Exxon, Royal Dutch Shell Settle FTC Charges

The Federal Trade Commission has reached a settlement agreement with Royal Dutch Shell and Exxon over charges that their proposed joint venture to develop, manufacture, and sell viscosity index improver -- an essential motor oil additive -- would reduce competition and violate federal antitrust laws. To settle the FTC charges, Exxon would sell its viscosity index improver business to a Commission-approved buyer prior to consummation of the joint venture and within 6 months.

On July 10, 1996, Exxon and Shell announced they would form a joint venture to develop, manufacture and sell their fuel and lubricants additives, including viscosity index improvers. Viscosity index improvers, also known as viscosity modifiers, are added to motor oil to assure that it has the high viscosity required to protect auto engines at high temperatures and the low viscosity required to operate engines when they are cold. Together, Exxon and Shell account for more than one-half of the sales of viscosity index improver in North America.

According to the FTC complaint, the proposed joint venture would increase the likelihood that Exxon/Shell and the few remaining firms in the market would collude rather than compete in the manufacture and marketing of viscosity index improver. The complaint also alleges that entry by a new competitor would not be "timely, likely or sufficient" to offset the competition lost to the joint venture.

To settle the FTC charges, Exxon has agreed to sell its viscosity index improver business to Chevron Chemical Company LLC, or another Commission-approved buyer. Chevron's Oronite division is currently in the lubricant additives business and Exxon and Chevron have negotiated a sales agreement for Exxon's viscosity index improver assets and certain synthetic rubber assets required for improver production. The agreement would also prohibit the transfer of competitively sensitive information about Chevron to Shell by Exxon. If the sale to Chevron is not consummated, Exxon will be required to sell not only the assets it had planned to sell to Chevron, but additional assets necessary to enable a non-producer of viscosity index improver to purchase Exxon's assets and manufacture the improver.

The Commission vote to accept the proposed consent agreement was 4-0.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, consent agreement and a free FTC publication, "Promoting Competition, Protecting Consumers: A Plain English Guide To Antitrust Laws," are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

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(FTC File No. 971 0007)