Notice2022-13415
ARKO/GPM Investments; Analysis of Agreement Containing Consent Orders To Aid Public Comment
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 23, 2022
Issuing agencies
Federal Trade Commission
Abstract
The consent agreement in this matter settles alleged violations of federal law prohibiting unfair methods of competition. The attached Analysis of Proposed Consent Orders 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.
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 120 (Thursday, June 23, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 120 (Thursday, June 23, 2022)]
[Notices]
[Pages 37514-37517]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-13415]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
[File No. 211 0087]
ARKO/GPM Investments; Analysis of Agreement Containing Consent
Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement; request for comment.
-----------------------------------------------------------------------
SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis of Proposed Consent Orders 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 25, 2022.
ADDRESSES: Interested parties may file comments online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Please write: ``ARKO/GPM
Investments; File No. 211 0087'' on your comment and file your comment
online at <a href="https://www.regulations.gov">https://www.regulations.gov</a> by following the instructions on
the web-based form. If you prefer to file your comment on paper, please
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.
FOR FURTHER INFORMATION CONTACT: Kurt Herrera-Heintz (202-326-3542),
Bureau of Competition, Federal Trade Commission, 400 7th Street SW,
Washington, DC 20024.
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 of Agreement Containing Consent Orders to Aid Public
Comment describes the terms of the consent agreement and the
allegations in the
[[Page 37515]]
complaint. An electronic copy of the full text of the consent agreement
package can be obtained from the FTC website at this web address:
<a href="https://www.ftc.gov/news-events/commission-actions">https://www.ftc.gov/news-events/commission-actions</a>.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before July 25, 2022.
Write ``ARKO/GPM Investments; File No. 211 0087'' 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 <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
Due to protective actions in response to the COVID-19 pandemic and
the agency's heightened security screening, postal mail addressed to
the Commission will be delayed. We strongly encourage you to submit
your comments online through the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
If you prefer to file your comment on paper, write ``ARKO/GPM
Investments; File No. 211 0087'' 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.
Because your comment will be placed on the publicly accessible
website at <a href="https://www.regulations.gov">https://www.regulations.gov</a>, you are solely responsible for
making sure your comment does not include any sensitive or confidential
information. In particular, your comment should not include 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 your comment does not include
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 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 <a href="https://www.regulations.gov">https://www.regulations.gov</a>--as legally required by FTC
Rule 4.9(b)--we cannot redact or remove your comment from that website,
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 website at <a href="https://www.ftc.gov">https://www.ftc.gov</a> to read this document
and the news release describing this matter. The 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 it receives on
or before July 25, 2022. For information on the Commission's privacy
policy, including routine uses permitted by the Privacy Act, see
<a href="https://www.ftc.gov/site-information/privacy-policy">https://www.ftc.gov/site-information/privacy-policy</a>.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted an
Agreement Containing Consent Order (``Consent Agreement'') from ARKO
Corp., GPM Investments, LLC, GPM Southeast, LLC, and GPM Petroleum, LLC
(collectively ``Respondents''). The Consent Agreement is designed to
remedy the anticompetitive effects that resulted from GPM's acquisition
of retail fuel assets from Corrigan Oil Company (``Corrigan'').
Pursuant to an Asset Purchase Agreement dated March 8, 2021, GPM
Petroleum, LLC, and GPM Southeast, LLC, which are directly controlled
by GPM Investments, LLC (collectively ``GPM'') and indirectly
controlled by ARKO Corp., acquired 60 branded Express Stop retail fuel
locations in Michigan and Ohio from Corrigan (the ``Acquisition''). GPM
consummated the Acquisition in May 2021 for total consideration of
approximately $94 million. As part of the Asset Purchase Agreement,
Corrigan agreed not to compete for a period of time and within a
specified radius around approximately 190 GPM owned, operated, and
leased locations, in addition to the Express Stop locations purchased
by GPM.
The Commission's Complaint alleges that the Acquisition violated
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 in
five local markets in Michigan, and for the retail sale of diesel fuel
in one of those same local markets. The Commission's Complaint also
alleges that the noncompete agreements violated 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 unreasonably
lessening potential competition for the retail sale of gasoline and
diesel fuel within the noncompete territories.
Under the terms of the Decision and Order (``Order'') contained in
the Consent Agreement, Respondents are required to rescind parts of an
Asset Purchase Agreement with Corrigan and release back to Corrigan
retail fuel assets in the five local markets in Michigan. Respondents
must transfer these assets back to Corrigan no later than the Closing
Date listed in the Reacquisition Agreement of June 28, 2022. In
addition, the Order resolves concerns raised by the noncompete
agreements in the parties' Asset Purchase Agreement.
The Consent Agreement has been placed on the public record for
thirty days to solicit comments from interested persons. The Commission
issued the accompanying Order as final prior to seeking public comment,
as provided in Section 2.34(c) of the Commission's Rules. This will
allow the Commission to enforce the Order if there are any violations
of its provisions during the public comment period. Comments received
during this period will become part of the public record. After thirty
days, the Commission will again review the Consent Agreement and
comments received and decide whether it should withdraw from the
Consent Agreement or modify the accompanying Order as provided in
Section 2.34(e) of the Commission's Rules.
II. The Respondents
Respondent ARKO Corp., through its wholly owned subsidiary GPM,
operates or supplies stores in thirty-three states and Washington, D.C.
GPM is the sixth largest convenience store chain in the country, with
approximately 3,000 locations comprising approximately 1,400 company-
operated stores and 1,625 independent dealer locations.
[[Page 37516]]
GPM sells fuel to retail and wholesale customers. GPM earned 2021
revenue over $4.7 billion, with fuel sales accounting for $3 billion.
GPM derives most of its revenue from the retail sale of fuel and
products sold in its convenience stores. GPM retains control over the
fuel operation at its company-operated stores and sets wholesale fuel
prices on a delivered basis to its dealer-operated network.
III. Retail Sale of Gasoline and Diesel Fuel
Relevant product markets in which to analyze the Acquisition are
the retail sale of gasoline and the retail sale of diesel fuel.
Consumers require gasoline for their gasoline-powered vehicles and can
purchase gasoline only at retail fuel outlets. Likewise, consumers
require diesel fuel for their diesel-powered vehicles and can purchase
diesel fuel only at retail fuel outlets. The retail sale of gasoline
and the retail sale of diesel fuel constitute separate relevant markets
because the two are not interchangeable. Vehicles that run on gasoline
cannot run on diesel fuel, and vehicles that run on diesel fuel cannot
run on gasoline.
The Commission alleges that the relevant geographic markets in
which to assess the competitive effects of the Acquisition with respect
to the retail sale of gasoline are five local markets in and around the
following cities: Saginaw, Chesaning, Mt. Morris, and Mason, Michigan.
The relevant geographic market in which to analyze the effects of the
Acquisition on the retail sale of diesel fuel include one local market
in and around one of the Saginaw, Michigan retail gasoline markets.
The geographic markets for retail gasoline and retail diesel fuel
are highly localized, depending on the unique circumstances of each
area. Each relevant market is distinct and fact-dependent, reflecting
many considerations, including commuting patterns, traffic flows, and
outlet characteristics. Consumers typically choose between nearby
retail fuel outlets with similar characteristics along their planned
routes. The geographic markets for the retail sale of diesel fuel are
similar to the corresponding geographic markets for retail gasoline, as
many diesel fuel consumers exhibit preferences and behaviors similar to
those of gasoline consumers.
The Acquisition substantially lessened competition in each of these
local markets, resulting in five highly concentrated markets for the
retail sale of gasoline and one highly concentrated market for the
retail sale of diesel fuel. 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.
In each of the local gasoline and diesel fuel retail markets where
the Commission alleges harm, the Acquisition reduced the number of
competitively constraining independent market participants around the
locations GPM is returning to Corrigan to two or fewer. Absent the
Acquisition, Respondents and Corrigan would have continued to compete
directly in these local markets. Because of the Acquisition, GPM is
likely able to raise prices unilaterally in markets where GPM and
Corrigan were close competitors.
Moreover, the Acquisition would enhance the incentives for
interdependent behavior in local markets where only two competitively
constraining, independent market participants would remain. Two aspects
of the retail fuel industry make it vulnerable to such coordination.
First, retail fuel outlets post their fuel prices on price signs that
are visible from the street, allowing competitors to easily observe
each other's fuel prices. 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 changing prices affect fuel sales.
The Commission's Complaint also alleges that, absent the Consent
Agreement, the agreement not to compete harms customers in local retail
gasoline and retail diesel fuel markets throughout Michigan and Ohio.
By prohibiting Corrigan from competing with (1) each acquired retail
fuel outlet and (2) a list of specified GPM locations, whether those
GPM locations are anywhere near an acquired Corrigan location, the
noncompete provision unreasonably restricts potential competition
between Corrigan and GPM that would otherwise benefit consumers.
A general desire to be free from competition following a
transaction is not a legitimate business interest. First, Corrigan's
agreement not to compete with the 190 GPM-identified retail fuel
outlets goes well beyond what is reasonably necessary to protect GPM's
investment in the 60 acquired retail Express Stop locations. Second,
the Corrigan noncompete agreements around the 60 acquired Express Stop
stations, based on the unique facts and conditions present in those
markets, is unreasonably overbroad in geographic scope and longer than
reasonably necessary to protect a legitimate business interest.
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 and
uncertainty associated with obtaining necessary permits and approvals.
IV. The Consent Agreement
The Order remedies the Acquisition's likely anticompetitive effects
by requiring Respondents to return to Corrigan the retail fuel outlets
included in the Acquisition in each of the five local markets. Corrigan
is an experienced operator of retail fuel sites and remains an active
market participant by continuing to operate a retail fuel business and
a wholesale fuel supply business in Michigan.
The transfer of assets must be completed no later than the Closing
Date listed in the Reacquisition Agreement of June 28, 2022. The Order
further requires Respondents to maintain the economic viability,
marketability, and competitiveness of each retail fuel business until
Corrigan reacquires the five retail fuel locations.
The Order also requires Respondents to obtain prior approval from
the Commission before acquiring retail fuel assets within a 3-mile
driving distance of any of the returned locations for 10 years. The
prior approval provision is necessary because the purchase of a retail
fuel business near any of the five retail fuel locations would likely
raise the same competitive concerns as the Acquisition and may not be
reportable under the Hart-Scott-Rodino Act.
The Order also resolves the competitive concerns raised by the
agreements not to compete. The Order requires that Respondents amend
the noncompete obligation in the Asset Purchase Agreement to (i) only
apply to retail fuel businesses acquired by GPM in this Acquisition,
excluding the five locations to be returned to Corrigan, and (ii) limit
the noncompete terms relating to each acquired retail fuel business to
no broader than 3 years in duration and no more than 3 miles from each
Express Stop location. The Order further (1) requires Respondents not
enter into or enforce any noncompete agreement related to acquisitions
of a retail fuel business that restrict competition around a retail
fuel business that GPM already owns or operates, as opposed to the
acquired retail fuel business, and (2)
[[Page 37517]]
to notify third parties subject to similar noncompete agreements of
GPM's obligations under the Order.
Retail fuel competition varies based on many factors, including
driving patterns, population density, and consumer demand. The
reasonableness of agreements not to compete will necessarily differ
with local retail fuel competition. A 3-year and 3-mile radius around
each acquired location in this transaction resembles a reasonable
duration and geographic scope given the local competitive conditions
around each Express Stop location. Noncompete agreements affecting
areas geographically distinct from acquired retail fuel outlets, and
noncompete agreements untethered to protecting goodwill acquired in the
acquisition, are highly suspect and warrant Commission scrutiny.
The purpose of this analysis is to facilitate public comment on the
Consent Agreement. The Commission does not intend this analysis to
constitute an official interpretation of the Consent Agreement or to
modify its terms in any way.
By direction of the Commission.
April J. Tabor,
Secretary.
Statement of Chair Lina M. Khan Joined by Commissioner Rebecca Kelly
Slaughter and Commissioner Alvaro M. Bedoya
Last year, in an unreportable transaction valued at approximately
$94 million, GPM Petroleum, LLC, GPM Southeast, LLC, GPM Investments,
LLC, and ARKO Corp. (collectively ``GPM'') acquired 60 retail gasoline,
diesel, and convenience stores from Corrigan Oil Company
(``Corrigan''). Today, after a thorough investigation of this deal, the
Commission announced an enforcement action alleging that GPM illegally
acquired five of those retail fuel stations from Corrigan, and imposed
illegitimate, overbroad agreements not to compete in connection with
that acquisition. This action marks an important step forward in
protecting the public from harm when rivals agree not to compete. Firms
proposing mergers should take note that the Commission will scrutinize
contract terms in merger agreements that impede fair competition.
Noncompete agreements affect millions of Americans every day, but
they come in a variety of forms. Much of the discussion surrounding
noncompete clauses in recent years has focused on their inclusion in
employment contracts and the resulting harm to workers. Noncompete
covenants, however, can also govern businesses that are direct or
potential competitors, and sometimes are included in merger agreements.
Today's Commission action highlights that noncompete clauses in a
merger agreement may unduly and illegitimately restrain competition
when both of the parties remain competitors in other markets.
By its very nature, an agreement not to compete between two
businesses reduces competition if it restrains the activities of actual
and potential rivals during the term of the agreement. Indeed,
noncompete agreements between competing businesses are suspect: for
instance, an agreement not to compete may constitute a thinly veiled
market allocation scheme, a per se violation of the antitrust laws.
In the context of mergers, parties sometimes assert that noncompete
clauses are necessary to protect a legitimate business interest in
connection with the sale of a business, such as the goodwill acquired
in a transaction. When the seller is exiting the business or selling
off assets needed to compete with the buyer, a noncompete that limits
prospects for reentry may in certain instances reflect that goodwill,
if appropriately limited in geographic scope and duration.
In this matter, as alleged in the Commission's complaint, GPM's
agreement to purchase Corrigan's retail fuel stations contained
noncompete terms that were overbroad and facially unrelated to
protecting any goodwill GPM might hope to acquire with the Corrigan
stations. According to the complaint, these noncompete provisions are
illegal because they were designed to ensure that GPM would not face
direct or indirect competition from Corrigan--not only in the
competitively overlapping areas, but even in geographic areas far from
the acquired stations.
As today's consent agreement makes clear, firms may not use a
merger as an excuse to impose overbroad restrictions on competition or
competitors. The Commission will evaluate agreements not to compete in
merger agreements with a critical eye.
We look forward to reviewing input and comments from the public
about the approach this settlement has taken with respect to the
noncompetes at issue here. The Commission is committed to acting in the
public interest, and comments from the public are vital to ensuring
that we are successful in doing so.
[FR Doc. 2022-13415 Filed 6-22-22; 8:45 am]
BILLING CODE 6750-01-P
</pre></body>
</html>Indexed from Federal Register on June 23, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.