The Federal Trade Commission yesterday filed an "administrative complaint against the two big bottled-propane producers -- UGI Corp and its AmeriGas Partners LP affiliate, of King of Prussia, and Blue Rhino (Ferrellgas Partners LP) of Overland, Kansas -- "alleging that they illegally coordinated on reducing the amount of propane in their tanks" in sales to Walmart, the giant retailer. More here.
According to FTC's complaint, "Blue Rhino and AmeriGas controlled approximately 80 percent of the market for wholesale propane exchange tanks in the United States. In 2008, Blue Rhino and AmeriGas each decided to implement a price increase by reducing the amount of propane in their exchange tanks from 17 pounds to 15 pounds, without a corresponding reduction in the wholesale price. In a statement, FTC Bureau of Competition director Deborah Feinstein called this "collusion" that "can lead to higher prices or lower quality."
Also, says the FTC: "Walmart, which purchased tanks from both Blue Rhino and AmeriGas, refused to accept the fill reduction. Faced with resistance from Walmart, Blue Rhino and AmeriGas colluded by secretly agreeing that neither would deviate from their proposal to reduce the fill level to Walmart. For a period of several months, sales executives from the two propane companies communicated repeatedly by telephone and email to apprise each other of the status of their discussions with Walmart and to work together to take the steps necessary to push Walmart to promptly accept the fill reduction. This secret agreement between Blue Rhino and AmeriGas had the effect of raising the price per pound of propane to Walmart, and likely to the ultimate consumers."
FTC voted 3-1 to approve the complaint, which the gas companies may challenge.