[Federal Register Volume 87, Number 120 (Thursday, June 23, 2022)]
[Notices]
[Pages 37514-37517]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13415]


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FEDERAL TRADE COMMISSION

[File No. 211 0087]


ARKO/GPM Investments; Analysis of Agreement Containing Consent 
Orders To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis of Proposed Consent Orders to Aid Public Comment 
describes both the allegations in the complaint and the terms of the 
consent orders--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before July 25, 2022.

ADDRESSES: Interested parties may file comments online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Please write: ``ARKO/GPM 
Investments; File No. 211 0087'' on your comment and file your comment 
online at https://www.regulations.gov by following the instructions on 
the web-based form. If you prefer to file your comment on paper, please 
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.

FOR FURTHER INFORMATION CONTACT: Kurt Herrera-Heintz (202-326-3542), 
Bureau of Competition, Federal Trade Commission, 400 7th Street SW, 
Washington, DC 20024.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 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 of Agreement Containing Consent Orders to Aid Public 
Comment describes the terms of the consent agreement and the 
allegations in the

[[Page 37515]]

complaint. An electronic copy of the full text of the consent agreement 
package can be obtained from the FTC website at this web address: 
https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before July 25, 2022. 
Write ``ARKO/GPM Investments; File No. 211 0087'' 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 https://www.regulations.gov website.
    Due to protective actions in response to the COVID-19 pandemic and 
the agency's heightened security screening, postal mail addressed to 
the Commission will be delayed. We strongly encourage you to submit 
your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``ARKO/GPM 
Investments; File No. 211 0087'' 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.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include sensitive 
personal information, such as your or anyone else'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 your comment does not include 
sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
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)--including competitively sensitive information such 
as costs, sales statistics, inventories, formulas, patterns, devices, 
manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). 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). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on https://www.regulations.gov--as legally required by FTC 
Rule 4.9(b)--we cannot redact or remove your comment from that website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website at https://www.ftc.gov to read this document 
and the news release describing this matter. The FTC Act and other laws 
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 it receives on 
or before July 25, 2022. For information on the Commission's privacy 
policy, including routine uses permitted by the Privacy Act, see 
https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted an 
Agreement Containing Consent Order (``Consent Agreement'') from ARKO 
Corp., GPM Investments, LLC, GPM Southeast, LLC, and GPM Petroleum, LLC 
(collectively ``Respondents''). The Consent Agreement is designed to 
remedy the anticompetitive effects that resulted from GPM's acquisition 
of retail fuel assets from Corrigan Oil Company (``Corrigan'').
    Pursuant to an Asset Purchase Agreement dated March 8, 2021, GPM 
Petroleum, LLC, and GPM Southeast, LLC, which are directly controlled 
by GPM Investments, LLC (collectively ``GPM'') and indirectly 
controlled by ARKO Corp., acquired 60 branded Express Stop retail fuel 
locations in Michigan and Ohio from Corrigan (the ``Acquisition''). GPM 
consummated the Acquisition in May 2021 for total consideration of 
approximately $94 million. As part of the Asset Purchase Agreement, 
Corrigan agreed not to compete for a period of time and within a 
specified radius around approximately 190 GPM owned, operated, and 
leased locations, in addition to the Express Stop locations purchased 
by GPM.
    The Commission's Complaint alleges that the Acquisition violated 
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, by 
substantially lessening competition for the retail sale of gasoline in 
five local markets in Michigan, and for the retail sale of diesel fuel 
in one of those same local markets. The Commission's Complaint also 
alleges that the noncompete agreements violated 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, by unreasonably 
lessening potential competition for the retail sale of gasoline and 
diesel fuel within the noncompete territories.
    Under the terms of the Decision and Order (``Order'') contained in 
the Consent Agreement, Respondents are required to rescind parts of an 
Asset Purchase Agreement with Corrigan and release back to Corrigan 
retail fuel assets in the five local markets in Michigan. Respondents 
must transfer these assets back to Corrigan no later than the Closing 
Date listed in the Reacquisition Agreement of June 28, 2022. In 
addition, the Order resolves concerns raised by the noncompete 
agreements in the parties' Asset Purchase Agreement.
    The Consent Agreement has been placed on the public record for 
thirty days to solicit comments from interested persons. The Commission 
issued the accompanying Order as final prior to seeking public comment, 
as provided in Section 2.34(c) of the Commission's Rules. This will 
allow the Commission to enforce the Order if there are any violations 
of its provisions during the public comment period. Comments received 
during this period will become part of the public record. After thirty 
days, the Commission will again review the Consent Agreement and 
comments received and decide whether it should withdraw from the 
Consent Agreement or modify the accompanying Order as provided in 
Section 2.34(e) of the Commission's Rules.

II. The Respondents

    Respondent ARKO Corp., through its wholly owned subsidiary GPM, 
operates or supplies stores in thirty-three states and Washington, D.C. 
GPM is the sixth largest convenience store chain in the country, with 
approximately 3,000 locations comprising approximately 1,400 company-
operated stores and 1,625 independent dealer locations.

[[Page 37516]]

GPM sells fuel to retail and wholesale customers. GPM earned 2021 
revenue over $4.7 billion, with fuel sales accounting for $3 billion.
    GPM derives most of its revenue from the retail sale of fuel and 
products sold in its convenience stores. GPM retains control over the 
fuel operation at its company-operated stores and sets wholesale fuel 
prices on a delivered basis to its dealer-operated network.

III. Retail Sale of Gasoline and Diesel Fuel

    Relevant product markets in which to analyze the Acquisition are 
the retail sale of gasoline and the retail sale of diesel fuel. 
Consumers require gasoline for their gasoline-powered vehicles and can 
purchase gasoline only at retail fuel outlets. Likewise, consumers 
require diesel fuel for their diesel-powered vehicles and can purchase 
diesel fuel only at retail fuel outlets. The retail sale of gasoline 
and the retail sale of diesel fuel constitute separate relevant markets 
because the two are not interchangeable. Vehicles that run on gasoline 
cannot run on diesel fuel, and vehicles that run on diesel fuel cannot 
run on gasoline.
    The Commission alleges that the relevant geographic markets in 
which to assess the competitive effects of the Acquisition with respect 
to the retail sale of gasoline are five local markets in and around the 
following cities: Saginaw, Chesaning, Mt. Morris, and Mason, Michigan. 
The relevant geographic market in which to analyze the effects of the 
Acquisition on the retail sale of diesel fuel include one local market 
in and around one of the Saginaw, Michigan retail gasoline markets.
    The geographic markets for retail gasoline and retail diesel fuel 
are highly localized, depending on the unique circumstances of each 
area. Each relevant market is distinct and fact-dependent, reflecting 
many considerations, including commuting patterns, traffic flows, and 
outlet characteristics. Consumers typically choose between nearby 
retail fuel outlets with similar characteristics along their planned 
routes. The geographic markets for the retail sale of diesel fuel are 
similar to the corresponding geographic markets for retail gasoline, as 
many diesel fuel consumers exhibit preferences and behaviors similar to 
those of gasoline consumers.
    The Acquisition substantially lessened competition in each of these 
local markets, resulting in five highly concentrated markets for the 
retail sale of gasoline and one highly concentrated market for the 
retail sale of diesel fuel. Retail fuel outlets compete on price, store 
format, product offerings, and location, and pay close attention to 
competitors in close proximity, on similar traffic flows, and with 
similar store characteristics.
    In each of the local gasoline and diesel fuel retail markets where 
the Commission alleges harm, the Acquisition reduced the number of 
competitively constraining independent market participants around the 
locations GPM is returning to Corrigan to two or fewer. Absent the 
Acquisition, Respondents and Corrigan would have continued to compete 
directly in these local markets. Because of the Acquisition, GPM is 
likely able to raise prices unilaterally in markets where GPM and 
Corrigan were close competitors.
    Moreover, the Acquisition would enhance the incentives for 
interdependent behavior in local markets where only two competitively 
constraining, independent market participants would remain. Two aspects 
of the retail fuel industry make it vulnerable to such coordination. 
First, retail fuel outlets post their fuel prices on price signs that 
are visible from the street, allowing competitors to easily observe 
each other's fuel prices. Second, retail fuel outlets regularly track 
their competitors' fuel prices and change their own prices in response. 
These repeated interactions give retail fuel outlets familiarity with 
how their competitors price and how changing prices affect fuel sales.
    The Commission's Complaint also alleges that, absent the Consent 
Agreement, the agreement not to compete harms customers in local retail 
gasoline and retail diesel fuel markets throughout Michigan and Ohio. 
By prohibiting Corrigan from competing with (1) each acquired retail 
fuel outlet and (2) a list of specified GPM locations, whether those 
GPM locations are anywhere near an acquired Corrigan location, the 
noncompete provision unreasonably restricts potential competition 
between Corrigan and GPM that would otherwise benefit consumers.
    A general desire to be free from competition following a 
transaction is not a legitimate business interest. First, Corrigan's 
agreement not to compete with the 190 GPM-identified retail fuel 
outlets goes well beyond what is reasonably necessary to protect GPM's 
investment in the 60 acquired retail Express Stop locations. Second, 
the Corrigan noncompete agreements around the 60 acquired Express Stop 
stations, based on the unique facts and conditions present in those 
markets, is unreasonably overbroad in geographic scope and longer than 
reasonably necessary to protect a legitimate business interest.
    Entry into each relevant market would not be timely, likely, or 
sufficient to deter or counteract the anticompetitive effects arising 
from the Acquisition. Significant entry barriers include the 
availability of attractive real estate, the time and cost associated 
with constructing a new retail fuel outlet, and the time and 
uncertainty associated with obtaining necessary permits and approvals.

IV. The Consent Agreement

    The Order remedies the Acquisition's likely anticompetitive effects 
by requiring Respondents to return to Corrigan the retail fuel outlets 
included in the Acquisition in each of the five local markets. Corrigan 
is an experienced operator of retail fuel sites and remains an active 
market participant by continuing to operate a retail fuel business and 
a wholesale fuel supply business in Michigan.
    The transfer of assets must be completed no later than the Closing 
Date listed in the Reacquisition Agreement of June 28, 2022. The Order 
further requires Respondents to maintain the economic viability, 
marketability, and competitiveness of each retail fuel business until 
Corrigan reacquires the five retail fuel locations.
    The Order also requires Respondents to obtain prior approval from 
the Commission before acquiring retail fuel assets within a 3-mile 
driving distance of any of the returned locations for 10 years. The 
prior approval provision is necessary because the purchase of a retail 
fuel business near any of the five retail fuel locations would likely 
raise the same competitive concerns as the Acquisition and may not be 
reportable under the Hart-Scott-Rodino Act.
    The Order also resolves the competitive concerns raised by the 
agreements not to compete. The Order requires that Respondents amend 
the noncompete obligation in the Asset Purchase Agreement to (i) only 
apply to retail fuel businesses acquired by GPM in this Acquisition, 
excluding the five locations to be returned to Corrigan, and (ii) limit 
the noncompete terms relating to each acquired retail fuel business to 
no broader than 3 years in duration and no more than 3 miles from each 
Express Stop location. The Order further (1) requires Respondents not 
enter into or enforce any noncompete agreement related to acquisitions 
of a retail fuel business that restrict competition around a retail 
fuel business that GPM already owns or operates, as opposed to the 
acquired retail fuel business, and (2)

[[Page 37517]]

to notify third parties subject to similar noncompete agreements of 
GPM's obligations under the Order.
    Retail fuel competition varies based on many factors, including 
driving patterns, population density, and consumer demand. The 
reasonableness of agreements not to compete will necessarily differ 
with local retail fuel competition. A 3-year and 3-mile radius around 
each acquired location in this transaction resembles a reasonable 
duration and geographic scope given the local competitive conditions 
around each Express Stop location. Noncompete agreements affecting 
areas geographically distinct from acquired retail fuel outlets, and 
noncompete agreements untethered to protecting goodwill acquired in the 
acquisition, are highly suspect and warrant Commission scrutiny.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement. The Commission does not intend this analysis to 
constitute an official interpretation of the Consent Agreement or to 
modify its terms in any way.

    By direction of the Commission.
April J. Tabor,
Secretary.

Statement of Chair Lina M. Khan Joined by Commissioner Rebecca Kelly 
Slaughter and Commissioner Alvaro M. Bedoya

    Last year, in an unreportable transaction valued at approximately 
$94 million, GPM Petroleum, LLC, GPM Southeast, LLC, GPM Investments, 
LLC, and ARKO Corp. (collectively ``GPM'') acquired 60 retail gasoline, 
diesel, and convenience stores from Corrigan Oil Company 
(``Corrigan''). Today, after a thorough investigation of this deal, the 
Commission announced an enforcement action alleging that GPM illegally 
acquired five of those retail fuel stations from Corrigan, and imposed 
illegitimate, overbroad agreements not to compete in connection with 
that acquisition. This action marks an important step forward in 
protecting the public from harm when rivals agree not to compete. Firms 
proposing mergers should take note that the Commission will scrutinize 
contract terms in merger agreements that impede fair competition.
    Noncompete agreements affect millions of Americans every day, but 
they come in a variety of forms. Much of the discussion surrounding 
noncompete clauses in recent years has focused on their inclusion in 
employment contracts and the resulting harm to workers. Noncompete 
covenants, however, can also govern businesses that are direct or 
potential competitors, and sometimes are included in merger agreements. 
Today's Commission action highlights that noncompete clauses in a 
merger agreement may unduly and illegitimately restrain competition 
when both of the parties remain competitors in other markets.
    By its very nature, an agreement not to compete between two 
businesses reduces competition if it restrains the activities of actual 
and potential rivals during the term of the agreement. Indeed, 
noncompete agreements between competing businesses are suspect: for 
instance, an agreement not to compete may constitute a thinly veiled 
market allocation scheme, a per se violation of the antitrust laws.
    In the context of mergers, parties sometimes assert that noncompete 
clauses are necessary to protect a legitimate business interest in 
connection with the sale of a business, such as the goodwill acquired 
in a transaction. When the seller is exiting the business or selling 
off assets needed to compete with the buyer, a noncompete that limits 
prospects for reentry may in certain instances reflect that goodwill, 
if appropriately limited in geographic scope and duration.
    In this matter, as alleged in the Commission's complaint, GPM's 
agreement to purchase Corrigan's retail fuel stations contained 
noncompete terms that were overbroad and facially unrelated to 
protecting any goodwill GPM might hope to acquire with the Corrigan 
stations. According to the complaint, these noncompete provisions are 
illegal because they were designed to ensure that GPM would not face 
direct or indirect competition from Corrigan--not only in the 
competitively overlapping areas, but even in geographic areas far from 
the acquired stations.
    As today's consent agreement makes clear, firms may not use a 
merger as an excuse to impose overbroad restrictions on competition or 
competitors. The Commission will evaluate agreements not to compete in 
merger agreements with a critical eye.
    We look forward to reviewing input and comments from the public 
about the approach this settlement has taken with respect to the 
noncompetes at issue here. The Commission is committed to acting in the 
public interest, and comments from the public are vital to ensuring 
that we are successful in doing so.

[FR Doc. 2022-13415 Filed 6-22-22; 8:45 am]
BILLING CODE 6750-01-P