Fuel Monopoly Has Kentucky AG Seeing Red

     LOUISVILLE, Ky. (CN) – Kentucky brought a federal complaint that accuses Marathon Petroleum of manipulating gas prices in the state by squeezing competitors out of the market.
     The May 12 action filed by Kentucky Attorney General Jack Conway claims that Marathon’s market share of 90 percent to 95 percent effectively eliminates other suppliers from providing any competition.
     “Marathon maintains and/or attempts to maintain this market dominance through the combined use of deed restrictions on real property at the retail level … through anticompetitive supply arrangements with independent retail sellers of gasoline; and through manipulation of the market for refined gasoline (RFG) in Louisville and Northern Kentucky,” the complaint states.
     By requiring many convenience store owners to sell only Marathon RFG, the company “deprives consumers of an increase in the number of retail gasoline stations selling competitively-priced gasoline, suppresses unbranded or other branded retailers as a competitive force throughout Kentucky, and illegally restricts a potential seller of motor fuels from choosing a supplier other than Marathon,” Conway says.
     “Marathon’s own corporate website unabashedly advertises its use of these deed restrictions [by displaying ‘for sale’ properties that] … ‘are subject to a possible 25-year deed restriction,'” the 23-page complaint continues.
     Gas prices in Louisville during the summer of 2014 were over 50 cents higher than those in St. Louis, a comparable market in terms of population and grade requirements, the attorney general noted.
     He says Marathon is able to control the supply of gas to the Louisville and Northern Kentucky areas because it “owns and operates the only refinery in the state … [and] there is only one refined products pipeline joined to this refinery.”
     “Such pipelines are used to transport products among the states, but the refined products pipeline connected to this refinery leads directly out of the commonwealth,” the complaint continues.
     Marathon’s exchange agreements with “horizontal competitors” for the Kentucky gas supply allegedly serves to limit refining capacity.
     Conway says the agreements have done nothing but raise prices in Louisville and Northern Kentucky, and that their purpose was to “prevent other major refiners of gasoline … from upgrading their refinery and supply infrastructure … thereby avoiding any potential increase in the supply of … gasoline in that market.”
     Kentucky wants a federal judge to find that Marathon’s monopolistic policies violate the Sherman, Clayton and Kentucky Consumer Protection Acts. The state also seeks civil penalties.
     Conway and the state are represented by Chief Deputy Attorney General Sean Riley from Frankfort.

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