BP/ARCO Merger Should Be Stopped, Says AAI Statement

STATEMENT OF THE AMERICAN ANTITRUST INSTITUTE REGARDING THE PROPOSED MERGER OF BP AND ARCO

The American Antitrust Institute applauds the decision of the Federal Trade Commission to block the merger of British Petroleum and ARCO. This proposed merger is part of a wave of large mergers and other collaborative ventures in the petroleum industry. Each previous merger has added to the concentration level of the industry and if this merger proceeds, it will likely encourage still more oil mergers. The FTC was right finally to draw a line.

If allowed to proceed, this merger will significantly harm the citizens and economies of Alaska and the West Coast of the United States. These harms would be of two separate types.

First, the merger would give BP and ARCO unprecedented control over Alaskan oil. It would result in (1) an unacceptable increase in their already formidable control over the Trans-Alaska Pipeline System; (2) the significant elimination of competition for leases on Federal and State oil land; (3) their ownership and control over an unacceptably large percentage of North Slope oilfield facilities; (4) their high degree of control over the marine transportation of oil from Alaska; and (5) their anticompetitive control over the procurement of oil service contractors.

Second, this merger would likely result in significantly higher petroleum prices on the West Coast of the United States. Northern California already suffers from a lack of competition in this industry and as a consequence has some of the highest petroleum prices in the United States. This merger would give British Petroleum a degree of control over oil imported into northern California and other parts of the West Coast, that would violate the Federal Merger Guidelines, thus exacerbating an already unhealthy competitive situation.

British Petroleum and ARCO's proposed "fix" of this merger is inadequate for many reasons. According to public documents, they offered too little by way of divestiture and could not give adequate assurances that divested assets would be deployed in a way that would maintain the pre-merger level of competition.

Any one of the five anticompetitive effects in Alaska, or the effects on the West Coast, would, by itself, violate the antitrust laws. Together, however, they would constitute a massive antitrust violation - indeed, without a "fix" that fully protects consumers, this could be one of the most anticompetitive mergers in United States history.