Statements on Introduced Bills and Joint Resolutions - S. 1737

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. WYDEN:

S. 1737. A bill to amend the Clayton Act to enhance the authority of the Federal Trade Commission or the Attorney General to prevent anticompetitive practices in tightly concentrated gasoline markets; to the Committee on the Judiciary.

Mr. WYDEN. Mr. President, it's time to bring competition back into our Nation's gasoline markets. Across America, gasoline prices have recently soared to the highest levels ever. Right now, gasoline costs 12 cents more than it did at this time last year. In my home State of Oregon, folks are paying a whopping 32 cents more per gallon than in October of last year.

Proven price manipulation is siphoning competition out of the gasoline markets and stealing money from Americans' wallets. It's time that government regulators opened their eyes to reality of rampant price manipulation by gas companies and protected American consumers from getting pummeled at the pump. That's why today I am introducing the Gasoline Free Market Competition Act.

Every extra penny Americans spend on the artificially inflated price of gasoline is a penny they aren't spending on other things—like clothes, groceries, or other consumer items. The difference is that buying a new washer dryer helps create jobs; paying extra for gas only creates a fatter bottom line for oil companies, nothing more.

With people losing their jobs and the economy in sorry shape, Congress should act right now to protect the American people from oil company price gouging. Artificially inflated gas prices hurt American families three ways: it steals dollars from their pocketbooks, slows down job creation, and often raises the price of the goods families need to buy due to increased transport costs.

Folks are looking to Congress to address gasoline price spikes and industry pricing policies that can't always be explained away by the market. But as the American people have called out for relief, the Federal government has stayed silent—refusing to respond in any meaningful way to the gas price crisis.

The Secretary of Energy says he's conducting an informal investigation to look into the issue. But under current law, the
Department of Energy has no power to do anything about gasoline prices.

On the other hand, the Federal Trade Commission (FTC) does have the power to protect consumers from gas price manipulation. Yet they've done almost nothing. They turned aside evidence of serious, documented anti-consumer practices—such as redlining and zone price—that inflate gas prices. They've argued that they can only prosecute if they find out-and-out collusion, setting out a standard that is almost impossible to prove against savvy oil interests.

You can see the results of the FTC's inaction at gas stations in Oregon and all across America. Nationwide, gasoline markets in Oregon and at least 27 other States are now considered to be "tight oligopolies" with 4 companies controlling more than 60 percent of the gasoline supplies. The problem is particularly dire in the West, where California, Oregon, Washington and Idaho are four of the top six States for high gas prices today.

In these tightly concentrated markets, numerous studies have found oil company practices are driving independent wholesalers and dealers out of the market. One practice they employ, called "redlining," limits where independent distributors can sell their gasoline. As a result, independent stations must buy their gasoline directly from the oil company, usually at a higher price than the company's own brand-name stations pay. With these higher costs, the independent stations can't compete.

Redlining is just the tip of the iceberg. Investigations have also found oil companies controlling not just stations' buying choices, but also distributors' selling prices. Companies engage in a practice called zone pricing, basing prices not on the cost of producing gasoline, but on the maximum a neighborhood will pay. They have squeezed out smaller refineries that could increase supply and introduce new competitions. They have exported gasoline and oil to Asia at rock-bottom prices, making up their profits by sticking West Coast consumers with the difference. So, stopping one anti-competitive practice, by itself, won't get the job done.

The solution is to update antitrust law to prohibit anti-competitive practices by single companies in concentrated markets.

The current standard of collusion is unenforceable. Smart oil companies will never hole up in a room and collude to set prices; they don't need to.

Chevron/Texaco's North American President David Reeves admitted to a congressional panel that the West Coast gasoline market is so dominated by a limited number of large committed refinery/marketers whose individual actions can have significant market impact.

Here's how the Gasoline Free Market Competition Act would tackle the problem. First, the Federal Government would establish consumer watch zones for concentrated gasoline markets. Where control is concentrated, supplies can be manipulated, and competition restricted with ease. Where that capability is ready-made, the FTC should watch markets more carefully.

Oil companies employing anti-competitive practices in consumer watch zones should have to prove they're not hurting consumers. The whole litany of anti-competitive practices should be considered presumptively illegal. That includes exporting at a discount and pressuring independents—all the practices that manipulate supply or limit competition.

Consumer watch zones would also be empowerment zones for quick action by the FTC. In these zones, the agency could issue cease and desist orders to companies participating in these anti-competitive practices, forcing them to stop gouging consumers.

These legislative proposals are first steps toward bringing back competition to the Nation's gasoline markets. Congress should act now to address the problem of skyrocketing gasoline prices—because even the oil companies admit the market won't solve the problem on its own. Last month, a report by the Rand Corporation revealed that even oil industry officials are predicting more price volatility in the future. That means consumers can expect more frequent and larger price spikes in the next few years.

I have spent years documenting unethical and anti-competitive practices in this country's gasoline markets—practices that have driven prices up and driven consumers crazy at the pump. The American people deserve relief from high gas prices and the Congress should act on their behalf.