[Federal Register Volume 75, Number 129 (Wednesday, July 7, 2010)]
[Notices]
[Pages 39017-39020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16433]
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FEDERAL TRADE COMMISSION
[File No. 091 0125]
Pilot Corporation, Propeller Corp., and Flying J Inc.; Analysis
of Proposed Agreement Containing Consent Orders 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 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 30, 2010.
ADDRESSES: Interested parties are invited to submit written comments
electronically or in paper form. Comments should refer to ``Pilot-
Flying J, File No. 091 0125'' to facilitate the organization of
comments. Please note that your comment -- including your name and your
state -- will be placed on the public record of this proceeding,
including on the publicly accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm).
Because comments will be made public, they should not include any
sensitive personal information, such as an individual'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. Comments also
should not include any sensitive health information, such as medical
records or other individually identifiable health information. In
addition, comments should not include any ``[t]rade secret or any
commercial or financial information which is obtained from any person
and which is privileged or confidential. . . .,'' as provided in
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule
4.10(a)(2), 16 CFR 4.10(a)(2). 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), 16 CFR 4.9(c).\1\
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\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 FTC Rule 4.9(c), 16 CFR
4.9(c).
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Because paper mail addressed to the FTC is subject to delay due to
heightened security screening, please consider submitting your comments
in electronic form. Comments filed in electronic form should be
submitted by using the following weblink: (https://public.commentworks.com/ftc/pilot-flyingj) and following the
instructions on the web-based form. To ensure that the Commission
considers an electronic comment, you must file it on the web-based form
at the weblink: (https://public.commentworks.com/ftc/pilot-flyingj). If
this Notice appears at (http://www.regulations.gov/search/index.jsp),
you may also file an electronic comment through that website. The
Commission will consider all comments that regulations.gov forwards to
it. You may also visit the FTC website at (http://www.ftc.gov/) to read
the Notice and the news release describing it.
A comment filed in paper form should include the ``Pilot-Flying J,
File No. 091 0125'' reference both in the text and on the envelope, and
should be mailed or delivered to the following
[[Page 39018]]
address: Federal Trade Commission, Office of the Secretary, Room H-135
(Annex D), 600 Pennsylvania Avenue, NW, Washington, DC 20580. 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.
The Federal Trade Commission Act (``FTC Act'') and other laws 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,
whether filed in paper or electronic form. Comments received will be
available to the public on the FTC website, to the extent practicable,
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of
discretion, the Commission 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.shtm).
FOR FURTHER INFORMATION CONTACT: Mary N. Lehner (202-326-3744), Bureau
of Competition, 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 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 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 30, 2010), on the World Wide Web, at (http://www.ftc.gov/os/actions.shtm). 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 for public comment,
subject to final approval, an Agreement Containing Consent Orders
(``Consent Agreement'') from Pilot Corporation and Propeller Corp.
(collectively, ``Pilot''), and Flying J Inc. (Pilot and Flying J Inc.,
collectively, ``Respondents''). Pursuant to agreements dated December
18, 2009, Pilot intends to acquire the interests and assets of Flying J
Inc.'s travel center and related businesses for approximately $1.8
billion (the ``acquisition''). The Commission's Complaint alleges that
the acquisition, if consummated, would violate Section 7 of the Clayton
Act, as amended, 15 U.S.C. Sec. 18, and Section 5 of the Federal Trade
Commission Act, as amended, 15 U.S.C. Sec. 45, by removing actual,
direct, and substantial competition between Pilot and Flying J and
increasing the likelihood that Pilot will exercise market power
unilaterally. The proposed Consent Agreement would resolve the
competitive concerns from the acquisition by requiring the divestiture
of 26 travel centers to Love's Travel Stops and Country Stores. The
divestiture will make Love's a stronger competitor and replace
competition weakened by the acquisition.
The proposed Consent Agreement has been placed on the public record
for thirty (30) days to solicit comments from interested persons.
Comments received during this period will become part of the public
record. After thirty (30) days, the Commission will review the proposed
Consent Agreement again and the comments received, and decide whether
it should withdraw from the Consent Agreement or make it final.
The sole purpose of this analysis is to facilitate public comment
on the Consent Agreement. The analysis does not constitute an official
interpretation of the Consent Agreement or the proposed Decision and
Order (``Order''), nor does the analysis modify their terms in any way.
I. Respondents and Other Relevant Entities
A. Pilot and Propeller
Pilot Travel Centers LLC is the largest travel center operator in
the United States. Pilot Travel Centers LLC is a privately held, for-
profit limited liability company and is controlled equally by Pilot
Corporation and Propeller Corp.
Respondent Pilot Corporation holds 52.5 percent of the non-
corporate interests of Pilot Travel Centers LLC and a right to 50
percent representation on Pilot Travel Centers LLC's Board of Managers.
Pilot Corporation is a privately held, for-profit corporation.
Respondent Propeller Corp. holds 47.5 percent of the non-corporate
interests of Pilot Travel Centers LLC and a right to 50 percent
representation on Pilot Travel Centers LLC's Board of Managers.
Propeller Corp. is a for-profit corporation, privately held in its
entirety by five stockholders managed by CVC European Equity V Limited
and three stockholders managed by CVC European Equity Tandem Fund
Limited.
B. Flying J
Respondent Flying J Inc., a privately held, for-profit corporation,
is a fully integrated oil company with operations throughout the United
States and Canada. Flying J Inc. owns and operates, among other things,
travel center, trucking, fuel card, and related businesses. Flying J
Inc., its wholly-owned subsidiary, and wholly-owned subsidiaries of
ConocoPhillips jointly control the CFJ Entities.
The CFJ Entities own Flying J-branded travel centers operated by
Flying J Inc. in 36 U.S. states. It is jointly controlled by Flying J
Inc., its wholly-owned subsidiary, and wholly-owned subsidiaries of
ConocoPhillips. The CFJ Entities consist of: (1) CFJ Properties, a
general partnership that is 50% owned by wholly-owned subsidiaries of
ConocoPhillips and 50% owned by a wholly-owned subsidiary of Flying J
Inc.; (2) CFJ I Management Inc., CFJ II Management Inc., and CFJ III
Management Inc. (``CFJ Management Companies''), each of which is 50%
owned by a wholly-owned subsidiary of ConocoPhillips and 50% owned by
Flying J Inc.; and (3) CFJ Plaza Company I LLC, CFJ Plaza Company II
LLC, and CFJ Plaza Company III LLC, each of which is 49.5% owned by a
wholly-owned subsidiary of ConocoPhillips, 49.5% owned by Flying J
Inc., and 1% owned by its corresponding CFJ Management Company.
II. The Proposed Complaint
Pilot's acquisition of Flying J presents substantial antitrust
concerns in the market for over-the-road sale of diesel to long-haul
fleets by national travel center operators in the contiguous United
States. Travel centers provide locations for long-haul trucks to fuel
and serve as the long-haul driver's home away from home, offering
amenities including parking for tractor-trailers, truck service
centers, truck washes, certified
[[Page 39019]]
automated truck scales, fast food restaurants, shower facilities,
internet access, and financial services for drivers. Four travel center
operators - Pilot, Flying J, TravelCenters of America (``TA''), and
Love's (collectively, ``national travel center operators'') - have the
scale and scope to compete for any substantial portion of long-haul
over-the-road diesel business although not all the major travel center
operators are able to compete for all customers. Pilot and Flying J are
the first and second choices for a number of long-haul fleets.
The acquisition may substantially lessen competition in the
relevant market by, among other things: (a) eliminating actual, direct,
and substantial competition between Pilot and Flying J; and (b)
increasing the likelihood that Pilot will exercise market power
unilaterally.
De novo entry or fringe expansion into the relevant market is
unlikely to deter or counteract the likely anticompetitive effects.
Entry is difficult and time-consuming and potential entrants would face
substantial barriers.
III. The Proposed Consent Agreement
The proposed Consent Agreement is intended to remedy the
acquisition's alleged anticompetitive effects by, among other things,
requiring the divestiture of travel center assets to Love's. Love's is
a growing national travel center operator that is currently
concentrated in the South. It is the smallest of the four national
travel center operators and some long-haul fleets do not encounter
Love's on the routes they travel, especially in the Midwest and the
Eastern portion of the United States.
Respondents have reached an agreement to sell to Love's 26 specific
travel center sites, the majority of which are located in the Midwest
or the Eastern portion of the United States. These sites, along with
Love's aggressive and independent expansion plan, will enhance Love's
market position as a national travel center operator, allowing it to
compete for more long-haul over-the-road diesel business. Love's
possesses the existing infrastructure, resources, and capability to
acquire the divested sites and operate them within Love's existing
network. The divestiture will allow Love's to replace competition lost
because of the acquisition of Flying J by Pilot. In particular, Love's
will now be able to compete for those customers who viewed Pilot and
Flying J as their first and second choices and who did not encounter
Love's on their routes prior to the divestiture.
The Order contains provisions designed to ensure the successful
implementation and remedial intent of the proposed Consent Agreement.
Some of these provisions are highlighted below.
A. Access to and Use of the TCH Fuel Card System
The Order requires Respondents to provide access to and use of the
TCH LLC (``TCH'') Fuel Card System upon request from Love's. Paragraph
II.C. of the Order provides that at Love's option, and upon reasonable
notice, Respondents shall provide non-discriminatory access to and use
of the TCH Fuel Card System for a period of up to three years pursuant
to a TCH Merchant Agreement. If Love's elects to use the TCH Fuel Card
System, Respondents shall institute a firewall protocol whereby: (a)
Respondents' employees affiliated with the TCH Fuel Card System are
prohibited from providing TCH Customer Confidential Business
Information to either the TCH Executive Board or to a Respondent; and
(b) Pilot shall appoint an internal compliance officer who will be
responsible for assuring that the firewall protocols are met.
B. Continued Operation of Restaurants
The Order also provides for the continuity of operation at Wendy's
restaurants affiliated with the sites acquired by Love's. Paragraph
II.E. of the Order provides that, for a period of one year, Pilot shall
manage and operate the Wendy's Restaurants affiliated with those sites.
To assure the efficient transfer and continuity of operation of the
divested travel centers, the Order requires Respondents to provide
assistance for, and information regarding, employees of those travel
centers. Paragraphs II.F. and II.G. of the Order require Respondents to
provide, for a period no longer than six months, assistance for, and
employment and salary information regarding, knowledgeable employees of
Respondents in the transfer of the travel centers from Respondents to
Love's. Paragraphs II.H. and II.I. of the Order provide that, for a
period of one year, Respondents shall not interfere with the hiring or
employing of employees by Love's relating to the divested sites, and
shall remove any impediments within the control of Respondents that may
deter these employees from accepting employment with Love's. Paragraph
II.J. of the Order prohibits Respondents from directly or indirectly
soliciting, inducing, or attempting to solicit or induce any employees
of the divested travel centers who have accepted offers of employment
with Love's to terminate that employment.
C. Transfer of Confidential Businesses Information and Maintenance of
Economic Viability
To further assure the efficient transfer and economic viability of
the acquired travel centers, Paragraphs II.K. and II.L. of the Order
require Respondents to provide all Confidential Business Information
relating to the Travel Centers Businesses and to maintain the full
economic viability and marketability of such assets until Respondents
complete the divestiture required by the Order.
D. Compliance and Notification Requirements
Paragraph III. of the Order allows the Commission to appoint an
Interim Monitor to assure that Respondents expeditiously comply with
their obligations and perform all of their responsibilities as required
by the Order.
To assure that Respondents fully comply with the obligations of the
Order, Paragraph IV. of the Order allows the Commission to appoint a
Divestiture Trustee to assign, grant, license, divest, transfer,
deliver, or otherwise convey the travel centers.
Paragraph V. of the Order provides that each Remedial Agreement
related to the divested sites shall be incorporated by reference into
the Order and that Respondents shall not modify or amend the terms of
any Remedial Agreement without prior approval of the Commission.
Paragraphs VI.A. and VI.B. of the Order require official
notification of the date on which the acquisition occurs and subsequent
periodic reports until the Commission is satisfied that the divestiture
has been completed in a timely manner and in good faith. Paragraph
VI.C. of the Order requires annual written reports of compliance, upon
the Commission's request, until the Order terminates in ten years.
Paragraph VII. of the Order requires Respondents to give the
Commission prior notice of certain events that might affect compliance
obligations arising from the Order.
E. Additional Provisions
Paragraph VIII. of the Order provides that the Commission shall,
with proper notice, have access to documents and personnel at the
offices of Respondents for the purpose of determining or securing
compliance with the Order.
Paragraph IX. of the Order provides that the Order shall terminate
after ten years.
[[Page 39020]]
IV. Order to Maintain Assets
The Commission also has issued an Order to Maintain Assets in this
proceeding. The purpose of the Order to Maintain Assets is: (a) to
maintain the full economic viability, marketability and competitiveness
of the travel centers through their full transfer and delivery to
Love's; (b) to minimize any risk of loss of competitive potential for
the travel centers; (c) to prevent the destruction, removal, wasting,
deterioration, or impairment of any of the travel centers, except for
ordinary wear and tear; and (d) to prevent disclosure of any
Confidential Business Information related to the travel centers to any
person except Love's or persons specifically authorized by Love's to
receive such information. The Commission may appoint an Interim Monitor
to assure that Respondents expeditiously comply with all of their
obligations and perform all of their responsibilities as required by
the Order to Maintain Assets.
By direction of the Commission, Commissioner Brill not
participating.
Donald S. Clark
Secretary.
[FR Doc. 2010-16433 Filed 7-6-10; 8:45 am]
BILLING CODE 6750-01-S