Gasoline Price Changes - Federal Trade Commission

GASOLINE PRICE CHANGES:
50. EIA, supra note 48, at 247; PETROLEUM MERGER REPORT, supra note 14, at 242 tbl.9-2.
51. See PETROLEUM MERGER REPORT, supra note 14, at 11-12.
52. A few states forbid refiners from owning retail outlets. See note 59, infra, and related text.
53. However, the degree of integration of such firms may vary geographically.
54. See Vita, supra note 25, and sources cited therein. See also DENNIS CARLTON & JEFFREY PERLOFF, MODERN
INDUSTRIAL ORGANIZATION 377-95 (3d ed. 2000); W. KIP VISCUSI ET AL., ECONOMICS OF REGULATION AND
ANTITRUST 218-33 (3d ed. 2000). For a discussion of the case law on vertical integration, see ANDREW I. GAVIL,
WILLIAM E. KOVACIC & JONATHAN B. BAKER, ANTITRUST LAW IN PERSPECTIVE: CASES, CONCEPTS AND PROBLEMS
IN COMPETITION POLICY 339-417, 689-756 (2002); Antitrust Law Developments, 2002 ABA SEC. ANTITRUST L.
130-228, 253-56.
55. Whether the direct managerial control lowers transactions costs will depend on the specific situation. For
example, some branded marketers choose to use direct distribution in some areas and jobber distribution in others.
56. The prices that pipeline operators charge for the use of their lines are often, but not always, fixed due to
government regulations. The oil pipeline pricing index was established in Revisions to Oil Pipeline Regulations
Pursuant to the Energy Policy Act of 1992, Order No. 561, FERC Stats. & Regs. (CCH) 30,985 (1993).
57. See John Geweke, Empirical Evidence on the Competitive Effects of Mergers in the Gasoline Industry (Public
Comment, FTC Conference on Factors That Affect Prices of Refined Petroleum Products II, July 16, 2003), at
http://www.ftc.gov/bc/gasconf/comments2/gewecke1.pdf.
58. Id. at 18-19.
59. Jurisdictions that have passed divorcement laws include Connecticut, Delaware, Hawaii, Maryland, Nevada,
Virginia, and the District of Columbia. For an analysis of various states’ divorcement statutes, see LEGISLATIVE
REFERENCE BUREAU, ST. OF HAW., REGULATING HAWAII’S PETROLEUM INDUSTRY 196-213 (Ch.15 “Retail
Divorcement”) (1995), at http://www.hawaii.gov/lrb/rpts95/petro/pet15.html; see also John M. Barron et al.,
Predatory Pricing: The Case of the Retail Gasoline Market, 3 CONTEMP. ECON. POL’Y 131 (1985).
60. Vita, supra note 25; John M. Barron & John R. Umbeck, The Effects of Different Contractual Arrangements:
The Case of Retail Gasoline Markets, 27 J. L. ECON. 313 (1984).
61. Vita, supra note 25. The study tested two conflicting hypotheses: (1) that divorcement legislation increases
consumer welfare because vertical integration is anticompetitive; and (2) that such legislation harms consumers by
eliminating efficiency gains from vertical integration. See also Barron & Umbeck, supra note 60; Williams 8/2 at
152.
62. Vita, supra note 25. Other studies have reached the same general conclusion. See A.A. Blass & Dennis W.
Carlton, The Choice of Organizational Form in Gasoline Retailing and the Cost of Laws that Limit that Choice, 44
J.L. ECON. 511 (2001) (finding that refiners open new company or lessee-operated retail outlets to gain efficiencies
– rather than for predatory purposes – and concluding that state divorcement policies may impose annual costs of as
much as $1 billion on society); Barron & Umbeck, supra note 60, at 327 (finding that the Maryland statute
mandating divorcement led to higher average self-serve and full-serve gasoline prices at the formerly integrated
stations as compared to the competing stations).
132
FEDERAL TRADE COMMISSION, JUNE 2005