Features

An investigation into West Coast gas prices has found oil industry practices that raise “competitive concerns” with the Federal Trade Commission, an FTC official said Tuesday. 

The investigation found that an oil industry practice known as zone pricing can lead to cases where refiners charge different wholesale gasoline prices to gas stations that are located near one another, said Richard Parker, director of the FTC’s Bureau of Competition. 

He said investigators also found evidence that oil companies prevent independent distributors from supplying gas to stations in particular areas, a practice known as redlining. 

“Arrangements by which independent business people are prevented by agreement from competing in the marketplace raises serious questions under the antitrust laws,” Parker said in a letter to Sen. Ron Wyden, D-Ore. 

But a spokesman for British Petroleum, which brands Arco and is one of the largest gas distributors in the West, defended the practice of zone pricing, saying it is the best way to make sure that all dealers in an area are treated fairly. Paul Langland said BP does not engage in redlining. 

The FTC launched an investigation in early 1999 at the request of Sen. Barbara Boxer, D-Calif., to look into a spike in gas prices in California. The commission expanded the probe later in the year to include Oregon, Washington state, Arizona and Nevada. The investigation is expected to be complete before the end of the year. 

Wyden submitted his own report to the FTC. It said oil companies charge higher prices for branded gasoline as opposed to unbranded gasoline; that oil companies arbitrarily set differing gas prices in different regions of Oregon; and that oil company owned-and-operated stations sell gasoline at retail prices lower than what competing stations paid wholesale for the gasoline. 

Parker said that when the investigators complete their examination of oil industry practices, the FTC could file a lawsuit, issue a report, recommend legislation to Congress or simply close the investigation. 

He cautioned that “proving an antitrust violation is not a simple matter. Oil companies have offered spirited defenses of zone pricing and redlining, arguing that these practices are justified by legitimate business considerations.” 

Oil companies have insisted that market conditions are responsible for gasoline prices, not industry actions.