With conditions, FTC approves merger of Phillips and Conoco

| 9/4/2002

The Federal Trade Commission Aug. 30 announced a proposed consent order with Phillips Petroleum Co. and Conoco Inc. that would allow the merger of the two companies to proceed upon their agreement to sell certain assets and provide other relief. Without these conditions, the Commission stated in its complaint, the proposed merger would violate federal antitrust laws and lead to decreased competition through an increase in the likelihood of coordinated interaction, particularly in the Rocky Mountain region of the United States.

Phillips, headquartered in Bartlesville, OK, and Conoco, headquartered in Houston, TX, are fully integrated petroleum companies. On Nov. 18, 2001, Phillips and Conoco agreed to merge the two companies, with the combined firm to be known as ConocoPhillips. At that time, it was estimated the value of the new corporation would be about $35 billion.

According to the Commission's complaint, the proposed merger would violate both Section 5 of the FTC Act and Section 7 of the Clayton Act by illegally lessening competition in five markets: the bulk supply of light petroleum products in eastern Colorado and northern Utah; light petroleum product terminal services in Spokane, WA, and Wichita, KS; the bulk supply of propane in southern Missouri, the St. Louis metropolitan area and southern Illinois; natural gas gathering in more than 50 sections of the Permian Basin in New Mexico and Texas; and the fractionation processes in Mont Belvieu, TX.

The FTC's complaint says the combination of Phillips and Conoco would allow the new firm to raise prices unilaterally or in combination with other companies, and entry into the relevant markets would be untimely, unlikely and insufficient to deter or counteract the anti-competitive effects resulting from the merger.

Under the terms of the proposed order, the companies would be required to divest certain Phillips and Conoco refineries, marketing assets, terminal services, natural gas gathering assets and processing facilities. Also, under the terms of the proposed order, a trustee would be appointed if the companies fail to complete one or more of the required divestitures. The companies also would be required to provide the Commission with compliance reports every 60 days, until each of the divestitures is completed, and to notify the FTC with regard to any changes relevant to the terms of the order. The FTC would have access to the companies' facilities and employees to ensure they are complying with the order. In addition, if any state fails to approve the divestitures specified in the proposed order, the time period allowed for that divestiture would be extended for 90 days. The proposed order would expire 10 years after the date it is finalized by the Commission.