FTC Staff Comment Before the U.S. House Subcommittee on General Oversight and the Economy Concerning H.R. 3824, the Motor Fuel Sales Competition Improvement Act of 1985

TESTIMONY 	OF THE 	STAFF OF 	THE
FEDERAL TRADE 	COMMISSION
before 	the
SUBCOMMITTEE 	ON 	GENERAL OVERSIGHT AND 	THE 	ECONOMY
of 	the
UNITED 	STATES 	HOOSE 	OF 	REPRESENTATIVES
on
BOOSE 	RESOLUTION 	3824
THE 	-MOTOR 	FUEL 	SALES 	COMPETITION
IMPROVEMENTS 	ACT 	OF 	1985-
April 	17, 	1986

Chairman 	Mavroules 	and 	Mem~ers of 	the 	SubCommittee: 	thank
yo~ 	for 	t~is opportunity 	to 	present 	the 	views 	of 	the 	Federal
Trade 	COm~ission's staff 	on 	t~e 	effects 	on 	competition 	and
consumers 	of 	proposed 	House 	Resolution 	3824, 	the 	"Motor 	Fuel
Sales 	Competi~ion Improvements 	Act 	of 	1985." 	This 	bill 	is
similar 	to 	other 	legislation 	offered 	in 	the 	Senate 	and 	House, 	and
in 	state 	legislatures, 	to 	rectify 	purported 	market 	failures 	and
antitrust 	problems 	in 	gasoline 	markets. 	The 	Commission 	has
previousl} 	approved 	comments 	by 	its 	staff 	opposing 	such
legis~ation. 	The 	Commission 	also 	has 	opposed 	si~ilar 	legislation
introduced 	in 	the 	Senate 	Judiciary Committee, 	S. 	1140 	(a 	copy 	of
a 	Commission 	letter 	to 	Senator 	Thurmond 	dated 	July 	9, 	1985, 	is
attached). 	This 	statement 	will 	summarize 	the 	Commission's
previous 	concerns 	with 	le9isla~ion of 	this 	type.
Summary 	of 	Opposition 	to 	B.R. 	3824
The 	bill's 	stated 	purpose 	is 	to 	"amend 	the 	Clayton 	Act 	to
preserve 	and 	promote 	wholesale 	and 	retail 	competition 	in 	the
retail 	gasoline 	market, 	and 	for 	other 	purposes." 	The 	Commission
!
endorses 	these 	goals, 	but 	opposes 	the 	specific 	provisions 	of
H.R. 	3824. 	There 	is 	no 	credible 	evidence 	that 	the
anticompetitive 	practices 	the 	bill 	purports 	to 	correct 	exist.
Present 	federal 	laws 	are 	sufficient 	to 	remedy 	predatory 	pricing
and 	collusion 	should 	these 	practices 	occur. 	Moreover, 	legislated
lessor-lessee 	contract 	alteration 	and 	vertical 	divorcement 	are
unnecessary, 	and 	would 	increase 	the 	costs 	of 	gasoline
distribution, 	eliminate 	legitimate 	price 	competition, 	and 	raise
prices 	for 	motor 	fuel 	to 	consumers.

1. 	There 	is 	no 	credible 	evidence 	of 	anticompetitive 	conduct
by 	refiners 	and 	producers 	to 	support 	B.R. 	3824.
If 	the 	purpose 	of 	n.R. 	382~ 	is 	to 	protect 	gasoline
francb.is~es of 	major, 	i~tesrated refiners 	from 	u~fair 	and
anticompeti~ive practices 	directed 	against 	them 	by 	their
suppliers, 	the 	bill 	is 	u~necessary. 	There 	is 	si~ply no 	credible
evidence 	t~at such 	practices 	are 	either 	occurring 	or 	could
successfully 	be 	used 	to 	harm 	gasoline 	dealers. 	In 	fact, 	a 	DOE
exa~ination 	of 	the 	state 	of 	competition 	in 	gasoline 	marketing 	in
the 	United 	States, 	bot~ 	before 	and 	after 	the 	decontrol 	of
I
petroleum 	refining 	and 	marketing 	in 	1981, 	indicates 	that 	gasoline
franchisees 	have 	not 	bee~ a~d 	are 	not 	likely 	to 	become 	targets 	of
,
anticompetitive 	practices 	by 	refiners. 	Claims 	that 	refiners
"subsidize" 	their 	own 	outlets 	to 	harm 	their 	franchisee 	dealers
are 	unsubstantiated.
Tje 	studies 	also 	in~icate that 	refiners 	have 	no 	logical
motive 	to 	~age war 	on 	their 	franchised 	dealers. 	Rather, 	refiners
an~ 	their 	franchised 	outlets 	are 	linked 	by 	mutual 	interest,
because 	lessee-dealers 	are 	the 	predominant 	distribution 	system
for 	direct 	gasoline 	sales 	by 	major, 	integrated 	refiners. 	Only 	a
small 	percentage 	of 	the 	gasoline 	stations 	in 	the 	United 	States
are 	operated 	by 	major, 	integrated 	refiners.
Moreover, 	the 	Co~~ission's September 	1982 	study, 	Mergers 	in
the 	Petroleum 	Industry, 	concluded 	that 	wholesale 	and 	retail
gasoline 	markets 	were 	unconcentrated 	at 	the 	national 	level 	and,
in 	general, 	only 	moderately 	concentrated 	in 	particular 	geographic
regions. 	Given 	the 	continued 	importance 	of 	the 	branded,
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franchised 	marketing 	distribution 	system 	to 	major 	refiners,
traditional 	antitr~s: and 	economic 	theory 	indicates 	it 	would 	be
irrational 	for 	an 	individual 	refiner 	to 	charge 	its 	franchisee-
dealers 	prices 	that 	would 	cause 	them 	to 	either 	secure 	new 	sources
of 	supply 	or 	go 	out 	of 	business. 	The 	likely 	results 	of 	such
irrational 	behaviJr 	in 	the 	current 	era 	of 	reduced 	gasoline 	demand
and 	plentiful 	supplies 	would 	be 	that 	the 	refiner 	would 	face 	a
decrease 	in 	market 	share, 	an 	increase 	in 	excess 	capacity, 	and
higher 	per 	unit 	costs. 	Thus, 	individual 	gasoline 	franchisors 	are
not 	likely 	to 	engage 	in 	predation 	against 	the 	mainstay 	of 	their
own 	retail 	distribution 	system, 	their 	franchised 	dealers.	,
2. 	Monopolistic 	and 	predatory 	behavior 	is 	subject
to 	prosecution 	under 	existing 	federal 	laws.
Even 	if 	predatory 	or 	monopolistic 	behavior 	by 	refiners 	were
found 	to 	exist, 	passage 	of 	H.R. 	3824 	is 	unnecessary. 	H.R. 	3824'5
prohibition 	against 	refiner 	or 	producer 	collusion 	is 	unnecessary
~ecause such 	conspiracies 	are 	su~ject to 	the 	criminal 	and 	civil
prohi~itions of 	the 	Sherman 	Act 	and 	Section 	5 	of 	the 	FTC 	Act.
Section 	3A 	of 	the 	bill, 	prohibiting 	indivicual 	refiners 	or
~
producers 	fro~ requiring 	their 	dealers 	to 	buy 	more 	than 	70
percent 	of 	their 	gasoline 	from 	them, 	and 	prohibiting 	limitations
bj 	refiners 	and 	producers 	on 	conversion 	of 	existing 	storage 	tanks
for 	alternative 	gasoline 	supplies, 	also 	is 	unnecessary. 	There 	is
no 	evidence 	of 	widespread 	anticompetitive 	abuses 	associated 	with
minimum 	volume 	requirements 	and 	restrictions 	on 	usage 	of 	refiner-
owned 	storage 	tanks 	in 	current 	franchise 	contracts.
-3-

3. 	Legislated 	lessor-lessee 	contract 	alteration 	and
vertical 	divorcement 	are 	unnecessary 	and 	vould 	raise
costs, 	diminish 	price 	competition, 	and 	raise 	gasoline
prices 	to 	consumers.
Fina:ly, 	H.R. 	3824 	should 	not 	be 	used 	to 	redress 	perceived
contractual 	im~alances bet~een refiners 	or 	producers 	and 	their
lessee-dealers; 	Congress 	has 	already 	addressed 	this 	concern
throus~ 	its 	earlier 	passage 	of 	the 	Petroleum 	Marketing 	Practices
Act 	of 	19/0 	("P!'~?;""). 	The 	legislative 	history 	of 	the 	PMPA 	shows
that 	it 	was 	the 	intent 	of 	the 	Congress 	to 	balance 	the 	franchise
relationship 	in 	a 	more 	equitable 	manner. 	H.R. 	3824 	should 	not 	be
allowed 	to 	alter 	this 	balance 	without 	a 	full 	study 	of 	its
effects.
Passage 	of 	H.R. 	3824 	in 	fact 	may 	be 	injurious 	to
franchisees, 	because 	its 	requirements 	would 	appear 	to 	lessen 	the
val~e of 	a 	franchised 	dealer 	networ~ to 	an 	integrated 	refiner.
Therefore, 	although 	direct 	refiner-operated 	stations 	presently
cons:itute 	on:y 	a 	small 	percentage 	of 	all 	retail 	gasoline
stations, 	passage 	of 	H.R. 	3824 	might 	encourage 	abandonment 	of
franchised 	dealer 	outlets 	in 	favor 	of 	company-controlled 	outlets,
assuming 	that 	the 	marketing 	divorcement 	part 	of 	H.R. 	3824 	would
:1ot 	be 	enacted.
The 	antitrust 	laws 	deter 	firms 	from 	engaging 	in 	predatory
behavior, 	but, 	at 	the 	same 	time, 	allow 	them 	to 	lower 	their 	costs
through 	vertical 	integration. 	In 	contrast, 	the 	prohibition
against 	refining/marketing 	integration 	found 	in 	H.R. 	3824 	would
ar~itrarily require 	marketing 	divorcement 	according 	to 	the 	amount
of 	aggregate 	refinery 	capacity 	of 	certain 	refiners. 	By 	denying
firms 	the 	possibility 	of 	increasing 	efficiency 	through 	vertical
-4-

i~tegratio~, 	this 	legislation 	cOwld 	add 	costs 	to 	the 	distribution
of 	gasoline 	in 	the 	United 	States, 	costs 	that 	would 	be 	borne 	by
cons~~ers.
The 	potential 	har~ of 	divorceme~t bills 	is 	illustrated 	by
the 	experience 	of 	Maryland, 	whic~ has 	already 	enacted 	legislation
similar 	to 	that 	now 	being 	proposed 	by 	H.R. 	3824. 	One 	study,
described 	by 	DOE 	as 	perhaps 	"the 	best 	empirical 	analysis 	of 	the
effects 	of 	Maryland's 	divorceme~t la~," 	has 	estimated 	that
Maryland 	consumers 	are 	now 	paying 	millions 	of 	dollars 	more 	per
year 	than 	they 	would 	have 	been 	paying 	if 	the 	divorcement 	law 	had
not 	been 	enacted.
Conclusions
Drawing 	upon 	an 	ongoing 	examination 	of 	energy 	competition,
issues, 	the 	Commission 	concludes 	that 	the 	proposed 	(1) 	alteration
of 	existing 	gasoline 	supply 	contractual 	obligations, 	and 	(2)
vertical 	divorcement 	of 	retail 	gasoline 	stations, 	are 	likely 	to
have 	harmful 	consequences 	for 	both 	competition 	and 	consumers. 	In
short, 	H.~. 	3S2~ 	wo~~j not 	enhance 	consumer 	welfare, 	but 	rather
~orld 	se:~e 	to 	insu~=~e one 	business 	segment, 	retail 	gasoline
dealers, 	fro~ 	the 	rigors 	of 	the 	free 	market.
-5-

As 	competition 	a~ong 	gasoli~e marketers 	has 	intensified 	in
rece~t years, 	retail 	dealers 	have 	faced 	an 	increasing 	need 	to
cha~ge wi~h 	the 	times 	8y 	operating 	more 	efficie~t, high-volume
outlets. 	Protec~io~iSt legislation 	such 	as 	H.R. 	3824 	would
interfere 	with 	this 	competitive 	process, 	and 	wo~ld 	result 	in
higher 	co~sumer prices.
For 	these 	reasons, 	H.R. 	3824 	should 	not 	be 	enacted.
Thank 	you 	for 	your 	attention, 	Mr. 	Chairman. 	I 	would 	be
pleased 	to 	answer 	any 	questions 	you 	or 	other 	members 	of 	the
Committee 	may 	have.
f
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or~,::::E c t
~""'£ C~A'lii ",,"..A f-.o
FEDERAL TRADE COMMISSION
WASHINGTON ;:lC 20580
Jl;ly 	9, 	1985
The 	Honora~le Strom 	Thurmond
Chairman
Committee 	on 	the 	Judiciary
United 	States 	Senate
washington, 	D.C. 	20510_
Dear 	Mr. 	Chairman:
Thank 	you 	for 	your 	letter 	of 	May 	20, 	1985, 	requesting
Federal 	Trade 	Commission 	views 	on 	S. 	1140, 	the 	"Motor 	Fuel 	Sales
Competition 	Improvements 	Act 	of 	1985." 	This 	bill 	is 	similar 	to
other 	legislation 	offered 	in 	the 	Senate 	and 	House, 	and 	in 	s~ate
legislatures, 	to 	rectify 	purported 	market 	failures 	and 	antitrust
pro~lems in 	gasoline 	markets. 	The 	C~mmission's staff 	has
previously 	opposed 	such 	legislation. 	The 	Commission 	is 	opposed
to 	the 	enact~ent of 	S. 	llAO 	because 	this 	bill 	is 	anticompetitive
and 	would 	be 	harmful 	to 	consumers.
Description 	of 	S. 	1140
The 	bill's 	stated 	purpose 	is 	"[t]o 	amend 	the 	antitrust 	laws
in 	order 	to 	preserve 	and 	promote 	wholesale 	and 	retail 	competition
in 	the 	retail 	gasoline 	market 	and 	to 	protect 	the 	motoring 	safety
of 	the 	American 	public." 	Section 	2(a) 	of 	the 	bill 	would 	make 	it
unlawful 	for 	any 	petroleum 	producer 	or 	refiner, 	"directly 	or
indirectly, 	to 	require 	any 	retail 	motor 	fuel 	dealer 	to 	purchase
mor~ 	than 	70 	percent 	of 	the 	monthly 	retail 	sales 	of 	motor 	fuel
fro~ such 	producer 	or 	refiner 	or 	to 	prohibit 	the 	use 	or
conversion 	of 	storage 	tanks 	and 	dispensers 	as 	provided 	in
subsection 	(c)."
1 	The 	Commission's 	staff 	has 	filed 	comments 	opposing 	passage 	of
South 	Carolina 	House 	Bill 	2663 	(marketing 	divorcement 	and
below 	cost 	selling); 	North 	Carolina 	Senate 	Bill 	73 	(below
cost 	selling) i 	and 	Washington 	Senate 	Bill 	3418 	(marketing
divorce~ent). 	The 	FTC's 	Bureau 	of 	Competition 	Assistant
Director 	Ronald 	B. 	Rowe 	has 	testified 	in 	opposition 	to 	U.S.
House 	Resolution 	5023 	in 	1984 	(below 	cost 	pricing), 	and 	in
opposition 	to 	H.R. 	1362 	in 	1981 	(marketing 	divorcement 	and
below 	cost 	selling).

The 	Ho~orable Strom 	Thurmond 	-2-
Section 	2(b) 	of 	the 	bill 	wo~ld make 	it 	unlawful 	for 	a
producer 	or 	refiner 	to 	collude 	with 	any 	other 	producer 	or 	refiner
to 	req~ire retail 	dealers 	to 	carry 	more 	than 	70 	percent 	of 	the
suppliers' 	fuel 	or 	to 	prevent 	use 	of 	storage 	tanks 	to 	store 	other
suppliers' 	fuel.
Section 	2(c) 	would 	require 	trademarked 	dealers 	to 	notify
their 	custo~ers if 	they 	carry 	and 	dispense 	motor 	fuel 	at 	one 	or
more 	pumps 	that 	is 	not 	supplied 	by 	the 	refiner 	or 	producer 	whose
tracesark 	or 	trade 	name 	is 	displayed 	by 	the 	dealer.
Section 	3 	would 	make 	it 	unlawful 	for 	any 	"large 	integrated
refiner 	to 	opera~e any 	motor 	fuel 	service 	station 	in 	the 	United
States," 	although 	such 	refiners 	are 	not 	prohibited 	under 	Section
4 	of 	the 	bill 	froD 	owning 	the 	underlying 	assets 	of 	the 	service
station, 	as 	long 	as 	the 	refiner 	does 	not 	participate 	in 	any 	way
in 	operating 	the 	station., 	The 	prohibition 	in 	Section 	3 would
become 	ef::ective 	"one 	year 	after 	the 	date 	of 	the 	enactment 	of
this 	Act." 	[Sec. 	6(c))
Under 	Section.S 	of 	the 	bill, 	a 	"large, 	integrated 	refiner,"
as 	used 	in 	Sections 	3 	and 	4 	of 	the 	bill, 	is 	defined 	as 	a 	refiner
that 	has 	thirty 	percent 	crude 	oil 	self-sufficiency 	and 	whose
total 	refining 	capacity 	exceeds 	175,000 	barrels 	per 	day.
Section 	6 of 	the 	bill 	would 	authorize 	a 	federal 	district
co~rt civil 	action 	brought 	by 	the 	Federal 	Trade 	Commission 	to
prevent 	or 	stop 	violations 	of 	S. 	1140, 	"or 	any 	regulation
prom~lgated thereunder," 	and 	gives 	the 	district 	courts 	certain
jur"isdiction 	to 	restrain 	violations, 	to 	require 	compliance, 	and
to 	"impose 	monetary 	penalties 	under 	the 	same 	terms 	and 	conditions
as 	p.ro\"ided 	in 	Section 	5 (m) (2) (A) 	of 	the 	Federal 	Trade 	Commission
Act u 	and 	to 	order 	such 	additional 	equitable 	relief 	as 	it 	deems
appiopriate." 	[Sec. 	6(a)) 	Private 	civil 	actions 	by 	"any 	other
person 	affected" 	by 	a 	violation 	of 	S. 	1140 	would 	allow 	the
successful 	plaintiff 	to 	obtain 	monetary 	damages 	and 	equitable
relief 	in 	any 	district 	"in 	which 	the 	plaintiff 	resides 	or 	is
doing 	business, 	or 	in 	which 	the 	defendant 	resides, 	or 	is 	doing
business." 	[6 (b) (1) 	and 	(2)]
Finally, 	S. 	1140 	would 	require 	the 	Commission 	to 	"prescribe
regulations 	for 	the 	collection 	of 	information" 	necessary 	to
dete~mine which 	refiners 	would 	and 	would 	not 	be 	permitted 	to
operate 	retail 	gasoline 	outlets. 	[Sec. 	6 (e) (1))
II

The 	Honorable 	Strom 	Thurmond
Summary 	of 	Opposition 	to 	S. 	1140
-3-
S. 	1140, 	althou9~ facially 	different 	from 	the 	myriad 	of
other 	retail 	divorce~ent ane 	"below-cost" 	pricing 	legislation
unsuccessfully 	urged 	in 	the 	United 	States 	Congress 	and 	in 	many
state 	legislatures, 	is 	but 	~ 	new 	variety 	of 	the 	same 	species.
Although 	such 	bills 	are 	usually 	described 	by 	their 	proponents 	as
necessary 	to 	protect 	dealers 	from 	the 	"monopolistic" 	and
"predatory" 	practices 	of 	their 	suppliers, 	no 	credible 	evidence
has 	been 	found 	that 	gasoline 	suppliers 	have 	engaged 	in 	such
practices. 	None 	of 	the 	provisions 	of 	S. 	1140 	would 	in 	any 	way
increase 	competition; 	the 	bill's 	effect 	rather 	would 	be 	to
protect 	and 	increase 	profit 	ffiargins 	for 	branded 	gasoline 	dealers
as 	well 	as 	other 	gasoline 	dealers. 	Price 	competition 	would 	be
thereby 	debilitated 	and 	the 	result 	would 	be 	higher 	gasoline 	and
motor 	f~el 	prices 	for 	consumers 	in 	all 	regions 	of 	the 	country.
The 	Commission 	opposes 	the 	specific 	provisions 	of
S. 	1140 	because: 	(1) 	there 	is 	no 	credible 	evidence 	that 	the
anticompetitive 	practices 	the 	bill 	purports 	to 	correct 	exist;
(2) 	present 	feder~l laws 	are 	sufficient 	to 	remedy 	predatory
pricing 	and 	collusion 	should 	these 	practices 	occur; 	and
(3) 	legislated 	lessor-lessee 	contract 	alteration 	and 	vertical
divorcement 	are 	unnecessary, 	and 	would 	increase 	the 	costs 	of
gasoline 	distribution, 	eliminate 	legitimate 	price 	competition,
and 	raise 	prices 	for 	motor 	fuel 	to 	consu~ers.
1. 	There 	is 	no 	credible 	evidence 	of 	anticompetitive 	conduct
by 	refiners 	and 	producers 	to 	support 	S. 	1140.
Proponents 	of 	legislation 	like 	S. 	1140 	maintain 	that 	its
passage 	is 	necessary 	to 	pro:ect 	gasoline 	franchisees 	of 	major,
int~grated refiners 	from 	unfair 	and 	anticompetitive 	practices
directed 	against 	them 	by 	their 	suppliers. 	They 	argue 	that 	it 	is
unfair 	for 	refiners 	to 	operate 	retail 	gasoline 	outlets 	in
competition 	with 	their 	franchised 	gasoline 	dealers. 	According 	to
this 	view, 	the 	refiners 	"subsidize" 	their 	own 	retail 	operations
by 	providing 	gasoline 	to 	their 	own 	outlets 	at 	internal~transfer
prices 	that 	are 	both 	"below 	cost" 	and 	below 	the 	wholesale 	prices
charged 	to 	independent 	dealers.
We 	are 	aware 	of 	no 	evidence 	that 	such 	subsidization 	has
occurred 	or 	is 	occurring 	anywhere 	in 	the 	United 	States. 	In 	fact,
an 	examination 	of 	the 	state 	of 	competition 	in 	gasoline 	marketing
in 	the 	United 	States, 	both 	before 	and 	after 	the 	decontrol 	of
petroleu~ refining 	and 	marketing 	in 	1981, 	indicates 	that 	gasoline
franchisees 	have 	not 	been 	and 	are 	not 	likely 	to 	become 	targets 	of
an:ico~petitive practices 	by 	refiners. 	Following 	enactment 	of
II!
I

T~e 	Honorable 	Strom 	~hurmor.d 	-4-
Title 	III 	0: 	the 	Pe~roleum Marketing 	Practices 	Act 	in 	1978, 	15
U.S.C. 	§ 	2841, 	the 	Depar:~ent of 	Energy 	("DOE") 	was 	required 	to
study 	whether 	the 	alleged 	"subsidization" 	of 	retail 	gasoline
operations 	of 	majo~ 	refiners 	actually 	existed 	and, 	if 	it 	did,
whethe: 	the 	practice 	was 	predatory 	or 	anticomP2titive. 	The 	final
report 	to 	Congress, 	published 	in 	January 	1981, 	was 	based 	on 	an
extensive 	study 	of 	pricing 	data 	in 	several 	Standard 	Metropolitan
Statistical 	Areas 	for 	1978, 	as 	well 	as 	on 	internal 	oil 	company
documents 	subpoenaed 	by 	the 	DOE 	staff. 	The 	study 	concluded 	that
there 	was 	no 	evidence 	of 	such 	subsidization. 	In 	1984, 	DOE
published 	a 	report 	that 	further 	substantiated 	its 	1981 	findings. 3
In 	its 	1984 	report, 	DOE 	presented 	the 	results 	of 	an
ex:ensive 	study 	of 	gasoline 	marketing 	since 	decontrol. 	DOE
concluded 	that 	the 	increased 	pressures 	on 	gasoline 	retailers
since 	1981 	were 	not 	caused 	by 	anticornpetitive 	behavior 	by 	oil
companies. 	Rather, 	the 	decline 	in 	the 	overall 	number 	of 	retail
outlets 	and 	the 	intensification 	of 	competition 	among 	gasoline
rna:keters 	could 	be 	attributed 	to 	decreased 	consumer 	demand 	for
gasoline 	and 	a 	continuing 	trend 	toward 	the 	use 	of 	more 	efficient,
high-volume 	retail ,outlets. ~ 	Statistics 	published 	by 	DOE 	and
industry 	publications, 	such 	as 	the 	Lundberg 	Letter, 	indicate 	that
since 	federal 	cont:01s 	were 	removed 	in 	January 	1981, 	the 	public
has 	been 	the 	bene:iciary 	of 	vigorous 	price 	competition.
DOE 	case 	studies 	have 	revealed 	no 	instances 	of 	predatory
behavior 	on 	the 	part 	of 	major 	gasoline 	refiners. 	Instead, 	the
studies 	indicate 	that 	the 	fortunes 	of 	refiners 	and 	their
franc~ised outlets 	are 	inextricably 	merged, 	and 	that 	the 	two
groQps 	"form 	a 	mutually 	sup~orting system 	backed 	by 	company
advertising 	and 	prornotion."~ 	Indeed, 	lessee-dealers 	have
ccnt~nued to 	be 	by 	far 	the 	largest 	outlet 	for 	the 	direct 	gasoline
!
2
3
4
DOE, 	Final 	Reoort= 	The 	State 	of 	Comoetition 	in 	Gasoline
Marketinc, 	January 	1981.
DOE, 	Dereculat~d 	Gasoline 	Marketing= 	Conseauences 	for
Comoetition, 	Com~etitors, ane 	Consumers, 	January 	1984 	draft
report 	[hereinafter 	cited 	as 	1984 	DC~ 	Report].
Id. 	at 	125-32.
rd. 	at 	ii.

The 	Honorable 	Strom Thurmond
sales 	of 	the 	major, 	integrated 	refiners. 6 	In 	fac~, 	only 	3.3
percent 	of 	the 	gasoline 	stations 	in 	the 	United 	States 	~re
operated 	by 	the 	major, 	integrated 	refiners 	themselves.
-5-
In 	the 	context 	of 	merger 	analysis, 	the 	Commission's
September 	1982 	study, 	Mercers 	in 	the 	Petroleum 	Industrv,
concluded 	that 	wholesale 	and 	retail 	gasoline 	markets 	were
unconcentrated 	at 	the 	national 	level 	and, 	in 	general, 	only
moderately 	concentrated 	in 	particular 	geographic 	regions. 	Given
the 	continued 	importance 	of 	the 	branded, 	franchised 	marketing
distribution 	system 	to 	major 	refiners, 	traditional 	antitrust 	and
economic 	theory 	indicates 	that 	it 	would 	be 	irrational 	for 	an
individual 	major 	refiner-franchisor 	to 	charge 	its 	franchisee-
dealers 	prices 	that 	would 	cause 	them 	to 	either 	secure 	new 	sources
of 	supply 	or 	go 	out 	of 	business. 	The 	likely 	results 	of 	such
irrational 	behavior 	in 	the 	current 	era 	of 	reduced 	gasoline 	demand
and 	plentiful 	supplies 	would 	be 	that 	the 	refiner 	would 	face 	a
decrease 	in 	market 	share, 	an 	increas€ 	in 	excess 	capacity, 	and
higher 	per 	unit 	costs. 	Thus, 	individual 	gasoline 	franchisors 	are
not 	likely 	to 	engage 	in 	predation 	against 	the 	mainstay 	of 	their
own 	retail 	distribution 	svstem, 	their 	franchised 	dealers.	, 	-
2. 	Monopolistic 	and 	predatory 	behavior 	is 	subject
to 	prosecution 	under 	existing 	federal 	laws.
Even 	if 	predatory 	or 	monopolistic 	be~avior by 	refiners 	were
found 	to 	exist, 	it 	could 	be 	reached 	under 	the 	Sherman 	Act, 	the
Cla~ton Act, 	or 	the 	Federal 	Trade 	Commission 	Act.
Section 	2 (b)' s 	prohitition 	against 	refiner 	or 	producer
collusion 	is 	unnecessary 	because 	such 	conspiracies 	are 	subject 	to
the 	cri~inal and 	civil 	prohibitions 	of 	the 	Sherman 	Act.
Conspiracies 	in 	restraint 	of 	trade 	also 	violate 	Section 	5 	of 	the
FTC 	Act.
Section 	2 (a), 	prohibiting 	individual 	refiners 	or 	producers
from 	req~iring their 	dealers 	to 	buy 	more 	than 	70 	percent 	of 	their
gasoline 	from 	them, 	and 	prohibiting 	refiners 	and 	producers 	from
6
7
In 	1981, 	the 	eight 	largest 	refiners, 	who, 	in 	the 	aggregate,
accounted 	for 	about 	half 	of 	all 	gasoline 	sales, 	sold
approximately 	eight 	times 	more 	gasoline 	throush 	lessee-
dealers 	than 	through 	refiner-owned 	rttail 	outlets 	Id. 	at 	146
(Ta:,le 	A-lO).
Lunc:,erg 	Letter, 	Vol. 	XI, 	No. 	36, 	Ju:y 	6, 	198~, 	at 	3.

The 	Hono:able 	Strom 	Thurmond 	-6-
preventing 	their 	dealers 	from 	converting 	existing 	storage 	tanks
for 	alternative 	gasoline 	supplies, 	also 	is 	unnecessary 	and
unwise. 	These 	provisions 	~ight 	be 	justified 	if 	there 	were
evidence 	of 	widespread 	antico~petitive abuses.
As 	discussed 	in 	the 	last 	section, 	however, 	allegations 	of
oil 	company 	anticompetitive 	practices 	and 	behavior 	are 	simply 	not
supported 	by 	any 	credible 	evidence. 	Certainly, 	as 	a 	group, 	the
major 	refiners 	have 	not 	been 	engaged 	in 	predation 	against 	their
branded 	franchisees, 	who 	constitute 	the 	mainstay 	of 	their
distribution 	network. 	Nor 	does 	it 	seem 	reasonable 	to 	conclude
that 	individual 	oil 	producers 	and 	refiners 	have 	in 	any 	way 	been
attempting 	to 	drive 	their 	own 	franchiseas 	out 	of 	business 	by
operating 	company-owned 	retail 	outlets.
3. 	~ Legislated 	lessor-lessee 	contract 	alteration 	and
vertical 	divorcement 	are 	unnecessary 	and 	would 	raise
costs, 	diminish 	price 	competition, 	and 	raise 	gasoline
prices 	to 	consumers.
One 	proponent 	of 	the 	bill 	contended 	that 	Section 	2 of
S. 	1140 	is 	necessary 	because 	it 	"extends 	throughout 	the 	industry
the 	settlement 	achieved 	in 	Bocosian 	v. 	Gulf 	Oil 	Corp~," 1985-1
T rae e 	Cas. 	(CCH ) 	'i 	66 , 51 0 	a t 	6 5 , 5 48 	(E . D. 	P a. 	1 9 85) . 	Howe ve r ,
the 	litigation 	in 	Bocosi~n never 	resolved 	the 	issue 	of 	whether
supplier 	abuses 	had 	actually 	occurred. 	The 	Boaosian 	settlement
preceded 	any 	ruling 	on 	the 	merits 	of 	the 	plaintiff's 	antitrust
claims, 	and 	the 	Bocosian 	judge 	resisted 	attempts 	to 	enlarge 	or
mod~fy the 	consent 	decree 	in 	ways 	that 	are 	now 	being 	urged 	by 	the
proponents 	of 	this 	legislation. 	Indeed, 	District 	Judge
VanArtsdalen 	gave 	the 	following 	response 	to 	disappointed 	members
of 	the 	Bocosian 	class 	suggesting 	that 	their 	claims 	would 	likely
8
9
See 	SUDra 	notes 	5 	and 	6 	and 	accompanying 	text.
Suora 	note 	7 	and 	8. 	Plaintiffs 	in 	this 	class 	action 	private
suit 	charged 	that 	the 	major 	oil 	company 	defendants 	conspired
by 	implementing 	and 	maintaining 	a 	system 	of 	gasoline
distribution 	in 	which 	the 	defendants 	would 	own 	and 	lease
gasoline 	stations 	to 	independent 	operators 	so 	as 	to 	prevent
plaintiffs 	from 	buying 	their 	gasoline 	supplies 	from 	anyone
but 	their 	lessors. 	The 	restraints 	were 	enforced, 	accordin;
to 	plaintiffs, 	by 	illegal 	tie-ins 	conditioning 	the 	lease 	of 	a
service 	station 	and 	the 	use 	of 	the 	refinery 	brand 	name 	and
trademark 	upon 	a 	dealer 	buying 	all 	his 	gasoline 	from 	the
refiner-lessor.

The 	Hono~a8le Strom 	T~ur~ond
have 	~ee~ 	fou;.d 	~ithout merit 	at 	trial:
T~e 	"risks" 	of 	esta~lishing liability 	1n 	this
case 	were 	great. 	For 	bot~ 	the 	da~age and
injunctive 	class, 	proving 	liability 	at 	trial
would 	have 	been 	extremely 	difficult. 	The
plaintiffs 	clearly 	had 	no 	direct 	proof 	of 	a
conspiracy.
-7-
[Bocosian 	v. 	Gulf 	Oil 	CorD., 	1985-1 	Trade 	Cas. 	(CCH) 	~ 	66,510 	at
65,548 	(E.D. 	Pa. 	1985)) 	Judge 	VanArtsdalen 	also 	suggested 	that,
without 	such 	direct 	proof, 	proving 	antitrust 	violations 	"would
have 	been 	a 	monumental 	task 	for 	plaintiffs." 	Id.
The 	district 	judge 	also 	gave 	the 	follo~ing response 	to
plaintiffs 	who 	complained 	that 	the 	relief 	on 	installation 	of
individual 	fuel 	tanks 	ano 	pumps 	was 	inadequate:
As 	to 	the 	contention 	that 	the 	right 	to 	install
individual 	tanks 	and 	pumps 	or 	take 	other 	steps
to 	de-br~nd a 	station 	is 	purely 	illusory, 	the
agreement 	at 	least 	recognizes 	the 	existence 	of
such 	a 	right. 	Only 	time 	will 	tell 	whether 	and
to 	what 	extent 	this 	right 	may 	be 	exercised 	by
lessee-dealers. 	If, 	in 	fact, 	as 	plaintiffs
have 	contended, 	supplies 	of 	gasoline 	could 	be
purchased 	by 	service 	station 	dealers 	at 	a
substantially 	reduced 	price 	if 	allowed 	to 	be
purchaseu 	on 	a 	free 	and 	open 	market,
undoubtedly 	some 	will 	find 	it 	economically
acvantageous 	to 	install 	separate 	tanks 	and
[.!£. ]
In 	sum, 	although 	the 	proposed 	requirements 	of 	Sections 	2(a)
and 	2(b) 	of 	S. 	1140 	would 	greatly 	expand 	the 	agreed-to 	relief 	in
the 	Boo05ian 	settlement, 	their 	enactment, 	without 	extensive
further 	analysis 	would 	appear 	to 	ignore 	the 	sense 	of 	Judge
Van~rtscalen's opinion 	of 	the 	allegations 	and 	claims 	for 	relief
by 	the 	30~osian plaintiffs.
Moreover, 	to 	the 	extent 	that 	S. 	1140 	is 	intended 	to 	redress
imb~lan~es between 	refiners 	or 	producers 	and 	their 	lessee-
dealers, 	Consress 	has 	already 	addressed 	this 	concern 	through 	its
earlier 	passage 	of 	the 	Petroleum Marketing 	Practices 	Act 	of 	1973
("PM?A"). 	T~e 	legislative 	history 	of 	the 	Pl-1PA 	shows
Con~~essional conce~n over 	alleged 	abuses 	of 	the 	franchise
I!
I

The 	Hono=a~le Strom 	Th~r~ond 	-8-
relationship.lO 	Because 	of 	perceived 	unequal 	bargaining
positions 	between 	major 	refiners 	and 	their 	individual 	dealers,
franchise 	agreements 	were 	regarded 	as 	adhesion 	contracts 	in 	many
instances. 	For 	that 	reason, 	the 	PMPA 	represented 	Congress'
legislative 	solution 	to 	balance 	the 	franchise 	relationship 	in 	a
more 	equitable 	manner. 	In 	contrast, 	S. 	1140 	would 	abandon 	such 	a
balanced 	approach 	and 	skew 	the 	balance 	sharply 	in 	favor 	of
gasoline 	dealers. 	Such 	an 	alteration 	without 	a 	f~ll 	study 	of 	its
effects 	is 	clearly 	not 	warranted 	and 	may 	be 	injurious 	rather 	than
helpful 	to 	franchisees. 	This 	is 	because 	the 	res~irements of
S. 	1140 	would 	appear 	to 	lessen 	the 	value 	of 	a 	franchised 	dealer
networK 	to 	an 	integrated 	refiner. 	Although 	direct 	refiner-
operated 	stations 	presently 	constitute 	only 	a 	small 	percentage 	of
a:l 	retail 	gasoline 	stations,~~ passage 	of
S. 	11~0 	might 	encourage 	abandonment 	of 	presently 	favored
franchi,sed 	dealer 	outlets 	in 	favor 	of 	company-co~trolled outlets,
assuming 	that 	the 	marketing 	divorcement 	part 	of 	S. 	1140 	would 	not
be 	enactec.
Finally, 	the 	enforcement 	standards 	develope~ over 	the 	years
in 	federal 	case 	law 	under 	the 	Sherman, 	Clayton, 	and 	FTC 	Acts 	and
their 	re~edi21 provisions, 	deter 	firms 	from 	enga;ing 	in 	predatory
behavior, 	but, 	at 	the 	same 	time, 	allow 	them 	to 	lower 	their 	costs
through 	vertical 	integration. 	In 	contrast, 	the 	prohi~ition
against 	refining/marketing 	integration 	found 	in 	S. 	1140 	would
arbitrarily 	req~ire marketing 	divorcement 	according 	to 	the 	amount
of 	aggregate 	refinery 	capacity 	of 	certain 	refiners. 	By 	denying
firms 	the 	possibility 	of 	increasing 	efficiency 	through 	vertical
inteoratio", 	this 	lecislation 	co~ld add 	costs 	to 	the 	distribution
of 'gisoline 	in 	the 	U;ited 	States, 	costs 	that 	would 	be 	borne 	by
co~s~~ers. 	Prices 	would 	also 	rise 	as 	a 	result 	0: 	the 	elimination
of 	competition 	from 	refiner-owned 	stations, 	whic~ 	tend 	to 	be 	low-
cos~, 	gasoli~e-o~ly outlets.
The 	potential 	harm 	of 	divorcement 	bills 	is 	illustrated 	by
the 	experience 	of 	Maryland, 	which 	has 	enacted 	divorcement
legislation 	similar 	to 	that 	now 	being 	proposed 	by 	S. 	1140.
Economists 	in 	one 	study, 	described 	by 	DO~ as 	perhaps 	"the 	best
empirical 	analysis 	of 	the 	effects 	of 	Maryland's 	divorcement
10
11
See 	Senate 	Reoort 	No. 	95-731, 	95th 	Cong., 	2d 	Sess., 	15-19,
29-43 	("Senate 	Report").
See 	suora 	note 	6 	and 	accompanying 	text.

The 	Honora~le Strom 	Thurmond
la~,ft12 have 	es~i~ated that 	Mary:and 	consumers 	are 	now
over 	$15 	million 	dollars 	more 	per 	year 	than 	they 	wo~~d
paying 	if 	the 	divorcement 	la~ had 	not 	~een enacted.
Conclusions
-9-
paying
have 	been
Drawing 	upon 	our 	ongoing 	examination 	of 	energy 	competition
issues, 	we 	conclude 	that 	the 	proposed 	(1) 	alteration 	of 	existing
gasoline 	supply 	contractual 	obligations, 	and 	(2) 	vertical
divorcement 	of 	retail 	gasoline 	stations, 	are 	likely 	to 	have
harmful 	consequences 	for 	both 	competition 	and 	consumers. 	In
short, 	S. 	1140 	would 	not 	enhance 	consumer 	welfare, 	but 	rather
would 	serve 	to 	insulate 	one 	business 	segment, 	retail 	gasoline
dealers, 	from 	the 	rigors 	of 	the 	free 	market.
As 	co~petition 	among 	gasoline 	marketers 	has 	intensified 	in
recent 	years, 	retail 	dealers 	have 	faced 	an 	increasing 	need 	to
change 	wit~ 	the 	times 	~y operating 	more 	efficient, 	high-volume
outlets. 	Protectionist 	legislation 	such 	as 	S. 	1140 	would
interfere 	with 	this 	competitive 	process, 	and 	would 	result 	in
higher 	consumer 	pr~ces.
For 	these 	reasons, 	the 	Federal 	Trade 	Commission 	urges 	that
S. 	1140 	not 	~e 	enacted.
By 	direction 	of 	the 	Commission.
12
13
1984 	DO~ Report, 	sunra 	note 	5, 	at 	105.
See 	Barron 	& Umbeck, 	A Du~ious 	Bill 	of 	Divorcement,
Regulation, 	Jan.-Feb. 	1983, 	at 	29. 	See 	also 	Testimony 	of
Pester 	Corp., 	Cro~n Central 	Petroleum 	Corp., 	on 	Oct. 	21,
1981, 	before 	the 	United 	States 	Senate's 	Judiciary 	Committee,
on 	a 	nationwide 	divorcement 	bill, 	S. 	326; 	Barron 	& Um~eck,
The 	Effects 	of 	Different 	Contractual 	Arranaements: 	The 	Case
of 	Retail 	Gasoli~e Markets, 	27 	J. 	Law 	& Econ. 	313 	(1984).

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Gentlemen:
t1.nitni 	~tat(S 	~rnat£
COMMITTEE ON THE JUOIClAR'Y
WASHINGTON, D.C. 20510
May 	20, 	1985
FEDERAL TRADE COMMISSION
nECE\V~9
MAY 2'i 'ea5
orm: fir CONGr\lSSIONAl FltLAiIOl·:S
\\'ASHINGTO~';. D.C. 205~'J
$. 	1140
The 	Corr~ttee on 	the 	Judiciary 	is 	herewith 	transmitting
for 	your 	stuc~ and 	report 	thereon 	in 	triplicate.
To 	facilitate 	the 	work 	of 	the 	Co~~ttee I 	urgentJ~ 	request
The 	Cornrni. t ~ee	t.hat 	your 	repo~ be 	sub:n.itted within 	20 	days.
should 	be 	formally 	advised 	in 	writing 	if 	any 	delay 	beyond
that 	tirre 	period 	is 	necessary.
Sincerely,
Chairman
,
E.nclosures
Fece~al Trace 	Co,,~ission
Pen~sylvania Avenue 	at 	Sixth 	Street
Was~inston, D.C. 	20580

99TH CO~GRESS
1ST SESSION 5.1140
n
To &.mend the Vltitrust lAws in order to preserve and promot.e ..-hoJeuJe &.Dd
reu.il competition in the retAil ga.soline m.a.rket &.Dd to prot,ect the motoring
wet)' of the Amenca.Il public.
11\ TIrE 	SE~ATE OF 	THE 	Ul\lTED 	STATES
lliY 15 (legislative day, APRIL 15), 1985
Mr. METZn"llAeM ((or himseU, Mr. THUlUdOh1>, and Mr. DECONCIh') introduced
the rollo".ing bill; ""hich was read t",ice tJld referred 1.0 the Committee OD
the J udiciarv
A 	BILL
To amend the antitrust laws in order to preserve and promote
wholesale 	and 	retail 	competition 	in 	the 	retail 	gasoline
market and to protect the motoring safety of the American
public.
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1 	Be it enacted by the Senate and House of Representa-
2 	tires of the United States of America in Congress assembled,
3 	That this Act may be cited as the "Motor Fuel Sales Compe-
4 	titian Improyement Act of 1985".
5 	WROLESALE prRCHASE OF GASOLI~L
6 	SEC. 2. (a) Kot\\ithstanding any other pro\;sion of law
7 	and except as pro\ided in this section, it shall be unlav.1ul for
8 	any producer or reEner, directly or indirectly, to require any
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1 	retail motor fuel dealer to purchase more than 70 per centum
.2 	of the monthly retail sales of motor fuel from such producer
, '3 	or refiner or to prohibit the use or conversion of storage ta.nk.s
4 	and dispensers as provided in subsection (c).
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(b) It shall be a violation of this Act for any producer or
refiner to contract, combine, or conspire \\;th any other pro-
ducer or refiner for the purpose of violating subsection (a).
(c) It shall be unJa\\1uJ for an)' dealer, at a motor fuel
senice station displaying a trademark, trade name, or other
identifying symbol or name owned by a refiner or producer,
to sell motor fuel which is not provided by or for such produc-
er or refiner \\ithout pro\iding reasonable notice at the point
13 'of sale that motor fuel dispensed by one or more dispensers is
14 	not refined by or for such producer or refiner, except that a
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15 	de~ler may com'en one or more existing storage tanks and
16 	dispense;:: or establish ne\\' storage tar.ks and dispensers for
1i 	sale of motor fuel 	supplied by other than the owner of the
"
18 	trademark, trade na;ne, or ide!ltu.:-ing symbol displayed at the
19 	station.
20 	OPERATIO~ OF MOTOR Ft:EL SER\'1CE STATIO!'S
21 	SEC. 	3. 	It 	shr,Jl 	be 	unla\dul 	for 	any large integrated
22 	refiner to opemte any motor fuel senice station in the United
23 	States.
24 	EXCEPTIO~S
SEC. 4. Kot\\ithstanding section 3, it shall not be a \'io-
26 	la tion of this Act for a large integrated refiner to own a11 or
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1 	part of the assets of a motor fuel service station so long as
2 	such .produce! .~oes 	not. engage. in 	the 	business. of selling
3 	motor ,fuel at such station through any-
4 	(1) employee;
5 	(2) commissionpd agent;
6 	(3) person acting on behalf of the reEner or under
7 	the reEner's supenision; or
8 	(4) 	person 	operating 	such 	station 	pursuant 	to 	a
9 	contract \\ith the rermer which pro\ides that the refin-
10 	er has 	substantial or 	effective control over the motor
11 	fuel operations of the ,station.
12 	DEFI:SITlO:SS
13 	t SEC. 5. For },urposes of this Act the tenn-
14 	(1) "producer" means any person who is engaged,
15 	directly or indirectly, in the production of crude oil;
16 	(2) "refiner" means any person engaged, directly
1i 	or indirectly, in the refining of motor fuel 	or an)' pro-
18 	dueer who contracts 	\\ith another 	to 	refine petroleum
19 	products for purposes of sale of motor fuel by the pro-
20 	ducer;
21 	(3) 	"large 	integrated 	refiner" 	means 	an)' 	person
22 	who for 	the most recent calendar year for which data
23 	are available-
24 	(A) 	produced, 	directly 	or 	indlrectly, 	more
25 	than 30 per centum of the domestic and imported
26 	crude oil supplied to its rermer)'; and
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19 	. SEC. 6. (a) The Federal Trade Commission may com-
20 	mence a ci\"il action for appropriate relief, including a perrna-
21 	nent or temporary injunction, 	whenever the Federal Trade
22 	Commission has reason to belie\"e that any person has violat-
23 	ed or is violating any pro\'ision of this Act, or any regulations
24 	promulgated 	thereunder. 	Any 	action 	under 	this 	paragraph
25 	may be brought in the district court of the United States for
26 	the district in which the defendant is located, resides, or is
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(B) whos"e total refmel)' capacity exceeds ODe
hundred 	and· seventy-five 	thousand 	barrels 	per
daY'. '
(4) "motor fuel" means gasoline, diesel fuel, alco-
hol, or ani' mixture of them sold for use in a.utomobiles
and related vehicles;
(5) "motor fuel service station" meaDS a.ny facility
at which motor fuel is sold at retail;
(6) 	"person" 	includes 	one 	or 	more 	indi\;du:l!s,
partnerships, 	associations, 	corporations, 	legal 	repre-
se~tati\"es, joint-stock 	companies, 	trustees and 	receIv-
ers 	in 	bankruptcy 	and 	reorganization, 	(;l)mmt-l1 	bw
trusts, and any organized group, whether or not incor-
porated;
(7) "rniled States" means the several States, the
District of Columbia, and am" territory or possession of- 	.
the lTnited States.
E~FOP.CE;;lE~T A~D EFFECTI'"E DATE
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1 	doing business, and such co'urt shall have jurisdiction to re-
2 	strain such ,,;olation and 	to require 'compliance, 	to impose
3 	monetaT")' penalties under the same terms and conditions as
4 	pro\ided in section 5(m)(2)(A) of the Federal Trade Commis-
5 	sion Act, and to order such additional equitable relief as it
6 	deems appropriate,
7 	(b)(l) If any 	person fails 	to comply ~;th the reqwre-
8 	ments of this section, any other person affected by such fail-
9 	ure may maintain a ciyi] action against such person failing to
10 	comply \\-1th sych requi;ements for damages and appropriate
11 	equitable relief, includi~g temporary and permanent injunc-
12 	tiye 	relief. If the plaintiif freyails in any action under this
13 	section, the plaintiff shall be entitled to reasonable attorney
14 	a.nd expert \\itness fees to be paid by the defendant, except
15 	that 	in 	any 	case 	in 	which 	the 	court determines 	that only
16 	nominal damages are to be awarded to the plaintiff, the court
1i 	may, in its discretio;:, detennine not to direct that such fees
18 	be paid by the defendant.
19 	(2) An a.ction brought pursuant to this section may be
20 	brought, \\ithout regard to the amount in controyersy, in the
21 	district court of the l7nited States in any judicial district in
22 	which the plaintiff resides or is doing business or in which the
23 	defendant resides or is doing business,
24 	(c) Sections :2 and 3 of this Act shall take effect one
25 	year after the date of ,the enactment of this Act.
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1 	(d)( 1) The 	Federal 	Trade 	Commission 	shall 	prescribe
2 	regulations for the collection of information necessary lor the
3 	determ.i.nAtions specified in section 3 and for the manner of
4 	complying v:ith the requirements of section 2(c).
5 	(2) Notv.iths tanding &.D)' other provision of this Act, in-
6 	formati'on related to section 3 need not be pro\;ded by private
7 	persons if reliable and timely information is available from
8 	published sources.
9 	(3) Regulations promulgated pursuant to paragraph (1)
10 	shall be promulgated, after notice and a reasonable period for,
11 	comment by 	the public, 	no 	later than 	one 	hundred eighty
12 	days afte;- the date of enactment of this Act.	,
o 	...
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