FTC Ends Administrative Litigation in Western Refining Case

The Federal Trade Commission announced it will not continue with administrative litigation challenging Western Refining, Inc.’s acquisition of Giant Industries, Inc. The vote to dismiss the administrative complaint was 3-2, with the Commission majority issuing a statement explaining its reasons for dismissal, and Commissioners Pamela Jones Harbour and J. Thomas Rosch issuing a separate dissenting statement.

The Commission voted to challenge the proposed acquisition in April 2007, filing complaints before both a federal district court and an FTC administrative law judge. The case subsequently was heard before the U.S. District Court for the District of New Mexico, which denied the Commission’s motion for a preliminary injunction. The Commission then filed a motion for an injunction pending appeal in the U.S. Court of Appeals, which denied the motion. On June 7, 2007, the matter was withdrawn from administrative litigation in order to permit the Commission to assess the public interest in further proceedings.

The Commission based its decision to discontinue administrative litigation on application of the criteria set forth in the agency’s Policy Statement Regarding Administrative Merger Litigation Following the Denial of a Preliminary Injunction. These criteria are: (1) the factual findings and legal conclusions of the district court or any appellate court; (2) any new evidence developed during the course of the preliminary injunction proceeding; (3) whether the transaction raises important issues of fact, law, or merger policy that need resolution in administrative proceedings; (4) an overall assessment of the costs and benefits of further proceedings; and (5) any other matter that bears on whether it would be in the public interest to proceed with the merger challenge.

The statement notes the Commission’s strong disagreement with the district court’s view of the facts of this case and with many of its legal conclusions. After weighing all relevant factors, however, the Commission concluded that “continuing to pursue the case would not be in the public interest.” For example, according to the statement, “it does not appear that the record before the district court was deficient in any serious respect . . . and it does not appear that the Commission was prevented from presenting any important evidence regarding the potential impact of the merger.” In addition, new facts that came to light during discovery leading to the preliminary injunction hearing suggest opportunities for new bulk suppliers to deliver gasoline to the Albuquerque area, thereby increasing competition and lowering gasoline prices in Northern New Mexico. The Commission further concluded that the transaction does not raise important issues of fact, law, or merger policy that need resolution in administrative proceedings.

According to the Commission statement, “The use of FTC resources is always an important consideration in determining whether to continue in administrative litigation. . . [W]e believe that an administrative proceeding would require substantially more resources, which should instead be reallocated to new competition matters, including in particular other gasoline matters.”