A Sept. 16 article on the Exxon-Mobil merger misspelled the name of former Federal Trade Commission member Mary L. Azcuenaga. (Published 09/29/99)
Anxious Washington area Mobil and Exxon service-station operators want assurances from the federal government that they will survive the planned merger between the two giant oil companies.
Area station operators and representatives of a major dealers organization who met last week with Federal Trade Commission officials say they expect that Irving, Tex.-based Exxon Corp. and Fairfax-based Mobil Corp. will be required to sell a large number of their stations here and in some other major markets before the companies' $85 billion merger is approved.
Among the options the FTC discussed with them, the dealers said, is having one major new competitor take over divested stations in a given market. The dealers fear that might leave them at that supplier's mercy and prevent them from negotiating better deals for themselves.
Officials of the Washington, Maryland, Delaware Service Station & Automotive Repair Association proposed to the FTC at the Sept. 8 meeting that dealers who operate divested stations be given the right to purchase their stations and be allowed to seek new leasing agreements with a limited number of gasoline suppliers. The association represents 1,400 retail gasoline station operators who run company-owned stations under leases.
"I would like to go independent and buy from whoever I felt like--whoever gave me the best price," said Ben Simpson, who operates an Exxon station on Capitol Hill. "Then I could pass on the savings to my customers."
Simpson said that his lease was originally with Gulf Oil Corp., which was taken over by Chevron Corp. in 1984. Later, when Chevron and Exxon agreed to swap some stations, he became an Exxon operator. Now he faces the possibility of another change that is out of his control.
The FTC has been examining the proposed merger of Exxon and Mobil, announced last December, which would create the world's largest private sector oil company. The FTC won't comment on its deliberations with Exxon and Mobil, but many analysts have said they expect the combined company to be required to divest itself of significant retailing and refining assets. The companies hope the merger will be approved this fall.
William Baer, director of the FTC's bureau of competition, has told Congress that the agency is closely scrutinizing the proposed merger's impact on competition in the Northeast, the Gulf Coast and California. And the federal Energy Information Administration has identified the Northeast as the area in which the two companies have the biggest overlap in gas stations.
Exxon and Mobil together have 35.1 percent of the gasoline outlets in the District, 20 percent in Maryland and 14 percent in Virginia.
"The market share would be far higher in Northern Virginia," said Ron Harrell who operates a Mobil station in Germantown and another in Fairfax County not far from Mobil's corporate headquarters.
Harrell and Roy Littlefield, executive director of the service station operators association, said an FTC official told them at last week's meeting that the agency is considering turning the divested stations to a single strong competitor, as one option.
According to Richard Arnold, who operates a Mobil station in Bowie, the FTC said divestiture could follow one of several formats. In one, according to his account, the combined Exxon-Mobil would divest all the stations of one brand or another. In the other, whichever company has the largest presence in a particular market could stay and stations carrying the other brand would be divested.
"They gave as an example, in the Washington area, Exxon has the largest number of stations, and all the Mobil stations could be divested," he said.
When British Petroleum Co. and Amoco Corp. merged last year, 29 stations in Pennsylvania that were required to be divested were turned over by BP Amoco PLC to the independent refining company Tosco Corp. Littlefield said that the dealers, who didn't own the stations but operated them under leases, subsequently got notices that their leases were being terminated. The dealers went to court and reached a settlement that allowed them to continue to operate the stations.
Former FTC Commissioner Mary Azcuanaga, a partner in the law firm Heller, Ehrman, White & McAulliffe, said that requiring that all divested stations be supplied by one strong competitor would be an unusual remedy from the FTC. The FTC is seeking to ensure that markets--both geographic and product markets--not be rendered any less competitive by a merger. "One question," she said, "always is 'Are you creating more competition than existed before, or are you just restoring competition to the state it existed before the merger?' "
Azcuanaga said the consent agreement that the agency is likely to reach with Exxon-Mobil will be a landmark decision and that the length of time spent on deliberations so far suggests "that there's a major restructuring."