Federal Trade Commission Issues Interim Report on Midwest Gas Price Investigation

The Federal Trade Commission today issued an interim report to Congress on its investigation into recent Midwest gas price increases that sets forth the reasons the Commission launched the investigation and provides a status report on the ongoing investigation, including progress to date and a description of the work remaining. The report explains the chronology of the price spikes of reformulated gasoline (RFG) in the Midwest region and how these price increases led Commission staff to begin a preliminary investigation in early June and the Commission to launch a formal investigation on June 21.

The report discusses several factors cited as a potential cause of these spikes - ranging from high crude oil prices, to the introduction of EPA Phase II regulations for summer-blend reformulated gasoline in high-ozone urban areas, to the break in the Explorer pipeline in March. However, the report states that "[a]lthough it is likely that each of these supply factors contributed to the dramatic recent price spikes in the Midwest, no single factor appears from staff's preliminary investigation to be likely to provide a full explanation, and staff does not yet have sufficient information to assess the impact of these factors in combination."

According to the report, Commission staff are investigating "the possibility of collusion or tacit coordination, conduct that could be illegal under Section 5 of the Federal Trade Commission Act." Due to the multiplicity of potential interrelated causes as well as the immense amount of information being collected in the course of the investigation, the report states that "this investigation is likely to consume, at a minimum, another three or four months."

The report states that on June 29, Commission staff issued the first round of subpoenas to nine refiners that supply Midwest markets and that in less than a month, staff has received approximately 200 boxes of documents. By the middle of August, most documents requested from the first round of subpoenas should be delivered to the Commission.

The Commission issued a second round of subpoenas to other refiners last week, and has recently issued Civil Investigative Demands (CIDs) to the refiners, requesting compilations of data and answers to written questions. The Commission staff also issued another set of subpoenas on July 25 to the entities that own or control the pipelines serving the Midwest markets. Responsive documents from that set of subpoenas are expected to begin arriving shortly.

The report details plans to conduct extensive interviews as part of this investigation. Staff has conducted approximately 15 interviews with market participants, consumers, corporate users of gasoline and others with knowledge of relevant facts, and is in the process of obtaining industry-wide data from the Oil Price Information Service (OPIS). Once the documentary material has been analyzed, staff will take depositions under oath of key decision-making personnel throughout the gasoline distribution chain in the Midwest.

Commission staff is also coordinating its investigative efforts with the Attorneys General of Wisconsin, Illinois, Michigan, Ohio, Indiana, Missouri, Iowa, Minnesota, Kentucky, South Dakota and West Virginia, according to the report.

The Commission vote to approve the report was 5-0.

Copies of the report are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; toll-free: 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Eric London

Office of Public Affairs

202-326-2180

(FTC File No. 0010174)