[Federal Register Volume 72, Number 119 (Thursday, June 21, 2007)]
[Notices]
[Pages 34250-34252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-12033]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 061 0229]


American Petroleum Company, Inc.; Analysis of Agreement 
Containing Consent Order to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

-----------------------------------------------------------------------

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 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 July 13, 2007.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``American Petroleum, File No. 061 0229,'' to 
facilitate the organization of comments. A comment filed in paper form 
should include this reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania 
Avenue, NW., Washington, D.C. 20580. Comments containing confidential 
material must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR 
4.9(c) (2005).\1\ The FTC is requesting that any comment filed in paper 
form be sent by courier or overnight service, if possible, because U.S. 
postal mail in the Washington area and at the Commission is subject to 
delay due to heightened security precautions. Comments that do not 
contain any nonpublic information may instead be filed in electronic 
form as part of or as an attachment to email messages directed to the 
following email box: [email protected]. The FTC Act and other 
laws the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. All 
timely and responsive public comments, whether filed in paper or 
electronic form, will be considered by the Commission, and will be 
available to the public on the FTC website, to the extent practicable, 
at www.ftc.gov. As a matter of discretion, the FTC makes every effort 
to remove home contact information for individuals from the public 
comments it receives before placing those comments on the FTC website. 
More information, including routine uses permitted by the Privacy Act, 
may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/
privacy.htm.
---------------------------------------------------------------------------

    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).

FOR FURTHER INFORMATION CONTACT: Geoffrey Green (202) 326-2641, Bureau 
of Competition, Room NJ-6264, 600 Pennsylvania Avenue, NW., Washington, 
---------------------------------------------------------------------------
D.C. 20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission 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 thirty (30) days. The following

[[Page 34251]]

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 June 16, 2007), on the World Wide Web, at http://
www.ftc.gov/os/2007/06/index.htm. A paper copy can be obtained from the 
FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., 
Washington, D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. \\All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a proposed consent order with 
American Petroleum Company, Inc. (``American Petroleum'' or 
``Respondent''), an importer and seller of lubricants with its 
principal place of business located at Road 865 KM 0.2, Barrio 
Campanillas, Toa Baja, Puerto Rico 00951.
    The agreement settles charges that American Petroleum violated 
Section 5 of the Federal Trade Commission Act, 15 U.S.C. Sec.  45, by 
agreeing with competitors to restrict the importation and sale of 
lubricants in Puerto Rico. The proposed consent order has been placed 
on the public record for 30 days to receive comments from interested 
persons. Comments received during this period will become part of the 
public record. After 30 days, the Commission will review the agreement 
and the comments received, and will decide whether it should withdraw 
from the agreement or make the proposed order final.
    The purpose of this analysis is to facilitate comment on the 
proposed order. The analysis does not constitute an official 
interpretation of the agreement and proposed order, and does not modify 
their terms in any way. Further, the proposed consent order has been 
entered into for settlement purposes only, and does not constitute an 
admission by Respondent that it violated the law or that the facts 
alleged in the complaint (other than jurisdictional facts) are true.

I. The Complaint

    The allegations of the complaint are summarized below:
    American Petroleum has for many years been engaged in the business 
of importing lubricants into, and selling lubricants in, the 
Commonwealth of Puerto Rico.
    Puerto Rico Law 278, enacted in 2004, was intended to create 
incentives for the safe disposal of used lubricants. The law required 
all persons in the chain of distribution, from the importer to the end-
user, to pay an environmental deposit of fifty cents for each quart of 
lubricants purchased. The deposit could be recovered after the used 
lubricating oil was delivered to an authorized collection center. 
During 2005 and 2006, American Petroleum joined with numerous others in 
the Puerto Rico lubricants industry to lobby for the delay, 
modification, and/or repeal of Law 278. These efforts were partially 
successful. The Legislature postponed the starting date for the law 
until March 31, 2006.
    In March 2006, with the effective date for Law 278 approaching, 
American Petroleum and several competing importers and sellers of 
lubricants adopted a new strategy to pressure the Government to repeal 
Law 278. The companies agreed to cease importing lubricants, beginning 
on March 31, 2006, and continuing for so long as Law 278 remained in 
effect. The conspirators issued a public warning that as a result of 
this joint action, shortages of lubricants would arise throughout the 
island, and would continue until Law 278 was repealed.
    In December 2006, the Puerto Rico Legislature repealed Law 278.

II. Legal Analysis

    In several previous cases, the Commission has challenged under 
Section 5 of the FTC Act boycott activity where the victim was the 
government in its capacity as a consumer; that is, the conspiring 
sellers refused to deal in order to exact higher prices from the 
government.\2\ Here, the lubricant importers are alleged to have used 
their economic might in order to pressure the government in its role as 
a regulator. As discussed below, the antitrust laws reach this conduct 
as well.
---------------------------------------------------------------------------

    \2\ E.g., Superior Court Trial Lawyers Ass'n, 493 U.S. 411 
(1990); Peterson Drug Co., 115 F.T.C. 492 (1992); Michigan State 
Medical Society, 110 F.T.C. 191 (1983).
---------------------------------------------------------------------------

    The conspiracy alleged in the complaint is per se unlawful. A 
horizontal agreement to restrict output is inherently likely to harm 
competition, and there is no legitimate efficiency justification for 
respondent's conduct. SCTLA, 493 U.S. 411; NCAA v. Board of Regents, 
468 U.S. 85 (1984); Sandy River Nursing Care v. Aetna Casualty, 985 
F.2d 1138 (1\st\ Cir. 1993); PolyGram Holding, Inc., 5 Trade Reg. Rep. 
(CCH) ] 15,453 (FTC 2003) (available at ), aff'd, 416 F.3d 29 (D.C. Cir. 2005).
    Ordinarily, members of a cartel reduce output across the market in 
order to force consumers to bid up prices. Here the strategy was to 
impose pain on consumers in order to coerce the Government of Puerto 
Rico to accede to the industry's demand that Law 278 be repealed. This 
raises the possibility of viewing the alleged conspiracy as a form of 
petitioning activity that arguably is immune from antitrust sanctions. 
As the Supreme Court has held, it is not the purpose of the antitrust 
laws to regulate traditional petitioning activity aimed at securing 
anticompetitive governmental action. Eastern Railroad Presidents 
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961).
    On the other hand, where competitors coordinate their commercial 
activity, conspiring in a manner that harms consumers directly, the 
fact that the conspirators intended thereby to motivate governmental 
action is not a defense to liability. SCTLA, 493 U.S. 411. An exception 
to this latter rule governs group boycotts that seek a purely political 
objective (that is, an objective that involves no special pecuniary 
benefit for the conspirators). A politically motivated boycott is 
protected by the First Amendment, and is not subject to antitrust 
liability. NAACP v. Claiborne Hardware Co., 458 U.S. 886, 914 (1982) 
(The First Amendment protects ``a nonviolent, politically motivated 
boycott designed to force governmental and economic change to 
effectuate rights guaranteed by the Constitution itself.'').\3\
---------------------------------------------------------------------------

    \3\ See also Allied International, Inc. v. International 
Longshoremen's Ass'n, 640 F.2d 1368, 1380 (1\st\ Cir. 1981), aff'd, 
456 U.S. 212 (1982); Missouri v. National Organization for Women, 
Inc., 620 F.2d 1301 (8\th\ Cir. 1980).
---------------------------------------------------------------------------

    The conduct alleged in the complaint would not be immune from 
antitrust sanctions under these precedents. In Noerr, the alleged 
restraint of trade (legislation favoring the conspirators) was the 
consequence of governmental action, and for this reason was exempt from 
antitrust review. In the present investigation, the alleged restraint 
of trade (a constriction in the supply of lubricants) was the means by 
which the conspirators sought to obtain favorable legislation. It 
follows that the Noerr defense is not applicable.\4\ The

[[Page 34252]]

Claiborne Hardware defense is also inapplicable because the Puerto Rico 
conspiracy was an effort to escape regulation and advance the parochial 
economic interests of the importers. This was not a politically 
motivated boycott, as that term is used in the case law.
---------------------------------------------------------------------------

    \4\ See In re Brand Name Prescription Drugs Antitrust Litig., 
186 F.3d 781, 789 (7\th\ Cir. 1999) (The Noerr doctrine ``does not 
authorize anticompetitive action in advance of government's adopting 
the industry's anticompetitive proposal. The doctrine applies when 
such action is the consequence of legislation or other governmental 
action, not when it is the means for obtaining such action . . .'') 
(emphasis in original).
---------------------------------------------------------------------------

    The present case is similar to Sandy River Nursing Care v. Aetna 
Casualty, 985 F.2d 1138. A group of insurance companies agreed to cease 
offering workers' compensation policies in Maine in order to coerce the 
legislature into authorizing higher rates. The Court of Appeals 
concluded that this concerted refusal to sell insurance was a per se 
violation of the Sherman Act, and that the legislative agenda of the 
insurance companies afforded them no defense to liability. The opinion 
explains: ``[P]rivate actors who conduct an economic boycott violate 
the Sherman Act and may be held responsible for direct marketplace 
injury caused by the boycott, even if the boycotters' ultimate goal is 
to obtain favorable state action.'' 985 F.2d at 1142.
    It is not a legitimate antitrust defense to claim that Law 278 is 
inefficient, and that the repeal thereof would enhance consumer 
welfare. The legality of an otherwise anticompetitive restraint cannot 
turn on the wisdom or efficiency of the governmental policy that is 
targeted by the conspirators.\5\
---------------------------------------------------------------------------

    \5\ An analogous defense was considered and rejected by the 
Commission in Detroit Auto Dealers Ass'n, 110 F.T.C. 417 (1989), 
aff'd in part and rev'd in part, 955 F.2d 457 (6\th\ Cir. 1992). 
DADA involved an agreement among competing automobile dealers to 
limit the hours of operation of their dealerships. Respondents 
argued, inter alia, that the agreement to limit showroom hours was 
justified because it reduced the likelihood that their employees 
would join unions. Unionization would potentially lead to higher 
wages, and hence higher prices for automobiles. The Commission could 
find ``no merit'' in the proposed efficiency defense. ``Given the 
national policy favoring the association of employees to bargain in 
good faith with employers over wages, hours and working conditions, 
we do not believe that preventing unionization can be a legitimate 
justification for an otherwise unlawful restraint.'' Id. at 498 n. 
22.
    Just as collective bargaining is part of national labor policy, 
Law 278 represents the environmental policy of the Commonwealth of 
Puerto Rico. And just as escaping national labor policy is not a 
cognizable antitrust defense, altering Puerto Rico environmental 
legislation is not a cognizable antitrust defense.
---------------------------------------------------------------------------

III. The Proposed Consent Order

    American Petroleum has signed a consent agreement containing the 
proposed consent order. The proposed consent order enjoins American 
Petroleum from conspiring with competitors to restrict output.
    More specifically, American Petroleum would be enjoined from 
agreeing or attempting to agree with any other seller of lubricants: 
(i) to restrain, restrict, limit or reduce the import or sale of 
lubricants; or (ii) to deal with, refuse to deal with, threaten to 
refuse to deal with, boycott, or threaten to boycott any buyer or 
potential buyer of lubricants.
    The proposed order would not interfere with the company's 
Constitutional right to engage in legitimate petitioning activity. The 
proposed order includes a safe harbor provision expressly permitting 
American Petroleum to exercise rights under the First Amendment to 
petition any government body concerning legislation, rules, or 
procedures.
    The proposed order will expire in 20 years.
    By direction of the Commission.

Donald S. Clark,
Secretary.
FR Doc. E7-12033 Filed 6-20-07; 8:45 am]
BILLING CODE 6750-01;P