[Federal Register Volume 77, Number 10 (Tuesday, January 17, 2012)]
[Notices]
[Pages 2293-2296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-748]


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FEDERAL TRADE COMMISSION

[File No. 121 0022]


AmeriGas Propane, L.P., AmeriGas Propane, Inc., Energy Transfer 
Partners, L.P., and Energy Transfer Partners GP, L.P.; Analysis of 
Proposed Agreement Containing Consent Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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[[Page 2294]]

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 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 February 13, 2012.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``AmeriGas, File No. 121 
0022'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/amerigasetpconsent, by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, mail or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex 
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Thomas Dahdouh ((415) 848-5122), FTC, 
Western Regional Office--San Francisco, 600 Pennsylvania Avenue NW., 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 the 
Commission 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 January 11, 2012), on the World Wide Web, at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue NW., Washington, DC 
20580, either in person or by calling (202) 326-2222.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before February 6, 
2012. Write ``AmeriGas, File No. 121 0022'' 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 http://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 obtained from any person and which is privileged or 
confidential,'' as provided 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 
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/amerigasetpconsent by following the instructions on the web-based 
form. If this Notice appears at http://www.regulations.gov/#!home, you 
also may file a comment through that Web site.
    If you file your comment on paper, write ``AmeriGas, File No. 121 
0022'' on your comment and on the envelope, and mail or deliver it to 
the following address: Federal Trade Commission, Office of the 
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW., 
Washington, DC 20580. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at http://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 February 13, 2012. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Overview

    The Federal Trade Commission has accepted an Agreement Containing 
Consent Order (``Proposed Order'') with AmeriGas Propane, L.P. 
(``AmeriGas''), AmeriGas Propane, Inc., Energy Transfer Partners, L.P. 
(``ETP''), and Energy Transfer Partners GP, L.P. (``ETP GP''), which is 
designed to guard against possible anticompetitive effects that would 
likely result from the transaction as originally proposed.
    On October 15, 2011, AmeriGas entered into an agreement with ETP 
and ETP GP in which AmeriGas proposed to acquire ETP's Heritage Propane 
business through the approximately $2.9 billion acquisition of four 
entities owned by ETP, Heritage Operating, L.P., Heritage GP, LLC, 
Titan Energy Partner, L.P., and Titan Energy GP, L.L.C. ETP's Heritage 
Propane business includes Heritage Propane Express, an entity that is 
engaged in the business of preparing, filling, distributing and selling 
portable cylinders prefilled with propane commonly used for barbeque 
grills (referred to herein as ``propane exchange cylinders''). The 
AmeriGas Cylinder Exchange or ``ACE'' division is also engaged in the 
business of preparing, filling, distributing and selling exchange 
cylinders, and is the second largest provider of propane exchange 
cylinders in the United States. In response to competitive concerns 
raised by Commission staff regarding

[[Page 2295]]

AmeriGas's purchase of the Heritage Propane Express Business, the 
parties subsequently proposed a modified transaction that excludes 
those assets. The Order, as accepted by the Commission, settles charges 
that the acquisition, as originally proposed, may have substantially 
lessened competition in the market for preparing, filling, distributing 
and selling propane exchange cylinders in the United States and in 
certain regional areas within the United States.

II. The Parties

    AmeriGas, a limited partnership, is the largest propane 
distribution company in the United States. Its ACE division supplies 
prefilled propane exchange cylinders to retailers who then sell those 
cylinders to consumers. AmeriGas is the second largest supplier and 
marketer of propane exchange cylinders.
    ETP GP is a publicly traded partnership and the general partner of 
ETP, which is also a publicly traded partnership. ETP is engaged in the 
business of supplying propane exchange cylinders through its Heritage 
Propane Express division. Heritage Propane Express is the third largest 
supplier and marketer of propane exchange cylinders in the country with 
operations in 37 states.

III. The Products and the Structure of the Market

    Propane exchange cylinders, often referred to as 20 pound DOT 
cylinders,\2\ are small, portable tanks that can be filled with 
propane, and that are used primarily for barbeque grills, patio 
heaters, and mosquito magnets. At one time, the only option for 
consumers who needed to purchase propane for these uses was to purchase 
empty cylinders and take them to locations where they could have the 
cylinders filled. Starting in the 1990's cylinder exchange became 
popular. This option allows consumers to purchase a prefilled cylinder 
which can then be exchanged for a clean prefilled cylinder when the 
fuel in the first cylinder has been used. The consumer exchanging an 
empty cylinder for a full one typically pays only for the propane. 
Exchange cylinders are available for purchase and exchange at various 
locations, including grocery stores, home improvement stores, hardware 
stores, big box stores, convenience stores, and gas stations. Although 
consumers have the option of refilling these cylinders, many prefer the 
convenience of purchasing prefilled exchange cylinders that have been 
cleaned and safety tested by the supplier before they are sold. Many 
retailers also prefer the convenience and possible safety benefits of 
selling prefilled exchange cylinders rather than arranging to have 
large propane tanks on their premises and training employees to perform 
refilling services. For these reasons, the use of propane exchange 
cylinders has grown, and the refilling of cylinders has declined over 
the last ten years. As a consequence of these changes in demand, 
refilling cylinders does not provide a competitive constraint on the 
price of propane cylinder exchange services.
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    \2\ The metal cylinders can hold approximately 25 pounds of 
propane, but for safety reasons, can only be filled to 80% capacity, 
or approximately 20 pounds. In the marketplace at this point in 
time, most exchange cylinders are only filled with 15 to 17 or so 
pounds of propane. The reference in this Analysis is intended as a 
description of the size and type of cylinder, and is not a reference 
to actual fill levels.
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    Companies that distribute and sell propane exchange cylinders 
typically provide the following services, either directly or 
indirectly: Cylinder preparation (including cleaning, rust removal, 
repainting and valve repairs for the cylinders); refilling with a 
designated amount of propane; marketing and distribution (including 
delivery and retrieval of cylinders, and placement and maintenance of 
cages that display and dispense exchange cylinders at retail 
locations); and sale of exchange cylinders.

IV. The Complaint

    The Complaint alleges that the market for propane exchange cylinder 
services that can serve large multi-state chain retailers is highly 
concentrated. Large multi-state retail chains generally require that 
their propane exchange cylinder suppliers have the scale and geographic 
scope of coverage to handle significant portions of their business. 
These retailers also require that their propane exchange cylinder 
suppliers offer ``just in time'' deliveries to ensure that cages are 
continuously stocked with prefilled cylinders, particularly during peak 
holiday periods and weekends. Currently, there are only three suppliers 
that can provide propane exchange cylinder services to such retailers: 
Ferrellgas Partners, L.P.'s ``Blue Rhino'' division, the largest 
provider of propane exchange cylinder services on a national and 
regional basis; AmeriGas's ACE, the second largest provider of propane 
exchange cylinder services; and ETP's Heritage Propane Express, the 
third largest provider of these services. The Complaint alleges that 
AmeriGas's acquisition of the Heritage Propane Exchange assets, as 
originally proposed, would have reduced the number of companies that 
can supply these services to multi-state retail chains from three to 
two.
    The Complaint further alleges that Heritage Propane Express played 
the role of a disruptive ``maverick,'' offering lower prices and better 
terms and conditions than the other two large players. In addition, the 
Complaint alleges that entry into the market for supply of propane 
exchange cylinder services to large multi-state chain retailers is not 
likely to be timely or sufficient to defeat a price increase due to the 
large scale of entry needed to service large national or regional 
retailers requiring reliable distribution services in many locations.
    The Complaint alleges that the effect of the acquisition, as 
originally proposed, may be to substantially lessen competition by, 
inter alia, increasing the likelihood of collusion or coordinated 
interaction among the remaining two large competitors by removing 
Heritage Propane Express, a disruptive force in the marketplace.

V. The Modified Transaction

    AmeriGas, AmeriGas Propane, Inc., ETP and ETP GP have now entered 
into an amendment to their original agreement. Pursuant to this 
amendment (``Amendment 2''), AmeriGas will not acquire the Heritage 
Propane Express assets. Rather, they will continue to be operated by 
ETP through a new subsidiary, Heritage Propane Express, LLC, until such 
time as ETP decides to sell those assets. However, because Heritage 
Propane Express, LLC will no longer have access to certain back office 
and propane supply services that will be transferred to AmeriGas, 
AmeriGas is required to make such services available to Heritage 
Propane Express, LLC at cost for a specified period of time. This 
provision will allow Heritage Propane Express, LLC to continue to 
function as a viable entity. Amendment 2 contains a number of other 
provisions addressing the provision of transition services that are 
likely to be needed. Because Amendment 2 contains competitively 
sensitive information, the details of the transition services are not 
publicly available.

VI. The Order

    The Order remedies the Commission's competitive concerns raised by 
the original transaction, as proposed.
    The Order incorporates Amendment 2, described above, into the Order 
and requires the Respondents to comply with all the terms of that 
document, including all terms pertaining to the provision of transition 
services by AmeriGas to Heritage Propane Express, LLC until such time 
as Heritage Propane

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Express, LLC is sold to another entity, or, barring a sale, for a 
period of one year. The specified transition services include access to 
propane supply under specified terms.
    Section II.C of the Order requires that, for a period of two years, 
ETP cannot sell the Heritage Propane Express assets without prior 
written approval of the Commission. This ensures that the Commission 
will have an opportunity to review a future sale of these assets, 
particularly if the assets would not be reportable under the Hart-
Scott-Rodino Antitrust Improvements Act. Section II.D requires ETP to 
provide prior notification to the Commission before acquiring any other 
cylinder exchange businesses for the next 10 years. Section II.E 
similarly requires AmeriGas to provide prior notification to the 
Commission before acquiring any other cylinder exchange businesses for 
the next 10 years. Both II.D and II.E provide that prior notification 
is not necessary for transactions that fall under a certain threshold 
in terms of the annual sales of propane exchange cylinders by any 
company that they propose to acquire.
    Section II.F addresses the availability of the transition services 
outlined in Amendment 2. It requires that AmeriGas make these 
transition and supply services available to ETP for up to one year, so 
that Heritage Propane Express, LLC can be operated as a viable entity. 
If that company is sold within one year, Section II.F requires that 
AmeriGas provide transition and propane supply services to Heritage 
Propane Express's buyer for a period of six months, with an option to 
extend the arrangement for another six months. These provisions are 
designed to ensure that the Heritage Propane Express assets will 
continue to be viable as a stand-alone propane exchange cylinder 
business and that any new purchaser will have the necessary services 
and supply for a short transition period. Section II.G requires ETP to 
operate the Heritage Propane Express assets in a manner that maintains 
their economic viability for a period of two years or until ETP no 
longer holds an interest in the assets.
    The remaining Order provisions are standard reporting requirements 
to allow the Commission to determine on-going compliance with the 
provisions of the Order.

VII. Opportunity for Public Comment \3\
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    \3\ The Commission normally will issue an order for public 
comment but not issue a final order until it considers all comments 
received during the comment period. Here, however, consistent with 
Commission Rule 2.34(c), 16 CFR 2.34(c), the Commission has issued 
the Final Order in advance of the comment period. The Commission 
took this step to avoid any unnecessary and potentially costly delay 
to the larger underlying transaction involving the sale of ETP's 
bulk propane business, which is not the subject of the Order, and is 
a highly seasonal business; that is, the market for bulk propane and 
related services is greatest during the winter and early spring. 
After the public comment period, the Commission will have the option 
to initiate a proceeding to reopen and modify the Decision and Order 
or commence a new administrative proceeding if the public comments 
lead it to believe that such action is appropriate.
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    The Final Order has been placed on the public record for 30 days to 
receive comments from interested parties. Comments received during this 
period will become part of the public record. After 30 days, the 
Commission will review the comments received and determine whether to 
take further action. The purpose of this analysis is to facilitate 
comment on the Consent Agreement and Order. This analysis does not 
constitute and official interpretation of the Consent Agreement or 
Order, not does it modify its terms in any way. The Consent Agreement 
does not constitute an admission by AmeriGas, ETP or ETP GP that they 
have violated the law or that the facts as alleged in the Complaint, 
other than the jurisdictional facts, are true.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2012-748 Filed 1-13-12; 8:45 am]
BILLING CODE 6750-01-P