In an apparent effort to force more aggressive government enforcement of antitrust laws, Sen. Edward M. Kennedy (D-Mass.) yesterday formally petitioned the Federal Trade Commission to bar oil companies from owning petroleum pipelines.
Kennedy's action is the first of its kind in that it asks the FTC to issue a trade regulaion rule declaring that oil-company-owned pipelines represent "an unfair trade practice" because they put oil companies that don't own pipelines at a competitive disadvantage.
Previously, the FTC had issued trade regulation rules only in the area of consumer protection. A recent such FTC rule, for example, calls for vocational schools to make refunds to students who drop out.
The FTC and the Justice Department's Antitrust Division have long investigated the antitrust problems involved in pipeline ownership by oil companies.
Despite the fact that Justice's antitrust head, John Schenfield, has stated that divestiture school probably be ordered, his department has yet to bring a case in court.
Further, the FTC has been frustrated in its own overall divestiture battle against the oil company giants, -- which includes many areas of ownership. The struggle has dragged on for more than five years without getting out of the pretrial-discovery stage. Among the documents sought by the FTC are pipeline records.
The government can take four paths in antitrust matters. Either Justice or the FTC can go to court against the company or industry in question; Congress can draw up legislation, or the FTC can attempt a rulemaking procedure, like the one proposed yesterday by Kennedy.
Kennedy's decision to go with a rulemaking, sources said, at least partially represents his feeling that the exisiting Justice Department pipeline investigation has not gone fast enough and that the chances of effective antitrust legislation in the coming year are dim.
"This is a clear indication from the Kennedy people that Justice has moved too slowly," said one source, who asked not to be identified. "Kennedy's subcommittee (he chairs the antitrust and monopoly subcommittee of the Senate Judiciary Committee) took up the pipeline issue a year ago, and has come to the conclusion that legislation on the matter would not likely pass."
FTC sources called the rulemaking proposal a "significant step, in line with our thinking that case-by-case adjudication has not solved the problems."
Althought FTC and subcommittee sources say the success of Kennedy's effort depends a great deal upon the cooperation of the Justice Department, which is involved in an intensive pipelin ownership study, they acknowledge that Justice antitrust chief Shenefield is annoyed with the Kennedy proposal.
Shenefield said he had not seen the Kennedy petition, and would not comment on it until he has. In the past, however, he has indicated that his relations with Kennedy are good, and that he has plans to work closely with Kennedy and his staff in the future.
The Kennedy petition "is grounded upon a comprehensive staff report of the antitrust and monopoly subcommittee on oil company ownership of pipelines, and on an extensive analysis of pipeline ownership done by the Department of Justice and presented to the subcommittee last June," Kennedy said in a news release announcing the move.
"Essentially," the release continued, "this analysis says that oil companies have an incentive to undersize pipelines, forcing some part of the petroteum to move into a market by less efficient and higher cost methods such as barges, Trucks or rail."
The higher cost then sets the market price, Kennedy points out, "enabling the pipeling users to reap higher benefits."
Kennedy said the use of FTC trade regulations in this case "represents a new approach to antitrust and competition problems."
The petition contends that such use is appropriate "where an elaborate factual record need not be developed. Because the debate over the competitive consequences of petroleum pipeline ownership... will involve predoininately issues of competitive theory, with disputes of fact playing a less significant role, rulemaking rather than adjudication is the most efficient way to address this question."