately 45% of all

crude oil refined on the United States

West Coast is ANS crude oil.

BP Amoco and ARCO entered into an

agreement on March 31, 1999, to merge

their companies. The size of the

transaction, based upon the value of the

deal when it was announced, was about

$26 billion.

III. The Proposed Complaint and

Consent Order

The proposed complaint alleges that

merger of BP Amoco and ARCO would

Federal Register / Vol. 65, No. 78 / Friday, April 21, 2000 / Notices 21435

violate Section 7 of the Clayton Act, as

amended, 15 U.S.C. 18, and Section 5 of

the Federal Trade Commission Act, as

amended, 15 U.S.C. 45. The proposed

complaint alleges that the merger will

lessen competition in each of the

following markets: (1) The production,

sale, and delivery of ANS crude oil; (2)

the production, sale, and delivery of

crude oil used by targeted West Coast

refiners; (3) the production, sale, and

delivery of all crude oil used on the

West Coast; (4) the purchase of

exploration rights on the Alaskan North

Slope; (5) the sale of crude oil

transportation on TAPS; (6) the

development for commercial sale of

natural gas on the Alaskan North Slope;

and (7) the supply of crude oil pipeline

transportation to, and crude oil storage

in, Cushing, Oklahoma. The competitive

concerns underlying the allegations in

the draft complaint are discussed in Part

V of this analysis.

IV. The Proposed Consent Order

To remedy the alleged

anticompetitive effects of the merger,

the Proposed Consent Order requires

Proposed Respondents to divest: (1) All

of ARCO’s assets and interests related to

and primarily used with or in

connection with ARCO’s Alaska

businesses; and (2) all of ARCO’s assets

related to its Cushing, Oklahoma crude

oil business. Proposed Respondents will

divest all of ARCO’s Alaska assets to

Phillips Petroleum Company

(‘‘Phillips’’), an approved up-front

buyer. The vast majority of these assets

must be divested to Phillips within 30

days of the signing of the Proposed

Consent Order. Some of the ARCO

Alaska assets require third-party or

governmental approvals and Proposed

Respondents have up to six (6) months

to divest those particular assets.

Proposed Respondents will divest the

Cushing assets to an acquirer or

acquirers that receive the prior approval

of the Commission and in a manner

approved by the Commission. They

must divest the Cushing assets within

four (4) months of signing the Proposed

Consent order.

For a period of ten (10) years from the

date the Proposed Consent Order

becomes final, the Proposed Consent

Order prohibits the Proposed

Respondents from acquiring, directly or

indirectly, any ownership, leasehold or

other interests in any of the assets they

are required to divest without giving

prior notice to the Commission.

The Proposed Consent Order also

requires the Proposed Respondents to

provide the Commission with a report of

compliance with the terms of the

Proposed Consent Order within thirty

(30) days after the Order becomes final,

and every sixty (60) days thereafter,

until the Proposed Respondents have

fully complied with the divestiture

requirements under the Proposed

Consent Order. The Proposed

Respondents must also file annual

compliance reports detailing their

compliance with the notice provisions

under the Proposed Consent Order.

Proposed Respondents have also

agreed to a Hold Separate Order. The

purpose of the Hold Separate Order is

(a) to preserve the competitive viability

of the assets required to be divested

under the Proposed Consent Order,

pending their actual divestiture, (b) to

assure that no material confidential

information is exchanged between BP

Amoco and the held-separate

businesses, and (c) to prevent interim

harm to competition pending the

divestitures. The Commission may

immediately appoint an asset

maintenance trustee to monitor both the

ARCO Alaska businesses and the ARCO

Cushing Assets which are to be

divested, and, in the case of the Alaska

assets, to monitor whether the necessary

waivers and regulatory approvals are

being expeditiously pursued.

Under the terms of the Hold Separate

Order, if the Proposed Respondents

have not completed the divestiture of

the ARCO Alaska assets that do not

require third party or regulatory

approvals within thirty (30) days of

consummating the merger of BP Amoco

and ARCO, they must maintain the

relevant ARCO Alaska businesses as

separate, competitively viable

businesses, and not combine them with

BP Amoco’s operations. A trustee may

be appointed to oversee the held

separate businesses.

Under the terms of Hold Separate

Order, until the divestiture of the ARCO

Cushing Assets has been completed,

Proposed Respondents must maintain

the ARCO Pipeline Company as a

separate, competitively viable business,

and not combine it with BP Amoco’s

operations. The Proposed Consent Order

also requires the Proposed Respondents

to maintain the assets to be divested in

a manner that will preserve their

viability, competitiveness and

marketability, to avoid causing their

wasting or deterioration. Pending

divestiture, Proposed Respondents are

prohibited from selling, transferring, or

otherwise impairing the marketability or

viability of the assets to be divested.

Under the terms of the Proposed

Consent Order, in the event that BP

Amoco and ARCO do not divest the

assets required to be divested under the

terms and time constraints of the

Proposed Consent Order, the

Commission may appoint a trustee to

divest those assets, expeditiously, and at

no minimum price. Also, in the event

the assets requiring third-party or

governmental regulatory approvals are

not divested within the allowed time, a

trustee may be appointed to oversee the

divestiture of those assets to Phillips.

V. The Competitive Concerns

The merger of BP Amoco and ARCO

gives rise to competitive concerns in

seven relevant markets, each of which is

discussed below.

A. Production and Sale of ANS Crude

Oil

BP Amoco currently has about a 44%

share of all ANS crude oil production

and ARCO has about 30% share. BP

Amoco owns no refineries that it

supplies with ANS crude oil. As a

consequence, all of its ANS crude oil

sales are to third party customers.

ARCO, on the other hand, owns two

refiners that use ANS crude oil. One is

located in the Los Angeles area (at

Carson) and the second is in the Seattle

area (at Cherry Point). Because ARCO

supplies its West Coast refineries with

ANS crude oil, ARCO now sells only

relatively small amount of ANS crude

oil to third parties.

According to the complaint the

Commission intends to issue, BP Amoco

already exercises market power in the

sale of ANS crude oil to refineries on

the West Coast. The evidence of this

market power is the fact that BP Amoco

engages in price discrimination on two

fronts: First, BP Amoco sells ANS crude

to West Coast refinery customers at

different prices, net of transportation

(‘‘netbacks’’). Second, BP sells ANS

crude to the West Coast refineries at

higher netbacks than to refineries in the

Far East. The Commission’s draft

complaint alleges the existence of three

relevant markets implicated by BP

Amoco’s ANS crude oil pricing: (1) The

production, sale, and delivery of ANS

crude oil; (2) the production, sale, and

delivery of crude oil used by targeted

West Coast refiners; and (3) the

production, sale, and delivery of all

crude oil used by refiners on the West

Coast.

According to the Commission’s draft

complaint, for several reasons, ARCO is

the firm most likely to be able to

constrain BP Amoco’s future exercise of

market power. First, with the opening of

the Alpine oil field, ARCO has new

production that is about to commence.

Second, with a new and increased

ability to substitute away from ANS

crude oil to other types of crude oil at

its Los Angeles refinery, ARCO will

have incentives to substitute cheaper

21436 Federal Register / Vol. 65, No. 78 / Friday, April 21, 2000 / Notices

imports for ANS crude oil if the price

of ANS crude oil becomes noncompetitive. Third, ARCO is the firm

best positioned and most likely to find

new sources of ANS crude oil, and bring

that oil to market.

Entry into the crude oil markets

implicated by this merger is unlikely to

occur in a timely or sufficient manner

to prevent the merger from reducing

competition in the relevant markets.

Entry has not constrained BP Amoco’s

exercise of market power to date. Nor is

it likely that producers of other types of

crude oils will supply West Coast

refineries in a manner that would

constrain BP Amoco’s ability to exercise

market power. The most compelling

evidence is that they have not already

done so, even as BP Amoco has been

exercising market power directed at

West Coast refineries for many years.

B. Bidding for ANS Crude Oil

Exploration Rights

BP Amoco and ARCO are the two

most important competitors in bidding

for exploration leases for oil and gas on

the Alaska North Slope. They own or

control all exploration, development,

and production assets and won over

60% of all State of Alaska lease auctions

over the last decade. During that same

period the top four firms won 75%. In

the most recent North Slope lease sale,

BP Amoco and ARCO collectively won

more than 70% of the tracts bid.

After the merger, no single firm, or

combination of firms, will be both large

enough and sufficiently well informed

with respect to the value of individual

tracts, to replace the loss of revenues to

the State of Alaska and the Federal

Government, from bidding revenues.

Moreover, the reduced competition in

the bidding for oil and gas leaseholds

will eventually result in less exploration

and development, and less production

of ANS crude oil.

New entry will not be timely, likely

or sufficient to undermine the

anticompetitive effects of the merger.

Firms that lack the information,

infrastructure, and interest in North

Slope bidding will simply be unable to

fill the void created by the loss of ARCO

as an independent bidder for

exploration and development acreage.

C. TAPS Pipeline Competition

Seven companies jointly own the

TAPS pipeline, with BP Amoco and

ARCO the two largest owners. BP has

about a 50% interest and ARCO has

about a 22% interest. Each owner of

TAPS has an exclusive right to sell

space on its ownership-share of TAPS

capacity and to set its own tariff, and to

discount those tariffs, for carriage on

that capacity. After the merger, BP

Amoco would control a 72% interest in

TAPS. Alyeska Pipeline Service

Company operates TAPS.

The owners of TAPS are entitled to

capacity on the pipeline in proportion

to their ownership interests. Because

not all oil producers have an interest in

TAPS, or an interest in TAPS in

proportion to their oil production, TAPS

owners can and do discount their tariffs

in an effort to attract additional

shippers. According to the

Commission’s draft complaint, the

increase in concentration in TAPS

ownership may cause the TAPS tariffs

to increase.

D. Natural Gas Commercialization

BP Amoco and ARCO are the two

largest holders of natural gas reserves on

the Alaska North Slope. ExxonMobil is

the only other company that holds

sufficiently large volumes of natural gas

reserves to have the potential to develop

those reserves for significant

commercial use. The merger of BP

Amoco and ARCO would reduce the

potential for future competition in the

sale of North Slope natural gas from

three firms to two firms.

Although it is unclear at this time

when the North Slope gas fields will be

commercialized, it is likely that this will

eventually occur. To date, over $1

billion has been spent by various firms

in an effort to commercialize the North

Slope’s natural gas reserves. When gas

commercialization does become a

reality, the benefit of three firms

competing for this business, rather than

a market characterized by a duopoly,

will result in increased competition and

lower prices.

E. Crude Transportation and Storage

Services in Cushing, Oklahoma

Efficient functioning of the pipeline

and oil storage facilities leading into,

and in, Cushing, Oklahoma, is critical to

the fluid operation of both the trading

activities in Cushing and the trading of

crude oil futures contracts on the

NYMEX. The restriction of pipeline or

storage capacity can affect the

deliverable supply of crude oil in

Cushing, and consequently affect both

WTI crude oil cash prices and NYMEX

futures prices.

The proposed merger would

concentrate control of over 43% of

Cushing storage capacity, 49% of

Cushing pipeline delivery capacity, and

95% of the trading services provided at

Cushing. A firm that controls substantial

crude oil storage capacity in Cushing,

and crude oil pipeline capacity leading

into Cushing, would be able to

manipulate NYMEX futures trading

markets. This threat of manipulation

will cause prices to rise and, because

WTI crude oil is a benchmark crude oil,

have ripple effects throughout the oil

industry.

VI. Resolution of the Competitive

Concerns

The Proposed Consent Order

alleviates the competitive concerns

arising from the merger as discussed

below.

A. The Proposed Order Resolves

Competitive Concerns in Alaska by

Requiring That All of ARCO’s Alaska

Assets Be Divested to Phillips

The Proposed Consent Order, if

finally issued by the Commission,

would settle all of the charges alleged in

the Commission’s complaint. Under the

terms of the Proposed Consent Order,

BP Amoco has agreed to divest to

Phillips all of the assets, properties,

businesses, and goodwill, tangible and

intangible, that as of March 15, 2000,

were related to and primarily used with

or in connection with ARCO’s Alaska

businesses.

The ARCO assets and properties that

BP Amoco and ARCO are required to

divest to Phillips include the following:

(a) ARCO Alaska, Inc.; (b) ARCO

Transportation Alaska, Inc., (including

any interest in Alyeska Pipeline Service

Company and Prince William Sound Oil

Spill Response Company; (c) ARCO

Marine, Inc.; (d) ARCO Marine Spill

Response Company; (e) Union Texas

Alaska assets of Union Texas Petroleum

Holdings, Inc.; (f) Union Texas Alaska,

LLC; (g) Kuparuk Pipeline Company,

(including any interests in Kuparuk

Transportation Company and Kuparuk

Transportation Capital Corporation); (h)

Oliktok Pipeline Company; (i) Alpine

Pipeline Company; (j) Cook Inlet

Pipeline Company; (k) All Alaska oil

and gas leases; (l) AMI Leasing Inc.; (m)

ARCO Beluga, Inc. (a wholly-owned

subsidiary of CH-Twenty, Inc.); (n)

ARCO’s office complex in Anchorage;

(o) intellectual property; (p) Patents; (q)

seismic data; (r) ship construction

contracts; (s) customer and vendor lists;

(t) ARCO records; and (u) long-term

supply agreements entered between BP

Amoco and several West Coast refiners.

To ensure that key ARCO employees

remain with the company, and become

available to work for Phillips, the

Proposed Consent order also provides

that (a) BP Amoco not solicit for

employment any ARCO employee

unless that employee was terminated by

Phillips; (b) vest all current and future

pension benefits; and (c) pay a bonus of

not less than 35% of the base salary for

certain key ARCO employees.

Federal Register / Vol. 65, No. 78 / Friday, April 21, 2000 / Notices 21437

1The provision that we would favor is explained,

and its terms defined, further below.

Phillips is headquartered in

Bartlesville, Oklahoma and is the sixth

largest United States oil company. In

1999 it had total revenues of about $14

billion. Phillips currently has about a

one percent interest in ANS crude oil

production and about a 1.4% interest in

TAPS. Phillips also owns oil and gas

leases in the National Petroleum

Reserve area of the North Slope.

The divestiture of ARCO’s Alaska

Businesses is intended to preserve the

level of competition that existed before

the merger in the production, sale and

delivery of crude oil to the West Coast,

bidding for exploration rights on the

Alaskan North Slope, and in pipeline

transportation services for ANS crude

oil.

1. The Proposed Respondents Have

Thirty (30) Days To Divest Most of the

ARCO Alaska Assets to Phillips

Except for those ARCO Alaska assets

that require consents, waivers, or

approvals by regulatory authorities or

other third parties before they may be

transferred to Phillips (e.g., pipelines,

oil and gas leases, rights of way), the

Proposed Respondents must complete

the required divestitures of the Alaska

assets within thirty (30) days of the

acquisition. The Proposed Respondents

must cooperate with Phillips and use

reasonable best efforts to assist Phillips

in securing the consent and waivers that

may be required from private entities.

The Proposed Respondents must

complete all other divestitures within

six (6) months of consummating their

merger.

2. Transition Services

The Proposed Consent Order requires

that the Proposed Respondents enter

into a transition services agreement with

Phillips. Under this agreement, the

Proposed Respondents must provide

Phillips with the transition services it

may need in order to conduct the ARCO

businesses as they are currently being

conducted.

3. Licensing Agreements

The Proposed Consent Order requires

that the Proposed Respondents enter

into various licensing agreements with

Phillips for intellectual property

necessary or related to the ARCO Alaska

Assets. These agreements are in

addition to the absolute transfer of other

intellectual property.

B. The Proposed Order Resolves

Competitive Concerns in Cushing by

Requiring That All of ARCO’s Cushing

Assets Be Sold Within 120 Days to an

Acquirer Approved by the Commission

Under the terms of the Proposed

Consent Order, BP Amoco agreed to

divest ARCO’s assets related to its

Cushing, Oklahoma crude oil business

to an acquirer to be approved by the

Commission and in a manner approved

by the Commission. Those assets

include all of ARCO’s assets, properties,

businesses and goodwill, tangible and

intangible, in the Seaway Crude Oil

Pipeline and the Mid-Continent Crude

Oil Logistics Services Businesses.

The ARCO assets and properties that

BP Amoco and ARCO are required to

divest include the following: (a) ARCO’s

crude oil interest in Seaway Pipeline

Company, a partnership with

subsidiaries of Phillips; (b) ARCO’s

crude oil terminal facilities in Cushing,

Oklahoma and Midland, Texas,

including the line transfer and

pumpover business at each location; (c)

ARCO’s undivided ownership interest

in the Rancho Pipeline, a 400-mile, 24-

inch diameter crude oil pipeline from

West Texas to Houston; (d) ARCO’s

undivided ownership interest in the

Basin Pipeline, a 416-mile crude oil

pipeline running from Jal, NM, to

Wichita Falls, Texas and then on to

Cushing, Oklahoma; and (e) the ARCO

West Texas Trunk System of receipt and

delivery pipelines, which is centered

around Midland.

BP Amoco and ARCO must complete

the required divestitures of the Cushing

assets, within 120 days of their singing

the Proposed Consent Order, to an

acquirer or acquirers that receive the

prior approval of the Commission.

VII. Opportunity for Public Comment

The Proposed Consent Order has been

placed on the public record for thirty

(30) days fro receipt of comments by

interested persons. Comments received

during this period will become part of

the public record. After thirty (30) days,

the Commission will again review the

Proposed Consent Order and the

comments received and will decide

whether it should withdraw from the

Proposed Consent Order or make it

final.

By accepting the Proposed Consent

Order subject to final approval, the

Commission anticipates that the

competitive problems alleged in the

complaint will be resolved. The purpose

of this analysis is to invite public

comment on the Proposed Consent

Order, including the proposed

divestitures, to aid the Commission in

its determination of whether it should

make final the Proposed Consent Order.

This analysis is not intended to

constitute an official interpretation of

the Proposed Consent Order, nor is it

intended to modify the terms of the

Proposed Consent Order in any way.

By direction of the Commission.

Donald S. Clark,

Secretary.

Statement of Chairman Robert Pitofsky

and Commissioner Mozelle W.

Thompson, Concurring in Part and

Dissenting in Part

The Commission accepts for public

comment today a consent order that

requires BP Amoco plc (‘‘BP’’), as a

condition of its acquisition of Atlantic

Richfield Company (‘‘ARCO’’), to divest

all of ARCO’s crude oil exploration and

production assets in Alaska and related

pipeline rights, maritime assets, seismic

data and technical information. In

effect, BP agrees to divest ‘‘all of ARCO’’

in Alaska. In addition, the consent order

requires BP to divest all ARCO pipeline

and storage facilities in and around the

crude oil marketing and trading hub at

Cushing, Oklahoma to a buyer to be

approved by the Commission within

120 days of the date on which BP and

ARCO sign the consent order.

The consent order provides that the

divested Alaska assets will be acquired

by Phillips Petroleum Co. (‘‘Phillips’’).

Phillips is an integrated petroleum

company with oil and gas exploration

and production interests in several

countries and (as of 1999) assets of

about $15 billion and annual revenues

of about $13.9 billion. Phillips currently

has some Alaska oil and gas exploration

and production interests of its own, but

these are tiny relative to those of BP and

ARCO. Phillips is engaged in refining

and gasoline marketing in several of the

United States, but not on the West

Coast. BP selected Phillips as the buyer

of ARCO’s Alaska assets, and

Commission today unanimously

approves Phillips as the buyer, subject

to public comment.

In most respects, this consent order

achieves all the Commission sought,

and all the relief that would likely have

been achieved if the Commission

prevailed in litigation. We write

separately, however, to express our

concern with the majority’s decision not

to include in the consent order a

provision prohibiting BP and Phillips

from exporting ANS crude oil at a loss

for the purpose of maintaining oil prices

on the West Coast of the United States.1

21438 Federal Register / Vol. 65, No. 78 / Friday, April 21, 2000 / Notices

2See FTC v. BP Amoco plc, Civ. No. 00–0416–

SI (N.D. Cal. filed Feb. 4, 2000), Compl. ¶ 18.

3See FTC v. BP Amoco plc, Compl. ¶¶ 18, 23;

Points and Authorities in Support of FTC Motion

for a Preliminary Injunction at 7, 9–11.

4See id. at 7, n.13, 9–10 & nn. 16–18. (The public

version of the FTC’s Points and Authorities, with

the parties’ confidential information redacted, is

available at /http://www.ftc.gov/os/bpamoco/

index.htm. All references in this concurrence to the

memorandum supporting the complaint are to that

version.)

5See, e.g., H. Josef Hebert, ‘‘Company ties offer to

halt exporting Alaska crude to merger’’ (Associated

Press, March 24, 2000) (citing a letter from BP to

U.S. Representative Don Young of Alaska);

Associated Press, ‘‘BP Amoco Would End Alaska

Exports’’ (March 24, 2000); Reuters, ‘‘BP Amoco,

Phillips to halt Alaskan oil exports’’ (March 24,

2000) (citing a letter from BP to U.S. Representative

George Miller of California).

6 ‘‘Sell for Export’’ and ‘‘Sale for Export’’ would

be defined terms, referring to the sale, exchange,

delivery or transfer of ANS crude oil for refining at

a refinery located outside of PADD V, PROVIDED,

however, that they would not include any sale,

exchange, delivery or transfer of ANS crude oil in

return for which ANS crude oil from another person

is tendered or delivered to Respondents at a

location in PADD V.

7 ‘‘Spot Price’’ would be a defined term, referring

to the amount paid for a single delivery of crude

oil as part of an arms-length transaction as reported

by Reuters, Telerate or Platts.

8 FTC v. BP Amoco plc, Points and Authorities in

Support of FTC Motion for a Preliminary Injunction

at 10.

BP currently has the largest share—

about 40%—of all crude oil produced

on the Alaska North Slope (‘‘ANS’’); has

the largest interest—about 50%—in the

Trans-Alaska Pipeline System (‘‘TAPS’’)

that is used to transport crude oil to port

at Valdez, Alaska; and has the largest

fleet that is available for transporting

ANS crude oil from Alaska to refineries

in the rest of the United States. ARCO

is its largest rival in each of these

respects, with a share of over 30% of

ANS crude production; a 22% stake in

TAPS; and the second largest available

fleet. BP and ARCO’s dominance of the

market is even greater when measured

in terms of exploration assets and

operatorships in Alaska. BP, which does

not own any West Coast refineries,

currently sells all of its ANS crude in

the merchant market. ARCO, which

owns two of the largest refineries on the

West Coast, consumers the bulk of its

ANS production internally. However,

ARCO also sells on the merchant

market, thereby according to the

Commission’s complaint, serving as

‘‘the firm most likely to constrain BP’s

exercise of monopoly power,’’ a

constraint that ‘‘likely would increase’’

over time but for the merger.2

Because Phillips will acquire all of

ARCO’s assets in Alaska, the consent

order is likely to restore competition on

the Alaska North Slope. In the market

for the supply of ANS crude oil to

targeted refineries on the West Coast,

Phillips will be in a different position

from ARCO because, unlike ARCO,

Phillips is neither a refiner nor a

gasoline marketer on the West Coast.

This difference should leave Phillips

with more crude oil to sell on the open

market than ARCO currently has after

supplying its own refineries, and, if not

undermined by private conduct, may

actually improve upon the level of

competition in that market. In Cushing,

a clean sweep of ARCO’s pipeline and

storage assets to a buyer to be approved

by the Commission should also suffice

to restore competition.

Negotiations leading to this settlement

have been extensive and complicated.

Nevertheless, once the outline of a

settlement was agreed upon—that is,

divestiture of ‘‘all of ARCO’’ in Alaska

and in and around Cushing—BP, ARCO

and Commission staff worked out the

details with dispatch.

In one respect, however, the

Commission’s action in this matter is

disappointing. In its original complaint

and in its memorandum supporting the

complaint, the Commission alleged that

BP systematically and over an extended

period of time exported ANS crude at a

loss in Asia and to other regions in the

United States in order to curtail or

tighten supply to refiners on the U.S.

West Coast and to maintain crude oil

prices in that market.3 The Commission

was prepared to substantiate its charge

with a series of documents, cited in its

memorandum supporting the complaint

but currently under seal in the United

States District Court.4 The Commission

alleged that the pattern of exports

reflected BP’s market power, and that

such market power would increase as a

result of the proposed merger.

When litigation was suspended for

settlement negotiations, the issue of

exports designed to raise price was

addressed. BP and Phillips reportedly

stated publicly that they would not

export U.S. crude resources out of

PADD V (the technical term for the U.S.

West Coast market, specifically, the

States of Alaska, Arizona, California,

Hawaii, Nevada, Oregon and

Washington).5

We believe that the Commission

should follow the logic of its own

complaint and require BP and Phillips

to affirm their public statements in our

consent agreement in this matter. That

would require the following provision

in the order:

BP and Phillips shall not knowingly and

intentionally Sell for Export 6 ANS crude oil

for the purpose of increasing the Spot Price 7

of ANS crude oil in PADD V, PROVIDED,

however, that a Sale for Export at a price

reasonably anticipated to produce a higher

profit than a contemporaneous sale in PADD

V shall be presumed not to violate this Order.

This provision is narrower than the

parties’ public statements, thereby

assuring that it would in no way affect

normal, competitive business conduct,

such as exporting oil abroad when the

price offered abroad (net of

transportation and other costs) is higher

than on the West Coast. Instead, it

would target the systematic export of

United States’ crude oil to Asia or

elsewhere at a loss (relative to the profit

that could have been obtained on the

same crude oil within PADD V) for the

purpose of raising U.S. West Coast

Prices—a practice that we consider an

extraordinary exercise of market power.

If engaged in through coordinated

action—and the Commission’s

memorandum alleges that BP

‘‘mop[ped] up ‘excess’ supplies of ANS’’

crude from others 8—such conduct

would be illegal per se. See United

States v. Socony-Vacuum Oil Co., 310

U.S. 150, 190–91, 216, 218–28

(1940)(holding illegal per se agreements

to purchase ‘‘distress gasoline’’ in order

to raise prices or prevent price

decreases). Regardless of its legality,

exporting at a loss in order to raise West

Coast prices plainly threatens

competition in a market where this

agency has a duty to ensure that

competition is fully restored. see, e.g.,

Ford Motor Co. v. United States, 405

U.S. 562, 573 (1972); United States v.

E.I. du Point de Nemours & Co., 366

U.S. 316, 326 (1961).

Because the Commission was

prepared to prove that intentional

manipulation of supply on the West

Coast occurred in the past, and could

occur again in the future, the provision

would be appropriate relief for the

Commission to require. See, e.g., FTC v.

National Lead Co., 352 U.S. 419, 429,

430 (1957)(a remedy is proper if it bears

a ‘‘reasonable relation to the unlawful

practices found to exist’’ and ‘‘decrees

often suppress a lawful device when it

is used to carry out an unlawful

purpose’’) (citations omitted); cf. FTC v.

Ruberoid Co., 343 U.S. 470, 473 (1952)

(‘‘[I]f the Commission is to obtain the

objectives Congress envisioned, it

cannot be required to confine its road

block to the narrow lane the transgressor

has traveled; it must be allowed

effectively to close all roads to the

prohibited goal, so that its order may

not be by-passed with impunity.’’)

Notwithstanding the substantial

evidence of manipulation supporting

the allegations in the complaint and

memorandum, a majority of the

Commission declines to require this

Federal Register / Vol. 65, No. 78 / Friday, April 21, 2000 / Notices 21439

9The provision that we advocate is not, of course,

an export ban. It is, rather, a narrow restriction,

targeted at exports that entail an extraordinary

exercise of market power.

10 It is well established that the Commission has

a broad remedial discretion that would, where

appropriate, permit substantial further relief against

conduct that does not independently violate the

antitrust laws. See, e.g., Ford Motor Co., 405 U.S.

at 575; E.I. du Pont de Nemours, 366 U.S. at 344.

Courts have approved a variety of remedies against

potentially lawful conduct as ancillary to structural

relief, including future lawful participation in a

market previously entered by means of unlawful

merger, Ford Motor Co., 405 U.S. at 575–76, an

injunction against further acquisitions, United

States v. Grinnell Corp., 384 U.S. 563, 580 (1966),

requirements of prior Commission approval for

future joint ventures, mergers or acquisitions,

Yamaha Motor Co. v. FTC, 657 F.2d 971, 984–85

(8th Cir. 1981); Luria Bros. & Co. v. FTC, 389 F.2d

847, 865–66 (3d Cir. 1968), and prohibitions of sales

between joint venture partners, United States v.

Alcan Aluminum Ltd., 605 F. Supp. 619 (W.D. Ky.

1985).

11The majority emphasizes that ‘‘it is not the

Commission’s mandate to use merger enforcement

as a vehicle for imposing its own notions of how

competition may be ‘improved.’ ’’ We of course

agree that merger enforcement is not an appropriate

vehicle for ‘‘improving’’ markets in ways unrelated

to the merger. But as the precedents cited in

footnote 10, above, exemplify, it is equally

fundamental that mergers must be viewed, and the

competitive concerns that they raise addressed, in

the practical and dynamic context of the markets in

which they occur. See, e.g., Brown Shoe Co. v.

United States, 370 U.S. 294, 321–23 (1962).

12The majority expresses concern that our

provision would not ‘‘apply equally to all

producers’’ of ANS crude oil. It is true that our

provision would place restrictions on the two

parties before us, who will also be the two largest

producers of ANS crude oil, that would not apply

to smaller competitors. But our narrow restriction

would not prevent them from competing

vigorously—only from engaging in a practice that

the Commission’s complaint identified as an

exercise of market power that distorted

competition. Because the mandate of this agency is

to protect competition, not the individual interests

of particular competitors, we are not concerned

about inhibiting BP and Phillips’ ability to exercise

market power by manipulating West Coast prices.

provision. In omitting any provision

concerning exports, we do not

understand our fellow Commissioners

to condone the practices that we

identified in our complaint. But we see

no good reason for the omission.

First, the majority suggests that the

divestitures ordered today eliminate the

competitive overlap that was the central

competitive concern raised by the

proposed merger. While we believe that

the divestiture to Phillips is effective

and appropriate relief, and may even

improve competition, we would also

address directly the competitive

concerns raised by past and potentially

future exporting practices aimed at

exploiting precisely the market power

that the BP–ARCO merger places at

issue. Today’s consent permits both a

realignment of operatorship interests on

the Alaska North Slope and a vertical

realignment, whereby BP’s crude supply

will now be aligned with what were

ARCO’s downstream assets, and ARCO’s

successor, Phillips, will likely replace

BP as the principal supplier to the

merchant (i.e., non-vertically-integrated)

market on the West Coast. How those

realignments will affect the incentives

and opportunities of BP and Phillips to

continue BP’s past practice of exporting

to maintain West Coast prices is

uncertain, as are future fluctuations in

their production and reserves on the

Alaska North Slope and their likely

effects on those incentives and

opportunities.

The majority believes that it is

unnecessary to impose any restriction

on exports 9 because ‘‘BP likely will

need to use most of its ANS crude oil

production’’ in the ARCO refineries it is

acquiring on the West Coast, and

because ‘‘Phillips will have a much

smaller share of ANS crude oil

production than did BP.’’ (We

understand that Phillips’ initial share of

ANS crude oil production will be

between 30 and 35%.) Even if true

today, there is no assurance that in the

future either company, in an uncertain

and evolving marketplace, will not find

itself in a position to engage in the same

conduct BP engaged in previously. Any

such risk should not be borne by the

consumer.

Second, as noted above, precedent

establishes that conduct relief ancillary

to structural relief may be appropriate in

a merger case to address related

competitive concerns, even when the

conduct restriction may, in doing so,

restrain some lawful conduct.10 Such

relief is especially appropriate where, as

in this case, the merger creates

uncertainties in a market already

characterized by exercises of market

power that may harm consumers and

where the relief imposed will increase

the likelihood that competition will be

fully restored. See, e.g., Ford Motor Co.,

405 U.S. at 578 (approving district court

relief aimed at ‘‘nurtur[ing]’’ lost

competition over an objection that the

forces in the marketplace might suffice

to restore it).11

Third, we believe that a narrow

export-at-a-loss restriction like the one

set forth above would effectively

protect, and would in no way inhibit,

free and vigorous competition.12 We

recognize that in 1995, Congress

repealed an export ban on ANS crude

oil, and we have no intention of

undermining that repeal. However, as

we have noted above, a consent

agreement provision that narrowly

prohibits exports (1) reasonably

anticipated to be at a loss and (2) made

‘‘knowingly and intentionally * * * for

the purpose increasing the Spot Price of

ANS crude oil in PADD V’’ is far

removed from a general export ban, and

would leave firms entirely free to engage

in normal, competitive export activities

both within PADD V and elsewhere.

Further, although the provision that we

propose would be narrow, we believe

that it would be effective. The proviso

requiring that sales be reasonably

anticipated to be at a loss to be suspect

would give both the parties and FTC

enforcement staff an objective

benchmark, while the intent and

purpose requirements—requirements

familiar to antitrust law, see, e.g., Aspen

Skiing Co. v. Aspen Highlands Skiing

Corp., 472 U.S. 585, 602 (1985)—would

ensure that normal competitive conduct

would be unaffected.

Under normal circumstances we favor

structural rather than behavioral

remedies. That approach underlies the

substantial structural relief that the

Commission unanimously requires in

this case. However, we believe that in

addition, the above-described export

restriction is appropriate and warranted

by the facts and circumstances of this

case. Accordingly, we dissent from the

majority decision not to include in the

consent order a provision restraining in

the future the manipulation of ANS

crude supply to the West Coast that we

believe occurred in the past.

Statement of Commissioners Anthony,

Swindle, and Leary

Alaska’s North Slope is one of the

largest sources of crude oil in the world.

Crude oil extracted from Alaska’s North

Slope (‘‘ANS crude oil’’) is transported

through the Trans-Alaska Pipeline

System (‘‘TAPS’’) to the warm water

port of Valdez, Alaska. From Valdez,

large oil tankers transport ANS crude oil

to refineries, most of which are located

on the West Coast of the United States.

The West Coast refineries process ANS

crude oil and other crude oils to

produce gasoline that ultimately is sold

to consumers located on the West Coast.

The three main producers of ANS

crude oil are British Petroleum/Amoco

Oil Co., Inc. (‘‘BP’’), Atlantic Richfield

Corporation (‘‘ARCO’’), and ExxonMobil

Corporation (‘‘Exxon’’). BP produces

about 45% of ANS crude oil, ARCO

about 30% and Exxon about 22%. Each

of these producers owns interests in

TAPS and the oil tanker fleet that are

roughly proportionate to its share of

ANS crude oil production. Because BP

currently does not own any refineries on

the West Coast, it sells most of its ANS

crude oil to other West Coast refiners. In

contract, ARCO and Exxon use most of

21440 Federal Register / Vol. 65, No. 78 / Friday, April 21, 2000 / Notices

1 It bears noting that in 1995, Congress explicitly

repealed the then-existing ban on ANS exports. If

Congress were to determine that the ban should be

reinstated, it could so act. In addition, the 1995

legislation lifting the export ban granted the

President, in consultation with the Secretary of

Energy, the power to reimpose the export ban upon

a determination by the Secretary of Commerce that

‘‘exporting oil * * * has caused sustained oil prices

significantly above world market levels * * *. ’’ (30

U.S.C. 185(s)(5)). Such a ban would apply equally

to all producers, and would not leave some

producers under the restrictions of the

Commission’s order while permitting other

producers to export without inhibition.

2Rather, the exports are cited as evidence that

pre-merger BP had existing market power with

respect to ANS sales on the West Coast. (Complaint

¶¶ 24–26) Therefore, the Commission alleges, it

would be unlawful for BP to acquire its closest

competitor in this market, and thereby enhance its

market power.

Of course, if two or more producers appeared to

engage in such exports through coordinated or other

illegal action, the Commission could initiate an

investigation of such unlawful conduct and take

appropriate enforcement measures.

3We have reason to believe that the upward price

effects of these sporadic sales amounted to no more

than one-half cent per gallon at the pump.

their ANS crude oil in their own West

Coast refineries.

BP’s proposed merger with ARCO

would give the merged firm about a

75% share of exploration, production,

and transportation of ANS crude oil.

The complaint alleges that the proposed

merger is likely substantially to lessen

competition in the market for the sale of

ANS crude oil to West Coast refineries.

The basic theory is that prior to the

merger BP has been able to exercise

market power in sales of ANS crude oil

to West Coast refineries, i.e., BP has

been able to profitably maintain prices

above competitive levels for a

significant period of time. BP’s

acquisition of ARCO would increase

BP’s ability to exercise market power,

which could cause West Coast refineries

to pay more for ANS crude oil. While

the case raises complex market

definition and other issues, we have

reason to believe that the proposed

merger, absent the contemplated relief,

is likely substantially to lessen

competition as alleged in the complaint.

Traditionally, if a merger raises

competitive concerns, the Commission

requires the merging parties to divest

assets to eliminate the competitive

overlap before allowing the merger to be

consummated. Consistent with this

approach, in this case the Commission

has accepted a proposed order requiring

BP and ARCO to divest all of ARCO’s

assets in Alaska to Phillips Petroleum

Company (‘‘Phillips’’). We believe that

this divestiture will remedy the antitrust

concerns raised by the proposed merger.

In fact, as the concurring statement of

Chairman Pitofsky and Commissioner

Thompson points out, the consent

agreement has the potential to ‘‘actually

improve upon the level of competition’’

in the West Coast market. As a result of

the planned divestiture, Phillips will

have about a 30% share of ANS crude

oil exploration, production, and

transportation, and Phillips will have

even more crude oil to sell on the open

market than ARCO has today. Phillips

appears to have the financial resources

and experience to be a vigorous

competitor in the exploration,

production, and transportation of ANS

crude oil.

In addition to this structural relief,

Chairman Pitofsky and Commissioner

Thompson would favor ‘‘behavioral’’

relief that would require the

Commission to engage in extensive

monitoring of ANS crude oil exports

and prices for the next decade.

Specifically, they support a provision

that would prohibit BP and Phillips, for

10 years, from ‘‘knowingly and

intentionally’’ exporting ANS crude oil

outside the West Coast of the United

States ‘‘for the purpose of increasing the

Spot Price of ANS crude oil’’ on the

West Coast. The proposed export

restriction also would include a

presumptive safe harbor if an export

sale were made at a ‘‘price reasonably

anticipated to produce of higher profit

than a contemporaneous sale’’ on the

West Coast. We believe that this overregulatory exportation restriction would

be unnecessary, unenforceable, and

otherwise inappropriate.1

It is unnecessary to impose the

proposed export restriction on BP

because BP is highly unlikely to engage

in exports following the merger. There

is some evidence that, prior to the

merger, BP occasionally exported ANS

crude oil to the Far East in order to

increase spot prices for ANS crude oil

on the West Coast. It is important to

emphasize that BP’s unilateral actions

were not illegal under the antitrust

laws—and, indeed, the complaint makes

no allegation that the exports were

illegal.2 In any event, however, BP’s

incentives to export will change as a

result of the proposed divestitures.

Before the merger, BP sold most of its

ANS crude oil to other West Coast

refiners because it did not own

refineries on the West Coast. BP

benefitted from higher spot prices

because of its status as a merchant

marketer, and also because Alaska’s

royalty scheme for ANS production was

tied to ANS spot prices on the West

Coast. After the merger, BP will acquire

two West Coast oil refineries that were

part of ARCO, and BP likely will need

to use most of its ANS crude oil

production to operate these two

refineries. Since BP will be consuming

most of its ANS production internally,

BP will now benefit from lower royalty

payments to the extent that the ANS

spot price drops. Therefore, as a result

of the new market structure created by

the proposed divestitures, BP is

extremely unlikely to resume exporting

ANS crude oil to the Far East (or

elsewhere) to increase spot prices for

ANS crude oil on the West Coast.

Nor is it necessary to impose the

export restriction on Phillips. Phillips is

purchasing ARCO’s assets in Alaska

lock-stock-and-barrel, i.e., Phillips is

assuming ARCO’s position as an

explorer, producer, and transporter of

ANS crude oil. There is no evidence

that ARCO ever engaged in strategic

ANS exports for the purpose of

increasing West Coast spot prices.

Granted, it might appear that Phillips

will have a greater incentive than ARCO

did to increase spot prices for ANS

crude oil, because Phillips, like the premerger BP, will sell its ANS crude oil

to West Coast refineries on the merchant

market (whereas ARCO consumed most

of its production in its own West Coast

refineries). However, Phillips will have

a much smaller share of ANS crude oil

production than did BP—approximately

30% for Phillips versus 45% for BP—

which makes it quite unlikely that

Phillips could successfully engage in

exports to increase spot prices for ANS

crude oil on the West Coast.

Not only is the export restriction

unnecessary, it also would be extremely

difficult to enforce because it would

require proof of BP’s or Phillips’s

knowledge and intent. We cannot rely

on the companies to create an

unambiguously inculpating ‘‘paper

trail,’’ and in the face of ambiguous

evidence, the Commission’s burden of

proof would be very high indeed. We do

not think that the public interest would

be well served by including an order

provision that is so obviously difficult

to enforce that it would have little or no

practical effect. Moreover, the proposed

safe harbor would complicate

enforcement proceedings even further

by introducing additional factual issues

that would be difficult to resolve.

We do not believe the export

restriction is an appropriate measure for

the Commission to impose in the

context of a merger settlement,

especially when the proposed structural

relief fully restores, and may even

improve upon, the status quo ante. The

export restriction would address a preexisting market condition, under which

BP allegedly, unilaterally, and

sporadically exported ANS crude oil

with some slight effect on West Coast

prices.3 We acknowledge the public

Federal Register / Vol. 65, No. 78 / Friday, April 21, 2000 / Notices 21441

concern over the relatively high price of

gasoline on the West Coast, but people

will be cruelly disappointed if they are

led to believe that the export restriction

would have a detectable effect on the

situation. Moreover, it is not the

Commission’s mandate to use merger

enforcement as a vehicle for imposing

its own notions of how competition may

be ‘‘improved.’’ Instead, Congress has

directed the Commission only to

prevent any harm to competition that is

likely to flow from a merger. We believe

that the planned divestitures already

accomplish that goal.

We acknowledge that the parties are

willing to sign an order with an export

restriction. We need not speculate about

whether they were induced to do so

because of a compelling need to strike

a deal promptly, or because they believe

the restriction in unnecessary or

unenforceable. Whatever the reason, in

light of the structural relief the proposed

order achieves, we see no need to bind

the parties to an unnecessary behavioral

provision.

For the reasons set forth above, we do

not believe that the export restriction

should be included in the proposed

order.

[FR Doc. 00–10008 Filed 4–20–00; 8:45 am]

BILLING CODE 6750–01–M

FEDERAL TRADE COMMISSION

[File No. 981 0124]

Texas Surgeons, P.A., et al.; Analysis

to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

SUMMARY: The consent agreement in this

matter settles alleged violations of

federal law prohibiting unfair or

deceptive acts or practices or unfair

methods of competition. The attached

Analysis to Aid Public Comment

describes both the allegations in the

draft complaint that accompanies the

consent agreement and the terms of the

consent order—embodied in the consent

agreement—that would settle these

allegations.

DATES: Comments must be received on

or before May 15, 2000.

ADDRESSES: Comments should be

directed to: FTC/Office of the Secretary,

Room 159, 600 Pennsylvania Ave., NW.,

Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Richard Feinstein or Alan Friedman,

FTC/S–3115, 600 Pennsylvania Ave.,

NW., Washington, DC 20580. (202) 326–

3688 or 326–2742.

SUPPLEMENTARY INFORMATION: Pursuant

to section 6(f) of the Federal Trade

Commission Act, 38 Stat. 721, 15 U.S.C.

46 and section 2.34 of the Commission’s

Rules of Practice (16 CFR 2.34), notice

is hereby given that the above-captioned

consent agreement containing a consent

order to cease and desist, having been

filed with and accepted, subject to final

approval, by the Commission, has 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

agreement, and the allegations in the

complaint. An electronic copy of the

full text of the consent agreement

package can be obtained from the FTC

Home Page (for April 13, 2000), on the

World Wide Web, at ‘‘http://

www.ftc.gov/ftc/formal.htm.’’ A paper

copy can be obtained from the FTC

Public Reference Room, Room H–130,

600 Pennsylvania Avenue, NW.,

Washington, DC 20580, either in person

or by calling (202) 326–3627.

Public comment is invited. Comments

should be directed to: FTC/Office of the

Secretary, Room 159, 600 Pennsylvania

Ave., NW., Washington, DC 20580. Two

paper copies of each comment should

be filed, and should be accompanied, if

possible, by a 31⁄2 inch diskette

containing an electronic copy of the

comment. Such comment or views will

be considered by the Commission and

will be available for inspection and

copying at its principal office in

accordance with section 4.9(b)(6)(ii) of

the Commission’s Rules of Practice (16

CFR 4.9(b)(6)(ii)).

Analysis of Agreement Containing

Consent Order to Aid Public Comment

The Federal Trade Commission has

accepted, subject to final approval, an

agreement to a proposed consent order

by the Texas Surgeons, P.A. (‘‘Texas

Surgeons IPA’’) and six medical practice

groups comprised of Texas Surgeons

IPA members—Austin Surgeons,

P.L.L.C.; Austin Surgical Clinic

Association, P.A.; Bruce McDonald &

Associates, P.L.L.C.; Capital Surgeons

Group, P.L.L.C.; Central Texas Surgical

Associates, P.A.; and Surgical

Associates of Austin, P.A. The

agreement settles charges by the Federal

Trade Commission that the Texas

Surgeons IPA and the six medical

practice groups (the ‘‘respondents’’)

violated section 5 of the Federal Trade

Commission Act, 15 U.S.C. 45, by fixing

prices and other terms of dealing with

third-party payers; collectively refusing

to deal with third-party payers or

threatening to do so; and agreeing to

deal with third-party payers only on

collectively determined terms. The

proposed consent order has been placed

on the public record for thirty (30) days

for reception of comments by interested

persons. Comments received during this

period will become part of the public

record. After thirty (30) days, the

Commission will review the agreement

and the comments received, and will

decide whether it should withdraw from

the agreement or make it and the

proposed order final.

The purpose of this analysis is to

facilitate public comment on the

proposed order. The analysis is not

intended to constitute an official

interpretation of the agreement and

proposed order, or to modify in any way

their terms. Further, the proposed

consent order has been entered into for

settlement purposes only and does not

constitute an admission by any

respondent that the law has been

violated as alleged in the complaint.

The Complaint

Under the terms of the agreement, a

complaint will be issued by the

Commission along with the proposed

consent order. The allegations in the

Commission’s proposed complaint are

summarized below.

Respondent Texas Surgeons IPA is an

association of general surgeons who

practice in the Austin, Texas area.

Members of the Texas Surgeons IPA are,

and at all times relevant to the

complaint have been, the majority of

general surgeon private practitioners

serving the adult population in the

Austin area.

Nearly all of the members of the Texas

Surgeons IPA belong to one of six

general surgery practice groups, which

are also respondents in this matter. At

all times relevant to the complaint, the

Texas Surgeons IPA has been governed

by a board of directors composed of

representatives from each of the

respondent medical practice groups.

The Texas Surgeons IPA has served as

a vehicle for the six respondent medical

practice groups (and the few solo

practitioner members) to engage in

actual or threatened concerted refusals

to deal, and to negotiate collectively, in

order to obtain higher prices from Blue

Cross Blue Shield of Texas (‘‘Blue

Cross’’) and United HealthCare of Texas

(‘‘United’’). The six respondent medical

practice groups actively furthered the

unlawful conduct through their

collective control of the Texas Surgeons

IPA board of directors, and through

their direct participation in collective

fee negotiations between United and the

Texas Surgeons IPA.

In April 1997, Blue Cross changed its

reimbursement system from one based

on historical charges to one based on a