[Federal Register Volume 82, Number 126 (Monday, July 3, 2017)]
[Notices]
[Pages 30864-30866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13912]


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FEDERAL TRADE COMMISSION

[File No. 161 0207]


Alimentation Couche-Tard Inc. and CST Brands, 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 methods of competition. 
The attached Analysis to Aid Public Comment describes both the 
allegations in the complaint and the terms of the consent orders--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before July 26, 2017.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write: ``In the Matter of 
Alimentation Couche-Tard Inc., File No. 161-0207'' on your comment, and 
file your comment online at https://ftcpublic.commentworks.com/ftc/act-cstconsent by following the instructions on the web-based form. If you 
prefer to file your comment on paper, write ``In the Matter of 
Alimentation Couche-Tard Inc., File No. 161-0207'' on your comment and 
on the envelope, and mail your comment to the following address: 
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580, or deliver 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, Constitution Center, 400 7th Street SW., 5th Floor, 
Suite 5610 (Annex D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Nicholas Bush (202-326-2848), Bureau 
of Competition, 600 Pennsylvania Avenue NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 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 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 26, 2017), on the World Wide Web, at 
https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before July 26, 2017. 
Write ``In the Matter of Alimentation Couche-Tard Inc., File No. 161-
0207'' on your comment. Your comment--including your name and your 
state--will be placed on the public record of this proceeding, 
including, to the extent practicable, on the public Commission Web 
site, at https://www.ftc.gov/policy/public-comments.
    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/act-cstconsent by following the instructions on the web-based form. 
If this Notice appears at http://www.regulations.gov/#!home, you also 
may file a comment through that Web site.
    If you prefer to file your comment on paper, write ``In the Matter 
of Alimentation Couche-Tard Inc., File No. 161-0207'' on your comment 
and on the envelope, and mail your comment to the following address: 
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580, or deliver 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary,

[[Page 30865]]

Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Because your comment will be placed on the publicly accessible FTC 
Web site at https://www.ftc.gov, you are solely responsible for making 
sure that your comment does not include any sensitive or confidential 
information. In particular, your comment should not include any 
sensitive personal information, such as your or anyone else's Social 
Security number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure that your comment does not include 
any sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including in particular competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC Web site--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC Web site, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC Web site to read this Notice and the news release 
describing it. The FTC Act and other laws that the Commission 
administers permit the collection of public comments to consider and 
use in this proceeding, as appropriate. The Commission will consider 
all timely and responsive public comments that it receives on or before 
July 26, 2017. For information on the Commission's privacy policy, 
including routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Orders (``Consent Agreement'') from Alimentation Couche-Tard 
Inc. (``ACT'') and CST Brands, Inc. (``CST'') (collectively, the 
``Respondents''). The Consent Agreement is designed to remedy the 
anticompetitive effects that likely would result from ACT's proposed 
acquisition of CST.
    Under the terms of the proposed Consent Agreement, ACT must divest 
to a Commission-approved buyer certain CST retail fuel outlets and 
related assets in 70 local markets in 16 metropolitan statistical areas 
(``MSAs''), and at the buyer's option, an ACT site in one local market. 
The divestiture must be completed no later than 75 days after the 
closing of ACT's acquisition of CST or 14 days after the Consent 
Agreement is issued as final. The Commission and Respondents have 
agreed to an Order to Maintain Assets that requires Respondents to 
operate and maintain each divestiture outlet in the normal course of 
business through the date the Commission-approved buyer acquires the 
outlet.
    The Commission has placed the proposed Consent Agreement on the 
public record for 30 days to solicit comments from interested persons. 
Comments received during this period will become part of the public 
record. After 30 days, the Commission will again review the proposed 
Consent Agreement and the comments received, and will decide whether it 
should withdraw from the Consent Agreement, modify it, or make it 
final.

II. The Respondents

    Respondent ACT, a publicly traded company headquartered in Laval, 
Quebec, Canada, operates convenience stores and retail fuel outlets 
throughout the United States and the world. ACT's current U.S. network 
consists of over 6,050 stores located in 41 states. Nearly 4,700 
locations are company-operated, making ACT the largest convenience 
store operator in terms of company-owned stores and the second-largest 
chain overall in the country. Approximately 88 percent of ACT's 
company-operated locations also sell fuel. ACT convenience store 
locations operate primarily under the Circle K and Kangaroo Express 
banners, while its retail fuel outlets operate under a variety of 
company and third-party brands.
    Respondent CST operates convenience stores and retail fuel outlets 
in the United States and Canada. With 1,146 convenience stores and 
retail fuel outlets in the United States, CST is one of the largest 
chains in the country. CST's U.S. convenience stores operate primarily 
under the Corner Store banner, while its retail fuel outlets operate 
primarily under the Valero brand. CST also is the general partner and 
operator of CrossAmerica Partners LP, a publicly traded master limited 
partnership that offers wholesale fuels marketing, and owns and 
operates convenience stores and retail fuel outlets.

III. The Proposed Acquisition

    On August 21, 2016, ACT, through its wholly-owned subsidiary Circle 
K Stores, Inc., entered into an agreement to acquire all outstanding 
shares of CST for $4.4 billion, with CST surviving post-acquisition as 
a wholly-owned subsidiary of Circle K Stores, Inc. (the 
``Transaction''). The Transaction would cement ACT's position as one of 
the largest operators of retail fuel outlets in the United States.
    The Commission's Complaint alleges that the Transaction, 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, by substantially lessening competition for the 
retail sale of gasoline and diesel in 71 local markets across 16 MSAs.

IV. The Retail Sale of Gasoline and Diesel

    The Commission's Complaint alleges that relevant product markets in 
which to analyze the Transaction are the retail sale of gasoline and 
the retail sale of diesel. Consumers require gasoline for their 
gasoline-powered vehicles and can purchase gasoline only at retail fuel 
outlets. Likewise, consumers require diesel for their diesel-powered 
vehicles and can purchase diesel only at retail fuel outlets. The 
retail sale of gasoline and the retail sale of diesel constitute 
separate relevant markets because the two are not interchangeable--
vehicles that run on gasoline cannot run on diesel and vehicles that 
run on diesel cannot run on gasoline.

[[Page 30866]]

    The Commission's Complaint alleges the relevant geographic markets 
in which to assess the competitive effects of the Transaction are 71 
local markets within the following MSAs: Phoenix, Arizona; El Paso, 
Texas; Tucson, Arizona; Colorado Springs, Colorado; Denver, Colorado; 
Jacksonville, Florida; Albuquerque, New Mexico; Corpus Christi, Texas; 
Austin, Texas; Shreveport, Louisiana; Albany, Georgia; Cleveland, Ohio; 
Las Cruces, New Mexico; Savannah, Georgia; Sierra Vista, Arizona; and 
Warner Robins, Georgia.
    The geographic markets for the retail sale of gasoline are highly 
localized, generally ranging from a few blocks to a few miles. None of 
the relevant geographic markets exceeds three driving miles from an 
overlapping retail fuel outlet. Fueling up on gasoline is rarely a 
destination trip for a consumer and therefore consumers are likely to 
frequent retail fuel outlets close to their planned routes. Each 
particular geographic market is unique, with factors such as commuting 
patterns, traffic flows, and outlet characteristics playing important 
roles in determining the scope of the geographic market. The geographic 
markets for the retail sale of diesel are similar to the corresponding 
geographic markets for retail gasoline as diesel consumers exhibit the 
same preferences and behaviors as gasoline consumers.
    The Transaction would substantially increase the market 
concentration in each of the 71 local markets, resulting in highly 
concentrated markets. In ten local markets, the Transaction would 
result in a monopoly. In 20 local markets, the Transaction would reduce 
the number of independent market participants from three to two. In 41 
local markets, the Transaction would reduce the number of independent 
market participants from four to three.
    The Transaction would substantially lessen competition for the 
retail sale of gasoline and the retail sale of diesel in these local 
markets. Retail fuel outlets compete on price, store format, product 
offerings, and location, and pay close attention to competitors in 
close proximity, on similar traffic flows, and with similar store 
characteristics. The combined entity would be able to raise prices 
unilaterally in markets where CST is ACT's only or closest competitor. 
Absent the Transaction, CST and ACT would continue to compete head to 
head in these local markets.
    Moreover, the Transaction would increase the likelihood of 
coordination in local markets where only three or two independent 
market participants would remain. Two aspects of the retail fuel 
industry make it vulnerable to coordination. First, retail fuel outlets 
post their fuel prices on price signs that are visible from the street, 
allowing competitors to observe each other's fuel prices without 
difficulty. Second, retail fuel outlets regularly track their 
competitors' fuel prices and change their own prices in response. These 
repeated interactions give retail fuel outlets familiarity with how 
their competitors price and how their competitors respond to their own 
prices.
    Entry into each relevant market would not be timely, likely, or 
sufficient to deter or counteract the anticompetitive effects arising 
from the Acquisition. Significant entry barriers include the 
availability of attractive real estate, the time and cost associated 
with constructing a new retail fuel outlet, and the time associated 
with obtaining necessary permits and approvals.

V. The Proposed Consent Agreement

    The proposed Consent Agreement remedies the Transaction's 
anticompetitive effects by requiring ACT to divest certain CST retail 
fuel outlets and related assets in 70 local markets, and an ACT site in 
one local market at the buyer's option, to Empire Petroleum Partners 
(``Empire''). Empire is a retail operator and wholesale fuel 
distributor doing business in 26 states; its executive team has decades 
of experience with some of the industry's largest players. The 
Commission is satisfied that Empire is a qualified acquirer of the 
divested assets.
    The proposed Consent Agreement requires ACT to divest to Empire 
CST's retail fuel outlets in 70 local markets. In the remaining local 
market, located in Albany, Georgia, the ACT outlet was damaged by a 
tornado in early 2017. To remedy potential competitive concerns in this 
local market, the Consent Agreement requires ACT to give Empire the 
option of acquiring the overlapping ACT site. If Empire declines the 
option, the Consent Agreement prohibits ACT, for ten years, from 
restricting the use of the property as a retail fuel outlet in any 
future sale. The proposed Consent Agreement requires ACT to divest the 
assets to Empire no later than 75 days after the Transaction closes or 
14 days after the Commission issues the Consent Agreement as final.
    The proposed Consent Agreement also requires that ACT provide 
transitional assistance to Empire for one year, with an option for 
Empire to extend the period for an additional year. Empire may extend 
the period for a third year, but only with Commission approval. ACT and 
Empire have entered into a Transition Services Agreement, whereby ACT 
has agreed to allow Empire to continue using the CST brand names and 
the store-specific licenses and permits during the transitional 
assistance period. In addition, ACT has agreed to provide temporary 
wholesale fuel supply to Empire on the same terms CST was receiving, 
giving Empire time to negotiate its own wholesale supply contracts.
    In addition to requiring outlet divestitures, the proposed Consent 
Agreement also requires ACT to provide the Commission notice, for a 
period of ten years, of certain acquisitions in the 71 local markets at 
issue. Specifically, the Consent Agreement requires ACT to give the 
Commission notice of future acquisitions of Commission-identified 
retail fuel outlets located in the same local markets as the divested 
assets.
    The proposed Consent Agreement contains additional provisions 
designed to ensure the adequacy of the proposed relief. For example, 
Respondents have agreed to an Order to Maintain Assets that will be 
issued at the time the proposed Consent Agreement is accepted for 
public comment. The Order to Maintain Assets requires Respondents to 
operate and maintain each divestiture outlet in the normal course of 
business, through the date the store is ultimately divested to a buyer. 
During this period, and until such time as Empire no longer requires 
transitional assistance, the Order the Maintain Assets authorizes the 
Commission to appoint an independent third party as a Monitor to 
oversee the Respondents' compliance with the requirements of the 
proposed Consent Agreement.
    The Commission does not intend this analysis to constitute an 
official interpretation of the proposed Consent Agreement or to modify 
its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2017-13912 Filed 6-30-17; 8:45 am]
 BILLING CODE 6750-01-P