UNITED STATES OF AMERICA In the Matter of The Williams Companies, Inc., a corporation. Docket No. C- COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and the Clayton Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission ("FTC" or "Commission"), having reason to believe that respondent The Williams Companies, Inc. (“Williams”), a corporation, and MAPCO Inc. (“MAPCO”), a corporation, have entered into an agreement and plan of merger for Williams to acquire all of the voting securities of MAPCO, that such agreement and plan of merger violates Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and that such agreement and merger, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and it appearing to the Commission that a proceeding in respect thereof would be in the public interest, hereby issues its complaint, stating its charges as follows: I. RESPONDENT 1. Respondent Williams is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at One Williams Center, Tulsa, Oklahoma 74172. 2. Respondent Williams is, and at all times relevant herein has been, a diversified energy products company engaged in the transportation and sale of natural gas and related activities; natural gas gathering, processing, and treating activities; the transportation and terminaling of petroleum products and natural gas liquids, including propane; hydrocarbon exploration and production activities; the production and marketing of ethanol; and the provision of a variety of other products and services to the energy industry. 3. Respondent Williams is, and at all times relevant herein has been, engaged in commerce as “commerce” is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. § 12, and is a corporation whose business is in or affecting commerce as “commerce” is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44. II. MAPCO AND THE PROPOSED ACQUISITION 4. MAPCO is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at 1800 South Baltimore Avenue, Tulsa, Oklahoma 74119. 5. MAPCO is, and at all times relevant herein has been, a diversified energy products company engaged in the transportation by pipeline of natural gas liquids ("NGLs"), anhydrous ammonia, crude oil and refined petroleum products; the transportation by truck and rail of NGLs and refined petroleum products; the refining of crude oil; the marketing of NGLs, refined petroleum products and crude oil; and NGL processing and storage. 6. MAPCO is, and at all times relevant herein has been, engaged in commerce as “commerce” is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. § 12, and is a corporation whose business is in or affecting commerce as “commerce” is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44. 7. On or about November 23, 1997, Williams and MAPCO entered into an agreement and plan of merger whereby Williams would acquire all of the outstanding voting securities of MAPCO, and MAPCO would become a wholly-owned subsidiary of Williams. Under the agreement, each share of MAPCO common stock will be exchanged for shares of Williams common stock and preferred stock purchase rights. Based on relative valuations at the time of the agreement, the transaction is valued at approximately $2.7 billion. III. TRADE AND COMMERCE A. Midwest Propane 8. A relevant line of commerce in which to evaluate the effects of this acquisition is the transportation by pipeline and terminaling of propane. 9. Relevant sections of the country in which to evaluate the effects of this acquisition on the relevant line of commerce are: (a) central Iowa, including Des Moines and Ogden; (b) northern Iowa and southern Minnesota, including Clear Lake and Sanborn, Iowa, and Mankato, Minnesota; (c) eastern Iowa, including Iowa City; (d) southern Wisconsin and northern Illinois, including Janesville, Wisconsin and Rockford, Illinois; and (e) north central Illinois, including Tampico and Farmington. 10. MAPCO owns and operates pipelines that transport propane to terminals owned and operated by MAPCO that service the relevant sections of the country. 11. Williams owns and operates pipelines that transport propane to terminals owned and operated by Kinder Morgan Operating L.P. “A” ("Kinder Morgan"), a Delaware limited partnership, that service the relevant sections of the country. Williams has agreements with Kinder Morgan pursuant to which customers of Kinder Morgan ship propane on pipelines owned by Williams to terminals owned by Kinder Morgan in the relevant sections of the country. Because it owns and operates said pipelines, Williams effectively controls the delivery of propane to the Kinder Morgan terminals under such agreements. 12. Respondent Williams, through its ownership and operation of the pipelines and through its agreements with Kinder Morgan, competes with MAPCO in the transportation and terminaling of propane in each relevant section of the country. 13. The markets for the transportation by pipeline and terminaling of propane in the relevant sections of the country are highly concentrated and would become substantially more highly concentrated as a result of the acquisition. 14. Entry into the transportation by pipeline and terminaling of propane in the relevant sections of the country is difficult. B. Pipeline Transportation of Raw Mix from Southern Wyoming 15. Raw mix is a mixture of natural gas liquids, consisting of at least two or more of the following components: propane, ethane, butanes, and pentanes-plus. Raw mix is processed into these individual component products at fractionation facilities. 16. MAPCO owns the only pipeline for the transportation of raw mix from gas processing plants in southern Wyoming to Hobbs, New Mexico, where it connects with other pipelines for transportation to major fractionation facilities in Texas, Oklahoma, and Kansas. 17. Williams owns and operates two large gas processing plants in southern Wyoming. At these plants, Williams extracts raw mix from natural gas produced from gas wells, for itself and for other well owners. 18. A relevant line of commerce and section of the country in which to evaluate the effects of this acquisition is the transportation by pipeline of raw mix from southern Wyoming to New Mexico, Texas, Oklahoma, and Kansas. 19. Prior to the acquisition agreement, MAPCO believed that its monopoly over the pipeline transportation of raw mix from southern Wyoming was in jeopardy. It was concerned that a new pipeline would be built to transport raw mix from southern Wyoming to fractionation facilities in Texas, Kansas and Oklahoma, and that such a pipeline would capture a significant portion of MAPCO’s volume. MAPCO perceived that Williams was an important participant in any such new pipeline, because of the location of Williams’ gas processing plants and the volume of raw mix extracted at these plants. 20. Because of its concern about the possible construction of a competing pipeline, MAPCO planned to expand the capacity of its pipeline and to offer a discounted tariff in exchange for long-term volume commitments. 21. Williams in fact had discussions with other interested parties concerning the construction of a pipeline to by-pass the MAPCO pipeline. Williams terminated these discussions when it entered into the agreement and plan of merger with MAPCO. 22. Entry into the pipeline transportation of raw mix from southern Wyoming is difficult. 23. After the acquisition Williams will no longer have an incentive to participate in, or cooperate with, a competing pipeline. Without Williams’ participation or cooperation, the prospects for such a competing pipeline are substantially reduced. Owners of raw mix extracted at Williams’ gas processing plants will continue to have no choice other than MAPCO for transporting their raw mix to major fractionation centers. Without the threat of a competing pipeline, MAPCO will have less of an incentive to expand its pipeline or to offer a reduced tariff. IV. EFFECT OF THE PROPOSED TRANSACTION 24. The effect of the proposed acquisition, if consummated, may be substantially to lessen competition or tend to create a monopoly in the relevant lines of commerce in the relevant sections of the country in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. § 45. In particular, the proposed acquisition will:
V. VIOLATIONS CHARGED 25. The agreement and plan of merger between Williams and MAPCO constitutes a violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. 26. The proposed acquisition, if consummated, would constitute a violation of Section 7 of the Clayton Act, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. IN WITNESS WHEREOF, the Federal Trade Commission has caused this complaint to be signed by the Secretary and its official seal to be affixed, at Washington, D.C. this day of , 1998. By the Commission. SEAL Donald S. Clark |