[Federal Register Volume 63, Number 64 (Friday, April 3, 1998)]
[Notices]
[Pages 16553-16555]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8763]


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FEDERAL TRADE COMMISSION

[File No. 981-0076]


The Williams Companies, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before June 2, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
Phillip Broyles, FTC/S-2105, Washington, DC 20580. (202) 326-2805.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the above-captioned consent agreement containing a consent 
order to cease and desist, having been filed with and accepted, subject 
to final approval, by the Commission, has been placed on the public 
record for a period of sixty (60) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for March 27, 1998), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room,
Room H-130, Sixth Street and Pennsylvania Avenue, NW., Washington, DC 
20580, either in person or by calling (202) 326-3627. Public comment is 
invited. Such comments or views will be considered by the Commission 
and will be available for inspection and copying at its principal 
office in accordance with Section 4.9(b)(6)(ii) of the Commission's 
Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted from The 
Williams Companies, Inc. (``Williams,'' or ``Proposed Respondent'') an 
Agreement Containing Consent Order (``Proposed Consent Order''). The 
Proposed Consent Order remedies the likely anticompetitive effects in 
two product markets arising from certain aspects of Williams' proposed 
acquisition of MAPCO Inc. (``MAPCO'').

II. Description of the Parties and the Transaction

    Williams, headquartered in Tulsa, Oklahoma, is a multinational 
company doing business in the energy and communications industries. 
Williams operates natural gas processing plants in Wyoming and 
pipelines that supply prepare to the upper Midwest. During 1997, 
Williams had total revenues of approximately $4.4 billion.
    MAPCO, also with headquarters in Tulsa, Oklahoma, is involved in 
the energy industry. One of its principal businesses is the production, 
shipment, and sale of natural gas liquids, such as propane, butane, and 
natural gasoline. In 1997, MAPCO had sales and operating revenues of 
approximately $3.8 billion.
    On November 23, 1997, Williams and MAPCO entered into an agreement 
and plan of merger under which MAPCO will be acquired by Williams. 
Under the agreement, each share of MAPCO common stock will be exchanged 
for shares of Williams common stock plus preferred stock purchase 
rights.

III. The Proposed Complaint and Consent Order

    The Commission has entered into an agreement containing a Proposed 
Consent Order with Williams in settlement of a proposed complaint 
alleging that the proposed acquisition violates Section 5 of the 
Federal Trade Commission Act, 15 U.S.C. 45, and that consummation of 
the acquisition would violate Section 7 of the Clayton Act, 15 U.S.C. 
18, and Section 5 of the Federal Trade Commission Act. The complaint 
alleges that the acquisition will lessen competition in the following 
markets: (1) the transportation by pipeline and terminaling of propane 
to (a) central Iowa, including Des Moines and Ogden; (b) northern Iowa 
and southern Minnesota, including Clear Lake and Sanborn, Iowa, and 
Mankato,

[[Page 16554]]

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; and (2) the transportation by pipeline of raw mix from 
southern Wyoming to New Mexico, Texas, Oklahoma, and Kansas.
    To remedy the alleged anticompetitive effects of the proposed 
acquisition, the Proposed Consent Order requires Williams to: (1) 
comply with a Pipeline Lease and Operating Agreement between Williams 
and Kinder Morgan Operating L.P. ``A'' (``Kinder Morgan''); and (2) 
agree to connect Williams' Wyoming gas processing plants to any 
proposed raw mix pipeline that could compete with MAPCO and requests 
such a connection. The Proposed Consent Order also provides that no 
modification to the Kinder Morgan Agreement shall be made without prior 
approval by the Commission.
    For ten (10) years after the consent order becomes final, Williams 
is prohibited from acquiring any interest in a concern that provides, 
or any assets used for, the pipeline transportation or terminating of 
propane in Iowa or within 70 miles of the Iowa border, without giving 
prior notice to the Commission.
    Williams is required to file annual compliance reports with the 
Commission for the next ten (10) years, with the first report due one 
year after the proposed order becomes final. Within 60 days and 120 
days after this order becomes final, Williams is required to provide 
the Commission with a report detailing its compliance with Paragraph 
III.C. of the order.

IV. Resolution of Antitrust Concerns

    The Proposed Consent Order alleviates the alleged antitrust 
concerns arising from the acquisition in the markets discussed below.

A. Pipeline Transportation and Terminaling of Propane to Markets in the 
Upper Midwest

    Propane is shipped by pipeline from production centers in Kansas 
and Canada to terminals in the upper Midwest, including Iowa, 
Wisconsin, Illinois and Minnesota. Retail propane dealers pick up 
propane at these terminals for delivery to users of propane. Important 
uses for propane in the local markets involved here includes 
residential heating and agricultural crop drying.
    Williams and MAPCO own pipelines and transport propane to terminals 
that serve customers at various locations in Iowa, Illinois, Wisconsin 
and Minnesota. In several areas, terminals supplied by Williams and 
MAPCO pipelines are the only, or almost the only, sources of propane. 
These area 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.
    MAPCO owns and operates pipelines that transport propane to MAPCO's 
terminals in these areas. MAPCO has terminals in Ogden, Sanborn and 
Iowa City, Iowa; Janesville, Wisconsin; Farmington, Illinois; and 
Mankato, Minnesota.
    Williams owns and operates pipelines that supply propane to 
terminals owned by Kinder Morgan in these areas. Williams has 
agreements with Kinder Morgan under which Kinder Morgan leases pipeline 
capacity from Williams to supply its customers at Kinder Morgan 
terminals. One agreement gave Williams an option to terminate with one 
year's notice. The other agreements are due to expire by 2001. 
Williams' pipeline is the only source of propane for Kinder Morgan's 
terminal in Clear Lake, Iowa. Kinder Morgan's terminals in Rockford and 
Tampico, Illinois, and Iowa City and Des Moines, Iowa, receive propane 
from the Williams pipeline or a Kinder Morgan pipeline. The Williams 
pipeline supplies a substantial portion of the propane delivered to 
these Kinder Morgan terminals. Kinder Morgan needs this capacity to be 
an effective competitive constraint on MAPCO. Because it owns and 
operates the pipeline, Williams can effectively control the supply of 
propane to the Kinder Morgan terminals under the current agreement.
    Each geographic area indicated above is a relevant antitrust 
geographic market because pipeline and terminal operators in each 
market could profitably raise prices by a small but significant and 
nontransitory amount without losing enough sales to other areas to make 
such an increase unprofitable. Retail propane dealers cannot 
economically turn to other areas to obtain their propane supply because 
of the additional costs associated with using more distant sources.
    The acquisition will eliminate Williams and MAPCO as independent 
competitors in the pipeline transportation of propane in these areas. 
The acquisition also will increase the ability of the combined 
Williams/MAPCO, either unilaterally or through coordinated interaction, 
to raise prices and restrict the supply of propane. In addition, 
following the acquisition, Williams will have both the incentive and 
the ability to restrict access to propane at Kinder Morgan's terminals, 
which will diminish Kinder Morgan's ability to compete with MAPCO. New 
entry is unlikely to be timely and sufficient to defeat an 
anticompetitive price increase because it would entail substantial sunk 
costs. The transaction could raise the costs of propane in these 
markets by more than $2 million per year.
    To remedy the potential anticompetitive effects, Paragraph II of 
the Proposed Consent Order requires the Proposed Respondent to comply 
with the Pipeline Lease and Operating Agreement between Williams and 
Kinder Morgan dated March 3, 1998. This Agreement will ensure Kinder 
Morgan's access to pipeline capacity, prevent Williams from affecting 
Kinder Morgan's ability to act as an independent competitor in the 
transportation and terminaling of propane in these markets, and thus 
prevent any lessening of competition.

B. Transportation of Raw Mix From Southern Wyoming

    ``Raw mix'' is a mixture of natural gas liquids--including ethane, 
butanes, and propane--that remains after the natural gas is extracted. 
MAPCO owns the only pipeline that transports raw mix from natural gas 
processing plants in southern Wyoming to fractionation plants in Texas, 
New Mexico, Kansas, and Oklahoma. Those fractionation plants separate 
the raw mix into its component products. Williams operates two large 
gas processing plants in Wyoming, where it obtains raw mix from 
processing natural gas of its own and for others. Williams and the 
other owners of this raw mix ship it from southern Wyoming to 
fractionation plants on the MAPCO pipeline.
    The pipeline transportation of raw mix from southern Wyoming to New 
Mexico, Texas, Oklahoma, and Kansas is a relevant antitrust market. 
MAPCO could profitably raise the price of such transportation by a 
small but significant and nontransitory amount without losing enough 
volume to make such an increase unprofitable. Owners of raw mix cannot 
economically use other means of transportation to deliver their product 
to fractionators in these states.
    Because of MAPCO's monopoly position, other companies have 
considered building a competing pipeline to transport raw mix to 
fractionators. Reacting to the potential

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competition, MAPCO planned to expand the capacity of its pipeline and 
to offer a discounted tariff.
    Williams had discussions with companies about building a pipeline 
to compete with MAPCO. Once it entered into the agreement and plan of 
merger with MAPCO, Williams ended these discussions.
    MAPCO perceived that Williams would be an important participant in 
a competing pipeline because of the location of its gas processing 
plants and the volume of raw mix extracted at these plants. The 
proposed acquisition would likely eliminate the possibility that any 
new or planned competing pipeline could connect to Williams' gas 
processing plants, which in turn would make it difficult or impossible 
for the owners of raw mix in Williams' plants to commit their volume to 
the competing pipeline. The unavailability of this volume would have 
made the construction of a competing pipeline very unlikely. As a 
result, the merged Williams/MAPCO would have an increased ability to 
raise prices and limit capacity on the MAPCO raw mix pipeline from 
southern Wyoming. Without the Proposed Consent Order, the merger could 
raise costs to raw mix owners in southern Wyoming by approximately $8 
million or more per year.
    To remedy this harm, Paragraph III of the Proposed Consent Order 
provides that, within 30 days of receipt of a written request from an 
exiting or proposed pipeline, Williams must agree to connect each of 
Williams' Wyoming gas processing plants to the pipeline.

V. Opportunity for Public Comment

    The Proposed Consent Order has been placed on the public record for 
sixty (60) days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After sixty (60) days, the Commission will again review the Proposed 
Consent Order and the comments received and will decide whether it 
should withdraw from the Proposed Consent Order to make the order 
final.
    The purpose of this analysis is to invite public comment on the 
Proposed Consent Order to aid the Commission in its determination of 
whether to make final the Proposed Consent Order. This analysis does 
not constitute an official interpretation of the Proposed Consent 
Order, nor is it intended to modify the terms of the Proposed Consent 
Order in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 98-8763 Filed 4-2-98; 8:45 am]
BILLING CODE 6750-01-M