Federal Trade Commission to Challenge Aloha Petroleum Ltd.s Planned Purchase of Hawaiian Gasoline Assets of Trustreet Properties, Inc.

The Federal Trade Commission has voted to authorize the staff to seek a temporary restraining order and preliminary injunction to block Aloha Petroleum LTD.’s (Aloha) proposed $18 million acquisition of the half interest in an import-capable terminal and retail gasoline assets of Trustreet Properties, Inc. (Trustreet) on the island of Oahu, Hawaii. According to the Commission’s complaint, the transaction, which was not reportable under the Hart-Scott-Rodino (HSR) premerger filing guidelines, would reduce the number of gasoline marketers and could lead to higher gasoline prices for Hawaii consumers.

The Proposed Transaction

Aloha seeks to acquire from Trustreet a 50 percent interest in the Barbers Point petroleum importing terminal on Oahu. Aloha already owns the other half. Aloha also would acquire, through long-term leases, 18 retail stations that Trustreet now operates under the “Mahalo” brand name.

Alleged Anticompetitive Impacts

Built in the 1990s, the Barbers Point terminal is the newest on the island. It can take full cargoes of gasoline, which is the most economical way to bring in low-cost bulk supply. The complaint alleges that the ability to import cargoes of gasoline is necessary to obtain a competitive bulk supply price from one of the two refiners on Oahu. These refineries are owned by Chevron Corporation (Chevron) and Tesoro Corporation (Tesoro). Both Aloha and Trustreet have the right and ability to use the Barbers Point terminal to import cargoes of gasoline or to store gasoline obtained from the refiners on Oahu. The only other terminal that will be available for gasoline imports is the Shell terminal. Consequently, the complaint alleges, this acquisition, if allowed to proceed, would reduce the number of gasoline marketers with ownership of, or guaranteed access to, a refinery or an import-capable terminal from five to four, and would reduce from three to two the number of bulk suppliers who have been willing to sell to unintegrated retailers, thereby leading to higher prices for bulk supply of gasoline.

All refined petroleum products supplied to Hawaii’s outer islands come from Oahu, which is the only island with refineries and with terminals large enough to supply the rest of the State. Accordingly, any combination of bulk suppliers on Oahu is likely to impact the other Hawaiian islands as well.

Regarding the retail market, there are seven major gasoline retailers on Oahu: Chevron, Tesoro, Shell, Aloha, Mid Pac, Costco, and Trustreet. The complaint alleges that the Mahalo and Aloha stations are each other’s closest competitors as low-priced retailers of gasoline on Oahu. This acquisition will end that competition and give Aloha the ability to raise prices. Accordingly, the complaint alleges, this proposed acquisition likely will lead to higher gasoline prices for consumers on Oahu.

According to the Commission’s complaint, the transaction as proposed would be anticompetitive and in violation of Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended.

The FTC vote to challenge the proposed acquisition was 2-1-1, with Commissioners Pamela Jones Harbour and Jonathan D. Leibowitz voting yes, Thomas B. Leary voting no and Chairman Deborah Platt Majoras recused. The motion was filed on July 27, 2005 in the U.S. District Court for the District of Hawaii. The Commission appreciates the assistance of the Hawaii Attorney General’s Office in investigating and prosecuting this matter.

The Commission’s action in this matter authorizes staff to seek a federal district court order to prevent Aloha’s proposed acquisition of the Oahu-based gasoline terminal and retail assets of Truststreet. The FTC will argue in court for a temporary restraining order and preliminary injunction on the grounds that the transaction as structured would violate federal antitrust laws. If the court grants the FTC’s motion, the Commission will have 20 days within which to determine whether to issue an administrative complaint.

Copies of the Commission’s complaint will be available upon filing on the FTC’s Web site at www.ftc.gov. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No. 051-0131)