Attorney General Jack Conway files federal antitrust lawsuit against Marathon Petroleum

05/12/2015 05:55 PM

Kentucky Attorney General Jack Conway has sued Marathon Petroleum, accusing the fuel company on Tuesday of unfairly keeping competitors out of the state and keeping gas prices high.

Conway filed the antitrust lawsuit in U.S. District Court in Louisville against the state’s largest supplier of gasoline and reformulated gasoline, which must be sold in Louisville and Covington during summer months to curb pollution from emissions.

Louisville residents typically pay between 20 and 30 cents per gallon more than others throughout Kentucky, and a comparison of reformulated gasoline prices between Louisville and St. Louis revealed gasoline typically cost 25 cents more per gallon in Louisville during the summer of 2014, Conway said.

“In our lawsuit we allege that Marathon discourages competition in three specific ways,” he said during a news conference.

“Number one, it requires independent retailers to sign unlawful supply agreements that eliminate wholesale competition. Secondly, Marathon Petroleum also executes trade agreements with horizontal competitors in the wholesale market that keep other suppliers from entering the Kentucky market, and third, we allege that Marathon Petroleum writes deed restrictions into sale agreements of some properties that are sold by Marathon.”

Some trade agreements require that retailers “purchase 100 percent of their RFG (reformulated gas) from Marathon” and include penalties for noncompliance, Conway said, noting his office has fielded complaints from retailers in the past nine to 10 months.

Some deed restrictions also allow gas stations to be opened on properties sold by Marathon, but only if the stations agree to sell only Marathon gasoline, Conway said.

Brandon Daniels, communications manager for Marathon, said the company “disputes the allegations outlined by Attorney General Jack Conway at a news conference earlier this afternoon and will defend this judicial action vigorously in court.”

“As we have not had the opportunity to review the full complaint, we have no further comment at this time,” he said in a statement.

Conway’s lawsuit can be viewed here: Marathon Petroleum antitrust lawsuit

Marathon, which merged with Ashland Oil in 1998, controls at least 90 percent of the state’s gasoline market, said Conway, whose office first began investigating Marathon in 2008.

Conway said he decided to act alone after the Federal Trade Commission declined to take up the investigation in 2014. That followed a failed appeal to U.S. Attorney General Eric Holder in 2011 and his first unsuccessful request for the FTC’s review in 2008.

Kentucky’s small market sizes may have played a role in the FTC’s decisions, he said.

“Without getting into private conversations I’ve had with members of the FTC, they look for size in cases, and maybe this particular market’s not big enough for the FTC,” Conway said. “But I’ll tell you, it’s big enough for this Office of the Attorney General, and the violations are egregious enough that we’re going to pursue it.”

Conway, who is seeking the Democratic gubernatorial nomination, said his office estimates Marathon profited $40 million from higher-than-necessary gas prices in Kentucky, and antitrust lawsuits can typically award triple damages.

“This is not an insignificant case when it comes to potential monetary damages, but most importantly I want competition in the wholesale market,” he said. “I want some injunctive relief from these contracts so the people of Kentucky don’t get treated poorly at the pump.”


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