FTC Acts to Protect South Carolina and Alabama Markets from Anticompetitive Gasoline Terminal Deal

The Federal Trade Commission today took action to protect competition in gasoline, diesel, and other fuel markets in South Carolina and Alabama, requiring pipeline and storage companies Buckeye Partners, L.P. and Magellan Midstream Partners, L.P. to divest to U.S. Venture, Inc. petroleum terminals in the two states as a condition of Buckeye’s $435 million proposed acquisition of 26 Magellan terminals.

“The FTC is committed to ensuring competitive gasoline and diesel markets, and that includes markets for petroleum storage and transportation to consumers,” said Holly Vedova, Director of the Bureau of Competition. “By requiring Buckeye and Magellan to divest terminals in these three local markets, the agency will prevent higher market-wide prices that otherwise would have resulted from the acquisition.”

Houston-based Buckeye owns more than 115 light petroleum products terminals, mostly in the Northeast, Southeast, and Midwest. Headquartered in Tulsa, Oklahoma, Magellan operates terminals and pipelines in central United States, and terminals in the southeastern United States.

These terminals are a critical link in the supply chain that makes it possible for the American public to get gasoline, diesel, and jet fuel. According to the complaint, terminals are critical to the efficient distribution of gasoline and other light petroleum products. Terminals generally consist of storage tanks and loading racks that pump fuel into tanker trucks for further delivery. Terminaling services include the cluster of services related to the off-loading, temporary storage, and dispensing of light petroleum products into trucks.

The complaint alleges that without a remedy, the acquisition would harm competition for terminaling services both for all light petroleum products, and for gasoline specifically, in North Augusta, South Carolina; Spartanburg, South Carolina; and Montgomery, Alabama. In all three geographic markets, the acquisition would eliminate the close competition between Buckeye and Magellan, increase the likelihood of collusive or coordinated interaction between the remaining competitors, reduce the number of terminaling options for third-party customers, and increase prices for terminaling services.

Among other things, the consent agreement settling the FTC’s complaint requires Buckeye to:

• Divest assets. Buckeye must sell five terminals and associated assets to divestiture buyer U.S. Venture no later than 10 days after the acquisition is consummated. The divested terminals include two light petroleum product terminals and associated assets in the North Augusta, South Carolina market, two terminals in the Spartanburg, South Carolina market, and one terminal in the Montgomery, Alabama. To ensure the terminals remain fully competitive, the parties must maintain the assets until the divestitures are complete.
• Seek prior approval for ten years. Buckeye must seek prior approval from the Commission for a period of ten years before it acquires any light petroleum products terminal (including the divested terminals) within a 60-mile radius of the divested assets.

The proposed order also requires U.S. Venture, the divestiture buyer, to obtain prior approval from the Commission for a period of 3 years before transferring any of the divested assets to any buyer, and for a period of 7 additional years to any buyer with an interest in any light petroleum products terminal in any of the 3 relevant geographic markets. As explained in the accompanying analysis to aid public comment, the Commission will appoint The Claro Group as an independent third-party monitor to oversee the parties’ compliance with the requirements of the proposed order. 

The Commission vote to issue the complaint and accept the proposed Consent Order for public comment was 5-0.  Commissioners Noah Joshua Phillips and Christine S. Wilson issued a statement. The FTC will publish the Consent Agreement package in the Federal Register shortly. Instructions for filing comments appear in the published notice. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. 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 up to $46,517.