Getty Oil Company

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IN THE MATTER OF TEXACO INC. and GETIY OIL COMPANY CONSENT ORDER, ETC. IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT AND SEC. 7 OF THE CLAYTON ACT Docket 313Z Complaint, July 10, 1984-Decision, July 10, 1984 This Consent Oraer requires Texaco Inc., among other things, to divest within 12 months to a Commission-approved purchaser, all the Getty assets and properties listed in Schedule A (excluding the assets listed in Schedule C). Should Texaco fail to timely divest the Schedule A properties, a trustee appointed by the court or the Commission will have 18 months in which to effect divestiture of the remaining assets. Until such time as the specified properties have been divested, Texaco is required to maintain their viability and marketability, and hold them separate and apart in accordance with the terms and provisions set forth in the Order. Texaco is further required, for a period of ten years, to take the following actions: 1) vote its shares in favor of any proposal to increase the capacity or enhance the ability of the Colonial Pipeline Company to transport refined product north of Dorsey Junction, Maryland; 2) offer Getty customers using the Getty pipeline from Santa Fe Springs to Los Angeles in 1983 access to that pipeline under the 1983 terms and conditions; and 3) refrain from acquiring, without prior Commission approval, any concern engaged in the refining or wholesale distribution of gasoline or middle distilates in certain states or in transporting any petroleum product by pipeline in or into Colorado. Additionally, for a period of five years, Texaco is required to sell to customers of Getty in 1983 (excluding 10 major oil companies), and to other West Coast refiners, California crude oil of similar grade and quality to that sold in 1983 on the contractual terms listed in Schedule B. Appearances For the Commission: Marc G. Schildkraut. For the respondents: William C Weitzel, Jr. and C Benjamin Crisman, Jr. in-house counsel, White Plains, N. , for respondent Texaco Inc. and Jack Leone, Los Angeles, Ca., for respondent Getty Oil Co. COMPLAINT The Federal Trade Commission, having reason to believe that respondent, Texaco Inc., a corporation subject to the jurisdiction of the Federal Trade Commission, intends to acquire, or has acquired the stock or assets of respondent Getty Oil Company, in violation of Section 7 of the Clayton Act, as amended (15 U. c. 18), and Section 5 of the Federal Trade Commission Act, as amended (15 U. C. 45), and that a proceeding in respect thereof would be in the public interest hereby issues its complaint, pursuant to Section II ofthe Clayton Act g.

Complaint 104 F.

(15 V.s.C. 21) and Section 5(b) of the Federal Trade Commission Act (15 V.s. C. 45(b)), stating its charges as follows: I. Definitions I. For purposes of this complaint, the following definitions shall apply:

a. Texaco means Texaco Inc., its predecessors, subsidiaries, divisions, groups, affliate entities, and each oftheir past or present directors, offcers, employees, agents and representatives; and each partnership, joint venture, joint stock company or concession in which Texaco is a participant. The words subsidiary, affiliate and joint venture refer to any partial (10 percent or more) as well as total ownership or control.

b. Getty means Getty Oil Company, its predecessors, subsidiaries divisions, groups, affliate entities, and each of their past or present directors, offcers, employees, agents and representatives; and each partnership, joint venture, joint stock company or concession in which Getty is a participant. The words subsidiary, affiliate and joint venture refer to any partial (10 percent or more) as well as total ownership or control.

c. The acquisition means the transaction described, in whole or in part, in paragraph 14 of this Complaint.

d. Aviation gasoline means that product as defined in connection with Department of Energy Form EIA--lO, Monthly Refinery Report product code 111.

e. Gasoline means motor gasoline as defined in connection with Department of Energy Form EIA-81O, Monthly Refinery Report product codes 132 and 133.

f. Jet fuels means naptha-type and kerosene-type jet aircraft fuel as defined in connection with Form EIA--lO, Monthly Refinery Report, product codes 211 and 213.

Middle distillates means the products commonly known as number one fuel oil (kerosene), and number two fuel oil (home heating, diesel), as defined in connection with Department of Energy Form EIA--lO, Monthly Refinery Report, product codes 311 and 411. h. Refined light products means aviation gasoline, gasoline, jet fuels, and middle distillates.

i. Heavy crude oil means crude oil below 20 API gravity. j.

241 Complaint Terminal means a facility used for receipt, storage, and distribution of gasoline, middle distilates, or jet fuel, and which receives product directly via pipeline, navigable waterway or from an adjacent refinery.

II. Respondents A. Texaco 2. Respondent Texaco is a corporation organized and doing business under the laws of the state of Delaware with its executive offces at White Plains, New York.

3. Respondent Texaco is a fully integrated petroleum company, engaged in the exploration for and production of crude oil and natural gas, refining, the transportation of crude oil, natural gas and refined products, and the distribution and marketing of refined products and natural gas.

4. In 1982, respondent Texaco had revenues of about $48 billon assets of about $27 bilion, and net income of about $1.28 bilion. 5. In 1982, respondent Texaco ranked sixth in the Vnited States in crude oil production, eighth in domestic crude oil reserves, fifth in refining capacity, and fourth in gasoline sales. 6. Respondent Texaco has refineries located at Wilmington, California; Lawrenceville, Ilinois; Convent, Louisiana; Westvile, New Jersey; Port Arthur, Texas; Port Neches, Texas; Amarillo, Texas; El Paso, Texas; and Anacortes, Washington, with a combined refining capacity of 937 thousand barrels per day. In 1982, Texaco sold its refineries in West Tulsa, Oklahoma and shut down its refinery in Casper, Wyoming.

7. At all times relevant herein, respondent Texaco has been and is now engaged in commerce as Ilcommerce" is defined in Section 1 of the Clayton Act, as amended, 15 C. , and is a corporation whose business is in or affecting commerce as ucommerce'J is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 44.

B. Getty 8. Respondent Getty is a corporation organized and doing business under the laws of the state of Delaware with its executive offces at Los Angeles, California.

9. Respondent Getty is a fully integrated petroleum company, engaged in the exploration for and production of crude oil and natural gas, refining, the transportation of crude oil, natural gas and refined products, and the distribution and marketing of refined products and natural gas.

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Complaint 104 F.

10. In 1982, respondent Getty had revenues of about $12.3 billon assets of about $9.9 bilion, and net income of about $692 million. 11. In 1982, respondent Getty ranked 10th nationally in crude oil production, 6th in United States crude oil reserves, 18th in United States refining capacity, and 16th in United States motor gasoline sales.

12. Respondent Getty has refineries located at Bakersfield, California; Delaware City, Delaware; and El Dorado, Kansas, with a combined refining capacity of about 278 thousand barrels per day. 13. At all times relevant herein, respondent Getty has been and is now engaged in commerce as ucommerce" is defined in Section 1 of the Clayton Act, as amended, 15 U. C. 12, and is a corporation whose is defined inbusiness is in or affecting commerce as ttcommerce" Section 4 ofthe Federal Trade Commission Act, as amended, 15 U. 44.

III. The Acquisition 14. On January 9, 1984, Texaco commenced a tender offer for 35 percent of Getty voting securities with the intention of effectuating a follow-up merger for the remaining outstanding shares; and on January 6, 1984, Texaco and Getty entered into a merger agreement pursuant to which Getty granted Texaco an option to purchase authorized but unissued shares constituting approximately 10.2 percent of the total Getty shares that would be outstanding after such issuance. Further, on or about January 6, 1984, and January 8, 1984 Texaco entered into agreements to purchase voting securities constituting approximately 11.8 percent and 40.2 percent, respectively, of the outstanding Getty shares. The total value of the transaction is about $10.1 bilion and, if consummated, would result in the second largest petroleum company in the United States in terms of assets. IV. Trade and Commerce A. Manufacture of Refined Light Products in the Northeast United States 15. One relevant line of commerce in which to evaluate the effects of the acquisition is the manufacture of refined light products. 16. The relevant section of the country is the Northeast region composed of Maryland, Delaware, eastern Pennsylvania, New Jersey, eastern New York, Connecticut, Rhode Island, Massachusetts, New Hampshire, Vermont and Maine, and any submarket thereof. This relevant section of the country also includes the United States possesf'tho \Tl-rITln TEXACO lne. and GETIY OIL CO. 245 241 Complaint 17. The manufacture of refined light products in the relevant section of the country is moderately concentrated. 18. Respondents Texaco and Getty are actual competitors of each other and of other firms in the manufacture of refined light products in the relevant section of the country. Respondent Texaco owns a refinery in Westvile, New Jersey, that manufactures refined light products. Respondent Getty owns a refinery in Delaware City, Delaware, that manufactures refined light products. 19. Refineries in the Northeast region have a locational advantage over Gulf Coast refineries in the supply of refined light products to the relevant section of the country.

20. Refineries in the Gulf Coast area are unlikely to be able to expand substantially, and within a reasonable period of time, shipments of refined light products to the relevant section of the country on Colonial Pipeline due to the likelihood of capacity constraints on the pipeline.

21. Foreign imports of refined light product into the relevant section of the country are unlikely within a reasonahle period of time to provide substantial competition to the manufacturers of refined light product in the relevant section of the country. 22. Conditions of entry into the manufacture of refined light products in the relevant section of the country are diffcult. 23. Texaco s incentives concerning the level of prices and outputs of refined light products in the relevant section of the country are affected by Texaco s share of refining capacity in the Northeast region. Texaco s share of refined light product supply into the Northeast region, Texaco s ownership share of Colonial Pipeline, and Texaco level of shipments into the Northeast region on Colonial Pipeline. B. Transportation of Refined Light Products 24. One relevant line of commerce in which to evaluate the effects of the acquisition is long distance transportation of refined light petroleum products into consuming regions. Within this market, petroleum product pipelines represent another relevant line of commerce.

25. One relevant section of the country is the Northeast region composed of Maryland, Delaware, eastern Pennsylvania, New Jersey, eastern New York, Connecticut, Rhode Island, Massachusetts, New Hampshire, Vermont, and Maine.

26. Another relevant section of the country is the State of Colorado. 27. Transportation of refined petroleum products into the relevant sections of the country is highly concentrated. 28. Refinery capacity for refined light products in the State of 246 FEDERAL TRADE COMMISSION DECISIONb Complaint 104 F.

Colorado is not adequate to meet demand and substantial amounts of refined light products are transported into the State of Colorado. 29. There are four pipelines capable of transporting refined light products into the State of Colorado: The Wyco Pipe Line; The Medicine Bow Products Pipeline System; the Chase Pipe Line; and a pipeline owned by Philips and Diamond Shamrock that runs from Borger Texas, to Aurora, Colorado, near Denver.

30. The Wyco Pipe Line is jointly owned by Texaco (40 percent), Amoco (40 percent), and Mobil (20 percent). The South Line of the Wyco Pipe Line runs from Cheyenne, Wyoming, through Denver Colorado, and terminates in Colorado Springs, Colorado. 31. The Chase Pipe Line is owned by Getty (50 percent) and Koch Oil Company (50 percent). It runs from EI Dorado, Kansas to the Denver, Colorado area.

32. Texaco s incentives with respect to the level of tariffs on the Wyco Pipe Line and Chase Pipe Line are affected by Texaco s ownership share of pipelines capable of transporting refined light product into the State of Colorado.

33. Refinery capacity for refined light products in the Northeast region is not adequate to meet demand for refined light products in this relevant section of the country. The Colonial Pipeline is the dominant means of transporting additional refined light products into the Northeast region, supplying approximately 36.9 percent of total consumption of refined light products in the relevant section of the country in 1982. Four firms (Texaco, Gulf, Amoco, and CITGO Pipeline Investment Company) account for approximately 59.35 percent of ownership of the Colonial Pipeline. 34. Conditions of entry into the business of the transportation of refined light products by pipeline into the relevant sections of the country are diffcult.

35. Respondents Texaco and Getty are actual competitors of each other and of other firms in the transportation of refined light products in the Northeast region. Respondent Texaco holds an ownership share of about 14.3 percent of the Colonial Pipeline. Respondent Getty owns 100 percent of the Getty Eastern Products Pipeline. 36. Tariff rates on the Colonial Pipeline are set by action of the Colonial Board of Directors.

37. Texaco s incentives concerning the level of tariffs on the Colonial Pipeline and expansion of the Colonial Pipeline are affected by Texaco s ownership share of Colonial Pipeline, Texaco s level of shipments on the Colonial Pipeline, Texaco s refining capacity in the Northeast region, and Texaco s share of petroleum product supply in the Northeast region.

TEXACO INC. and GETTY OIL CO. 247 241 Complaint C. Marketing of Gasoline and Middle Distilate 38. One relevant line of commerce in which to evaluate the effects ofthe acquisition is the wholesale distribution of gasoline and middle distilate and submarkets thereof.

39. The relevant sections of the country are the areas served by terminal clusters in or near the following cities and areas: a. New Haven, Connecticut b. Portland, Maine c. New York City, New York d. the Delaware River Valley e. Providence, Rhode Island f. Colorado Springs, Colorado g. the Delmarva Peninsula.

40. The wholesale gasoline and middle distilate markets described in paragraphs 38 and 39 are concentrated with substantial shares of wholesale gasoline and middle distilate sales in each ofthe relevant sections ofthe country accounted for by respondents Texaco and Getty.

41. Conditions of entry into the wholesale distribution of gasoline and middle distilate are diffcult.

42. Respondents Texaco and Getty are actual competitors of each other and of other firms in the wholesale distribution of gasoline and middle distilate in the relevant sections ofthe country. The combination of Texaco and Getty would increase the levels of concentration and combine their shares in the relevant sections of the country. 43. Texaco s incentives concerning the level of prices and output of gasoline and middle distilate sold from terminals and the price of and access to available terminal facilities are affected by Texaco s share of terminal capacity within each terminal cluster. D. Sale, Transportation and Refining of California Heavy Crude Oil into Petroleum Products 44. One relevant line of commerce in which to evaluate the effects of the acquisition is the sale of heavy crude oil. 45. Another relevant line of commerce in which to evaluate the effects of the acquisition is the transportation of crude oil through pipelines including trunk lines and gathering lines. 46. For the sale and transportation of crude oil, one relevant section of the country is the State of California.

47. Another relevant line of commerce in which to evaluate the effects of the acquisition is the refining of crude oil into petroleum products.

48. For the refining of crude oil into petroleum products, one rele- ..

248 FEDERAL TRADE CUMIVH";:l1vi. Complaint 104 F.

vant section of the country is the West Coast of the United States, extending from the State of California to the State of Washington. 49. Concentration in the relevant markets is high and entry conditions are diffcult.

50. Both Getty and Texaco own refineries in the relevant market. Getty owns a refinery in Bakersfield, California. Texaco owns a refinery in Wilmington, California and Anacortes, Washington. 51. Getty produces substantially more heavy crude oil than it can refine on the West Coast.

52. Texaco produces substantially less heavy crude oil than it can refine on the West Coast.

53. Texaco owns and operates a proprietary pipeline system to gather heavy crude oil in the San Joaquin Valley of California. 54. tietty owns and operates a proprietary pipeline system that gathers heavy crude oil in the San Joaquin Valley and transports heavy crude oil from Bakersfield to the San Francisco area. 55. Texaco s West Coast refineries compete with the refineries of non-integrated refiners.

56. Texaco has an incentive to increase its refining of heavy crude oil and to lessen competition from non.integrated refiners. 57. The acquisition of Getty is likely to increase Texaco s incentives and abilty to deny non-integrated refiners heavy crude oil and access to proprietary pipelines.

V. Effects 58. The effect of the acquisition may be substantially to lessen competition or tend to create a monopoly in each ofthe relevant lines of commerce and relevant sections of the country in violation of Section 7 ofthe Clayton Act, as amended, 15 U. C. 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U. C. 45, in the following ways, among others:

a. actual competition between respondents Texaco and Getty in the relevant lines of commerce and relevant sections of the country wil be eliminated; and b. actual competition between competitors generally in the relevant lines of commerce and relevant sections of the country wil be lessened.

59. The effect of the acquisition may be substantially to lessen competition or tend to create a monopoly in the relevant lines of commerce and relevant sections ofthe country in violation of Section 7 of the Clayton Act, as amended, 15 U. C. 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U. C. 45, in the following additional ways, among others:

TEXACO INC. and GETTY OIL CO. 249 241 Complaint a. Texaco may have the incentive and ability to and may raise price levels and restrict output of refined light products from its Northeast region refining capacity because the acquisition increases Texaco share of refining capacity in and pipeline capacity into the Northeast region, and increases Texaco s sbare of refined light product supply in the Northeast region.

b. Texaco may be likely to support and secure a higher level of tariffs on the Colonial Pipeline and oppose expansion of the Pipeline because the acquisition increases Texaco s refining capacity in the Northeast, increases Texaco s share of petroleum product supply in the Northeast, and decreases Texaco s relative shipment requirements on the Colonial Pipeline.

c. Texaco may be likely to support and secure a higher level of tariffs on the Wyco Pipe Line and Chase Pipe Line because the acquisition increases Texaco s share of pipeline capacity in the State of Colorado and increases its share of refined light product supply in the State of Colorado.

d. Control by Texaco of Getty s marketing operations is likely to reduce price competition in gasoline and middle distilate marketing provided by Getty and by independent private brand marketers previously supplied by Getty in the relevant sections of the country. e. Texaco may have the incentive and ability to and may raise price levels and restrict output from gasoline and middle distilate terminals and raise the level of price and limit access to available terminal faciliies in certain terminal clusters because the acquisition wil increase Texaco s share of terminal capacity in these terminal clusters.

f. For reasons unrelated to the effcient use of resources, Texaco may have the incentives and ability to and may deny access to heavy crude oil and to proprietary pipeline transportation to non-integrated refiners, thereby increasing the diffculty of entry into West Coast refining, decreasing the competitive significance of non-integrated West Coast refiners, and increasing concentration in West Coast refining.

VI. Violation Charged 60. The proposed acquisition of the stock and assets of Getty by Texaco, as set forth II paragraph 14 herein, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 C. , and Section 5 ofthe Federal Trade Commission Act, as amended, 15 Commissioner Pertschuk dissented.45.

250 FEDERAL TRADE COML\1"01V-n Decision and Order 104 F. DECISION AND ORDER The FTC having initiated an investigation of the proposed acquisition of shares of Getty Oil Company ("Getty ) by Texaco Inc. ("Texaco ), and Texaco having been furnished with a copy of a draft complaint that the Bureau of Competition has presented to the Commission for its consideration, and which, if issued by the Commission would charge Texaco and Getty with violations of the Clayton Act and Federal Trade Commission Act; and Respondent Texaco, its attorneys, and counsel for the Commission having thereafer executed an agreement containing a consent order an admission by respondent Texaco of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Commission having considered the matter and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, and having duly considered the comments fied thereafter by interested persons pursuant to Section 2.34 of its Rules and the recommendation of its staff, and having concluded that the consent agreement should be modified along the Jines suggested by staff, with changes; and Respondent Texaco and complaint counsel having thereafter executed and submitted a revised agreen.ent containing consent order dated July 9 1984, containing modifications agreed to by the Commission; and The executed agreement dated July 9, 1984, as modified, containing the following consent order, an admission by respondent Texaco of all the jurisdictional facts set forth in the complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in the complaint, and waivers as required by the Commission s Rules;

Now in further conformity with the procedure prescribed in Section 34 of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following order: 1. Respondent Texaco Inc. is a corporation organized, existing and doing business under and by the virtue of the laws of Delaware with its executive offce located at 2000 Westchester A venue, White Plains New York.

2. Respondent Getty Oil Company, a wholly owned subsidiary of 241 Decision- and Order Texaco, is a corporation organized and doing business under and by virtue of the laws of Delaware, with its executive offce at 3810 Wilshire Boulevard, Los Angeles, California.

3. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER As used in this order the following definitions shall apply: (a) the Acquisition means Texaco s acquisition ofthe common stock of Getty.

(b) Schedule A Properties means the assets and businesses listed in Schedule A of this Order.

(c) Getty means Getty Oil Company, as it was constituted prior to the acquisition, including its parents, predecessors, subsidiaries, divisions, groups, affliate entities, and their directors, offcers, employees, agents and representatives, and their successors and assigns. (d) Texaco means Texaco nc., its predecessors, subsidiaries, divisions, groups, affliate entities, and their directors, offcers, employees, agents and representatives, and their successors and assigns. II.

It is ordered That:

(A) Within 12 months of the date of service of this order, Texaco shall divest, absolutely and in good faith, the Schedule A properties. (B) Divestiture of the Schedule A properties shall be made only to an acquirer or acquirers, and only in a manner, that receive the prior approval ofthe Federal Trade Commission. The purpose ofthe divestiture of the Schedule A properties is to ensure the continuation of the assets as ongoing, viable enterprises, engaged in the same business in which the properties are presently employed and to remedy the lessening of competition resulting from the Acquisition as alleged in the Commission s complaint.

(C) If Texaco has not divested the Schedule A properties within the 12-month period, Texaco shall consent to the appointment of a trustee in any action that the Federal Trade Commission may bring pursuant to Section 5(1 of the Federal Trade Commission Act, 15 V. C. 45(1, or any other statute enforced by the Commission. In the event the court declines to appoint a trustee, Texaco shall consent to the ap- Decision and Order 104 F. pointment of a trustee by the Commission pursuant to this order. The appointment of a trustee shall not preclude the Commission from seeking civil penalties and other relief available to it for any failure by Texaco to comply with paragraphs lI(C) through IX of this order. (DJ If a trustee is appointed by a court or the Commission pursuant to Paragraph lI(C) ofthis order, Texaco shall consent to the following terms and conditions regarding the trustee s duties and responsibilities:

1. The Commission shall select the trustee, subject to Texaco s consent, which shall not be unreasonably withheld. The trustee shall be a person with experience and expertise in acquisitions and divestitures.

2. The trustee shall have the power and authority to divest any Schedule A properties that have not been divested by Texaco within the time period for divestiture in paragraph lI(A). The trustee shall have 18 months from the date of appointment to accomplish the divestiture, which shall be subject to the prior approval of the Commission and ifthe trustee was appointed by a court, subject also to the prior approval of the court. If, however, at the end of the 18-month period the trustee has submitted a plan of divestiture or believes that divestiture can be achieved within a reasonable time, the divestiture period may be extended by the Commission or by the court, if the trustee was appointed by a court.

3. The trustee shall have full and complete access to the personnel books, records and facilities of any business that the trustee has the duty to divest, and Texaco shall develop such financial or other information relevant to the assets to be divested as such trustee may reasonably request. Texaco shall cooperate with the trustee, and shall take no action to interfere with or impede the trustee s accomplishment of the divestiture.

4. The power and authority ofthe trustee to divest shall be at the most favorable price and terms available consistent with the order absolute and unconditional obligation to divest and the purposes of the divestiture as stated in paragraph lI(E). 5. The trustee shall serve at the cost and expense of Texaco on such reasonable and customary terms and conditions as the Commission or a court may set. The trustee shall account for all monies derived from the sale and all expenses incurred. After approval by the court or the Commission ofthe account ofthe trustee, including fees for his or her services, all remaining monies shall be paid to Texaco and the trusts power shall be terminated. The trustee s compensation shall be based at least in significant part on a commission arrangement contingent on the trustee divesting the trust property. 241 Decision and Order 6. Promptly upon appointment of the trustee and subject to the approval of the Commission, Texaco shall, subject to the Commission s prior approval and consistent with provisions of this order execute a trust agreement that transfers to the trustee all rights and powers necessary to permit the trustee to cause divestiture. 7. If the trustee ceases to act or fails to act dilgently, a substitute trustee shall be appointed.

8. The trustee shall report in writing to Texaco and the Commission every sixty (60) days concerning the trustee s efforts to accomplish divestiture.

(E) Texaco shall maintain the viability and marketabilty of the Schedule A properties and shall not cause or permit the destruction removal or impairment of any assets or businesses to be divested except in the ordinary course of business and except for ordinary wear and tear.

(F) Until such time as the Schedule A(1) assets have been divested Texaco shall continue to hold the Getty assets in Schedule A(l) separate and apart in a subsidiary or subdivision on the following terms and conditions:

1. Texaco shall not exercise direction or control over, or influence directly or indirectly, the day-to-day operations or personnel of the subsidiary or subdivision except as necessary to comply with this order;

2. Except as required by law and except to the extent that necessary information is exchanged in the course of evaluating the Acquisition defending litigation or negotiating agreements to dispose of assets Texaco shall not have access to any material confidential information relating to the subsidiary s or subdivision s operations not in the public domain. !!Material confidential information" as used herein means competitively sensitive or proprietary information not independently known to Texaco from sources other than from the subsidiary or subdivision, and includes, but is not limited to, customer lists, price lists, price information, price zones, marketing methods, patents technologies, processes, or other trade secrets. (G) Until such time as the Schedule A(2)(a) or (b) assets have been divested, Texaco shall not exercise direction or control over, influence directly or indirectly, or exercise any voting rights with respect to the v.yco Pipe Line.

II.

It is further ordered That, within (60) days after the date of service of this order, and every sixty (60) days thereafter unti Texaco has Decision and Order 104 F. fully complied with the provisions of Paragraph II ofthis order, Texaco shall submit to the Federal Trade Commission a verified written report setting forth in detail the manner and form in which it intends to comply, is complying with, or has complied with that provision. Texaco shall include in compliance reports, among other things that are required from time to time, a full description of contacts or negotiations for the divestiture of properties specified in paragraph II of this order, including the identity of all parties contacted. Texaco also shall include in its compliance reports copies of all written communications to and from such parties, and all internal memoranda, reports, and recommendations concerning divestiture. IV.

It is further ordered That, for ten (10) years following the date that this order shall become final, Texaco shall support, vote in favor of and take no action to impede any and all proposals and actions (including placing the matter on agenda for discussion, study proposals feasibility studies, or engineering studies) that have been made or supported by any owner of an interest in the Colonial Pipeline Company to expand, extend, or otherwise increase the capacity ofthe Colonial Pipeline north of Dorsey Junction, Maryland or otherwise to increase or enhance the ability of the Colonial Pipeline to transport refined product north of Dorsey Junction, Maryland. It is further ordered That Texaco sell California crude oil of similar grade and quality to that sold by Getty in 1983 to each Eligible Purchaser in accordance with the terms and conditions listed in Schedule VI.

It is further ordered That, for ten (10) years following the date that this order shall become final, Texaco shall offer access to Getty pipeline from Santa Fe Springs to Los Angeles to any Getty customer using the pipeline in 1983 in accordance with the terms and conditions in effect in 1983. Transportation fees shall be the fees levied for Getty s most recent arrangement in effect in December 1983 for comparable transportation, adjusted for the "Fuels and Related Products and Power Index " as published in "Producer Prices and Price Index S. Department of Labor, Bureau of Labor Statistics. Any disputes between Texaco and any customer shall be settled by arbitration. If 241 Decision and Order the parties are unable to agree on an arbitrator, the dispute shall be settled pursuant to the Commercial Arbitration Rules of the American Arbitration Association. The decision of the arbitrator shail be final and binding upon the parties and judgment thereupon may be entered in any court of competent jurisdiction. A violation by Texaco of any order of the arbitrator shall be a violation of this order. VII.

It is further ordered, That for a period commencing on the date of servce of this order and continuing for ten (10) years from and after the date of service of this order, Texaco shall cease and desist from acquiring, without the prior approval of the Federal Trade Commission, directly or indirectly, through subsidiaries or otherwise, assets used or previously used in (and stil suitable for use in), any interest , or the whole or any part of the stock, or share capital of any company that is engaged in:

(A) refining or the wholesale distribution of gasoline or middle distilates (including terminals and bulk plants) in Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut New York, New Jersey, Pennsylvania, Delaware, Maryland, West Virginia, or the District of Columbia; or (B) any petroleum product pipeline transportation in or into Colorado.

Provided, however these prohibitions shall not relate to the construction of new facilities or participation in joint ventures in which Texaco is a participant on the date of service of the order. One year from the date of service of this order and annually thereafter Texaco shall fie with the Commission a verified written report of its compliance with this paragraph.

VII For the purpose of determining or securing compliance with this order, and subject to any legally recognized privilege, upon written request and on reasonable notice to Texaco made to its principal offce, Texaco shall permit any duly authorized representatives ofthe Commission:

(A) Access during the offce hours in the presence of counsel, to inspect and copy all books, ledgers, accounts, correspondence, memoranda, and other records and documents in the possession or under the control of Texaco relating to any matters contained in this order; and , Decision and Order 104 F. (B) Upon five days notice to Texaco and without restraint or interference from them, to interview offcers or employees of respondents who may have counsel present, regarding any such matters. IX.

It is further ordered That Texaco notify the Commission at least thirty (30) days prior to any proposed change in the corporation such as dissolution, assignment or sale resulting in the emergence of a successo corporation, the creation or dissolution of subsidiaries or any other change that may affect compliance obligations arising out of the order.

Commissioner Pertschuk dissented.

Schedule A Schedule of Assets and Operations 1. Getty s petroleum-related assets, including the "Getty" brand name Getty trademark, and product inventories located in Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland, West Virginia, and the District of Columbia, other than the Getty refinery located in Delaware and the Getty inventories, crude handling facility, product pipeline, and terminal connected to the refinery, and 30 of the properties listed in Schedule C. Texaco s terminal facility near Salisbury, Maryland. Texaco s Eagle Point Refinery (Westville, N. ), including any crude haridling facilities, terminals inventories, or wholly-owned pipelines connected to the refinery. (The assets in this Paragraph, A(1), need not be divested as one package unless the Commission should so require in accordance with the terms of Paragraph II B of this Order. 2. Either a. Texaco s interest in the Wyco Pipe Line, or b. The Getty Refining and Marketing Company s EI Dorado, Kansas refinery and inventories, as web as related feedstock pipelines and terminals including Getty interest in the Conway, Kansas storage facility and related terminals and pipelines; Osage Pipeline Co.; Boyer terminal, the Oklahoma-Kansas portion of Getty Pipeline Inc. and Getty Crude Gathering, Inc.; the Cushing Crude Terminal; and the natural gas pipeline serving the refinery owned by Getty Gas Gathering, Inc. In addition, the Getty Refining and Marketing Company s marketing, sales and transportation assets, inventories, and the "Skelly" and "Surfeo" brand names and trademarks for use in the sale of gasoline and middle distilate, in: Colorado, Ilinois, Indiana, Iowa, Kansas, Minnesota, Michigan, Missouri, Nebraska, North Dakota, Oklahoma, South Dakota, Wisconsin, Wyoming and Texas and Getty s ownership interest in the Chase Transportation Company and the Chase Terminal Co. and any other product pipelines connected to the EI Dorado refinery.

241 Decision and Order Schedule B Terms and Conditions 1. Eligible Purchasers-Texaco shall offer California crude oil on the contractual terms and conditions set out below, to the following entities: (a) all purchasers of California crude oil from Getty in 1983 except Atlantic Richfield Co., British Petroleum Co., Chevron USA Inc., Exxon Co., Gulf Oil Co., Mobil Oil Corp. Philips Petroleum Co., Shell Oil Co., Standard Oil Co. (Ohio), and Union Oil Co. and each of their affliates, including affliates acquired in whole or in part after the date that this order shall become final ("Excluded Companies (b) entities other than Excluded Companies that acquired Getty California crude oil (including crude oil obtained by Getty through production, acquisition or exchange) during 1983 from an Excluded Company under a contract of three months or more in duration (For the purposes of this provision and Paragraph B(5)(b), the acquisition of Getty California crude oil by an entity shall include any contractual arrangement for the receipt of a net volume of crude oil that confers on such entity the right to receive or to direct the sale, exchange or other disposition of Getty California crude oil to or by or through another);

(c) entities that have refineries located in P ADD V and that had a total refining capacity worldwide of less than 100 000 barrels/day in December 1983. Notwithstanding such offer Texaco and any Eligible Purchaser may agree to other terms and conditions.

2. Term-From the date of termination of the contract on which Texaco s supply obligation is based or from 45 days after the date that this Order shall become final if no contract exists, until July 1 , 1989, or such shorter term desired by the Eligible Purchaser.

3. Price- The maximum price shall be determined as follows: (a) The arithmetic average ofthe prices posted for crude oil in the field where posted by any company that produced during the previous calendar year not less than 25 000 barrels/day of the crude oil produced in the state of California. Provided, however that Texaco s posting shall not account for more than 25 percent in the average price. (b) Ifone or more of the posters in a field, satisfying the criteria in Paragraph B(3)(a), above, except Texaco, shall post a price for crude oil in that field higher than the average for a period of at least ninety (90) consecutive days, then, commencing on the 91st day, the price shall be the highest price so posted for more than ninety (90) consecutive days. This price shall remain in effect so long as it remains highest. Thereafter the price shall revert to the price as determined by subparagraph (a). (c) If there is no posted price for a crude oil in a field from which crude oil is sold the price for that crude oil shall be the price determined in accordance with subparagraph (a) for similar crude oil from the nearest field in California, with adjustment for gravity in accordance with prevailing practice in the industry at the time and place. 4. DeliveryIf appropriate based on the location of the crude oil and the desired destination of the Eligible Purchaser, through Getty s or Texaco s existing pipelines (directly or through normal and customary accommodations with competitors' pipeline transportation systems to the extent Getty. or Texaco engaged in such accommodations in their past course of dealings and to the extent such accommodations remain available to Texaco) on conditions similar to conditions in December 1983. Transportation fees shall be the fees levied for Getty s most recent anangement in effect in December 1983 for comparable transportation, adjusted for the "Fuels and Related Products and Power Index " as published in "Producer Prices and Price Index " U.S. Department of Labor, Bureau of Labor Statistics. Provided, however that the fees may include a Decision and Order 104 F. reasonable return on any new investment to expand the capacity or extend the length of the pipelines.

5. Volume per year- (a) 'l'exacoshall offer to each Eligible Purchaser under Paragraph B(lXa) the percentage set out in Paragraph B(5)(d) of the volume of California crude oil such purchaser acquired from Getty in 1983.

(b) Texaco shall offer to each Eligible Purchaser under Paragraph B(l)(b) the percentage set out in Paragraph B(5)(d) of the volurre of Getty California crude oil such purchaser acquired from any Excluded Company in 1983. Provided, however that Texaco may provide such volume under an existing contract to the extent the Eligible Purchaser has contracted with Texaco for net purchases of California crude oil. In the event of any such contract, Texaco shall offer to rescind such contract and substitute therefor a new contract pursuant to this order. (c) If any Eligible Purchaser under Paragraph (B)(I)(a) and B(1)(b) should take less than the volume of crude oil that Texaco is required to offer, the Eligible Purchaser future rights are proportionally reduced but Texaco shall make the volume not taken available for sale, under the terms and conditions set out herein, to Eligible Purchasers under Paragraph B(I)(c). Provided, however Texaco shall not be required to prorate among all such Eligible Purchasers but may sell to anyone or more of them so long as such volume is sold.

(d) In each year, Texaco shall apply the following percentage to determine the volume it must offer to each Eligible Purchaser under Paragraphs B(5)(a) and (bJ: 1984 - 81 percent 1985 - 83 percent 1986 - 86 percent 1987 - 90 percent 1988 - 100 percent 1989 - 100 percent.

6. Exchanges and Buy-Sell Arrangementa-Texaco shall have no obligation to ofter crude oil under Paragraph V and Schedule B of this order for any volume of crude oil acquired in 1983 from Getty or an Excluded Company through an exchange or buy-sell arrangement to the extent that no net sale of crude oil occurred. 7. Resale-Texaco shall not condition any sale under this order on any requirement for resale or exchange of any crude oil. Provided, however that the parties may agee to exchanges or buy-sell arrangements that facilitate the delivery of crude oil and do not diminish the net volume sold, subject to normal pipeline differentials and volume allowances.

8. Practicality- Texaco shall not be required to deliver crude oil to the extent that Getty s production ha."i ceased or been reduced in the course of normal operations below its 1983 level in California. Provided, however any volumes not sold because production has ceased or been reduced shall be sold to the Eligible Purchaser on the same terms and conditions when production recommences, even after July 1, 1989. 9. Arbitration-Any dispute between Texaco and any party with a claim under Paragraph V and Schedule B of this order shall be settled by arbitration. In any case where the application of the terms of Paragraph V and Schedule B is not clear, the arbitrator shall resolve disputes in a manner that satisfies the objectives of this order. If the parties are unable to agree on an arbitrator within thirty (30) days, the dispute shall be settled pursuant to the Commercial Arbitration Rules and the procedures of the American Arbitration Association. The decision of the arbitrator shall be final and binding upon the parties and judgment thereupon may be entered in any court of competent jurisdiction. A violation by Texaco of any order of the arbitrator shaU be a violation of this order.

241 Decision and Order 10. Other-The contract will be subject to force majeure and other customary terms to he negotiated, consistent with terms customary in the industry, including customary credit terms consistent with the terms that would be available to the Eligible Purchaser in an arm length purchase of crude oil. The contract may be subject to prospective prorationing to compensate for inconsistent arbitration decisions or arbitration awards for past violations of this order that would require Texaco to sell more than 100 percent of the volume that Texaco is required and has committed to sell under this order. Schedule GETTY NORTHEAST PROPERTIES Withheld Properties 1. Massachusett 1 Powder Mil Rd. c/o Maynar, MA. 1060 Old Conn. Path c/o Framingham, MA. 221 Main St. c/o Gardner, MA. 245 N. Main St. c/o Randolph, MA. 609 Park Ave. c/o Worcester, MA. 671 Waahingtn St. colll Quincy, MA. 437 High Plain St. Walpole MA. 835 RokdaleAve. c/o New Bedford, MA. 150PlymouthAve. c/o Fall River, MA. 10. 964 Boylston St. c/o Newtn MA. 11. 346 Sea St. Quincy, MA. 12. Connecticut 156, Boston Post Rd. co/LL Waterford, CT. 13. Rhode Island 33 Jefferson Blvd. c/o Warwick, R.I. 14. 1307Posted. c/o Warick; R.I. 15. 1669WarickAve. c/o Warck, RI. 16. 722 Wilett Ave. c/o E. Providence, R.I. 17. 495 Tower Hil Rd. c/o E. Kingston, RI. 18. 2501 W. Shore Rd. Warick, RI. 19. New York 1128E. GunHilRd. colll Bronx, N.Y. 20. 1133 Jerome Ave. Bronx 21. 1740JeromeAve. Bronx 22. 1881 Forest Ave. c/o Staten Island, N. 23. 1124FirstAve. NewYork 24. 1981 Ocean Ave. Brooklyn, N. 25. 920 Hylan Blvd. Staten Island, N. 26. 15 College Pt. Blvd. New York, N.Y. 27. 1521OthAve. NewYork 28. 571 Coney Island Ave. Brooklyn, N. 29. New Jersey 350 Preakness Ave. c/o Paterson, N. 30. Rt. 30. McLean Blvd. c/o Paterson, N. 31. 132 Rt. 46 c/o Budd Lake, N. 32. Rt. 9 & Locnst St. c/o Lakewood, N. 33. Rt. 88 (South Side) c/o Bricktown, N. 34. 551 W. FrontSt. c/o Plainfield, N. 35. 1650 LincolnHwy (Rt. 27) c/o EdisonTwnp. Decision and Order 104 F. 36. 1121 St. George Ave. Woodbridge, N.J. 37. Sicklervlle & AndrewsRr. co/LL Winslow Twp.

38. 2031 Rt. 22 (Westbd) cafLL Union, N.J. 39. White Horse Pk & Franklin colll Berlin, N.

48 French St. colll New Brunswick 41. Rt. 130& Wilow Dr. Cinnaminson, N. 42. County Line Rd. JacksonTw. 43. DelseaDrive Deptford Park, N. 44. Rt. 20 Nortb Lib Paterson, N. 45. Rt. 35 & Poole Ave. Lib Haz1et 46. Rt. 22(East) Lib Hilside, N. 47. Middlesex & Main St. Lib Metuchen, N. 48. 2352 Morris Ave. cia Union 49. Egg. Harbor Rd. c/o Washingtn, N. 50. 738 Cedar Lane Teaneck, N. 51. 2284 Rt. #4 c/o Fort Lee, N. 52. Pennsylvania Hunt Pk & Clearfield cia Philadelphia, PA. 53. 6900 Frankford Rd. c/o Phitadelphia, PA. 54. Rt. 29 & Chestnut St. c/o Emmons, PA. 55. 3024 New Rogers Rd. cia BristoITwnp., PA. 56. Albright& Tilghman cia Allentown, PA. 57. 202& P.A. Trnpk. cia King of Prussia, P A. 58. BustJeton & Buck Rds. cia Feastervile. PA. 9. Maryland 121 South Bond 51. c/o Bel Air, MD. 60. 149 Back River Rd. cia Baltimore, MD. 61. Oaklelgh Rd. Parkvile, MD. TEXACO 1NC. and GETrY OIL CO. 261 241 Dissenting Statement DISSENTING STATEMENT OF COMMISSIONER PERTSCHUK Contrary to what appears to be prevailing Commission policy, Congress did not direct the antitrust agencies to strain the seams of the consent agreement-partial divestiture process to preserve massive mergers. We could have sued to enjoin this acquisition and we should have.

The final order as adopted by the majority has two major flaws. It fails to remedy a major competitive problem concerning independent refiners in California and instead creates a highly regulatory, incredibly complex and temporary crude supply program. Second, it fails to incorporate safeguards recently included in the BocallGulf agree. ment and, therefore, risks the ultimate unsuccessful divestiture and closing of assets which must be spun off under the order. (49 FR 23812 June 7, 1984) The staffs theory concerning the west coast crude oil market is that Getty has been the largest supplier of heavy crude oil to non-integrated refiners in California. Texaco does not have the same incentives as Getty to supply independent refiners, in large part because of the Windfall Profits Tax, and, therefore, is more likely to divert crude to its own refinery system. Such a diversion would endanger the long run viabiliy of refiners there and provide a means and added incentive for Texaco to attempt to acquire them at distress prices. The Commission accepts this theory but opts for the inadequate remedy of requiring Texaco to supply crude oil for five years to independent refiners. This crude allocation scheme has become more complex between the initial and final versioris of the order because of new questions about how to calculate price, volume, and related terms such as transportation and credit. The staff has done a good job under the circumstances in constructing a complex system which attempts to be fair, but the resulting scheme is incredibly complex and uncertain, as indicated by the fact that its features were stil being revised and new problems discovered even within the last few days. According to staff, Texaco itself argued in negotiations that it foresaw the possibilty of large numbers of disputes and that the resolution of them might take 100 years." As the Deputy Director of the Bureau of Economics argues, for the FTC to recreate the Petroleum Entitlements Program when the agency has consistently challenged the regulatory actions of other agencies is inappropriate.! Moreover, the 1 It is frequent Commission practicefor an individual Commissioner to state publicly the theories and findings of staff in explaining his or her decision on a Commission decision if no confidential commercial! information is disc101!d. Nevertheless, the General Counsel recently prepared a memorandum interpreting OUf confidentiality rules as forbidding any individual CommissiODcr from stating p..blic!y any staff arguments or conclusions prepared to aid Commission deliberations unless a majority of thl! Commis. ion agrees. Needless to ssy, this sweeping interpretation would mean that the majority could pick and choose which staITfindings an individual Commissioner could disclosc. Thus, it provides ample opportunity for suppression ofdis.enting viows as well as making the (footnote cont'dJ g., ._ 262 FEDERAL TRADE CUM!\'1""'vn Dissenting Statement 104 F. majority s confident reliance on only a five year requirement is speculative and may well prove inadequate.

The second problem is that the order does not include the safeaccepted SocallGulfguards that were built into the provisionally order, in particular, holding the two companies separate until the proposed divestitures are approved and providing for additional assets, including crude oil, to be divested in order to insure spun off assets remain viable. The staff makes an argument that the concerns that necessitated the safeguards in SocallGulf are not applicable here. I disagree. The general proposition that was recognized in SocaliGulfwas that divestiture of oil company assets, particularly refineries, may not result in viable entities. One way to ensure these divestitures are successful is to include additional assets, such as "crude oil supply, in the divestiture package, and to hold the merging companies separate-and in effect retan the option to challenge the underlying transaction-if the divestitures prove to be unworkable. The Commission justifiably claimed that the SocallGulfagreement was a major improvement over prior partial divestiture orders. But now, without any real ground for treating this agreement differently, it refuses to adopt the SocallGulf approach. The risk of unsuccessful divestitures arose most clearly in the case of the two refineries- Eagle Point and EI Dorado. In the case ofthe EI Dorado refinery, the Commission purports to have solved the problem of preserving it by allowing Texaco to retain it, along with pipeline and other assets, and instead divest its interest in the Wyco pipeline. Originally, staff says, the inclusion ofthe EI Dorado refinery in the divestiture package with the Chase pipeline was justified on the grounds that this pipeline divestiture would not be viable without a refinery. It is not entirely clear why now the Wyco pipeline interest can be divested alone, but no additional assets are needed to insure viabilty. As for Eagle Point the Commission hopes for the best.

Given that the Commission has not included any special safeguards in this order, it is enlightening to review the administration s response to Congressional consideration of H.R. 5452, introduced by Congressman Florio, which would insure that an oil company merger did not become final until the divestitures were approved. The Justice Department opposed this bil, arguing: "its basic goals. . . are fully protected by existing procedures. . . . If a hold separate order is required pending any given divestiture, it can be obtained through procss ofCommiBSioners communcating with the public about what the agency is doing and thnking extremely cumbersome. The General Counsel's opinion has fortwlIteJy never been adopted by the Commsson. It is impr8cti" ca, contrary to pastpradice 8ld highly inadvisable. I decline to fonow it- 2 See, e. the Comments of Calforna Attorney General John K. Van de Kamp (Comment No. 283) and independent refiner comments (No. 228, 236, 237, 240, 263). 3 Similar legislation was introduced in the Seate by Senator Ka8Sbaum. TEXACO INC. and GET OIL CO. 263 241 Dissenting Statement consent or litigation."4 Thus, we have the spectacle of the FTC failng to include safeguards in one merger order that it said were necessary in a similar case weeks ago, while the Justice Department opposes additional legislation on the grounds that the antitrust agencies can obtain these safeguards through existing procedures. Conclusion The error of the majority in this case has been to accept too readily the presumption that, whatever we do, the basic transaction must be preserved. As a result, we have accepted an extremely complex and uncertain partial divestiture plan along with a temporary and highly regulatory crude oil entitlements program. I continue to believe the Commission would have been more faithful to the Congressional intent behind Section 7 of the Clayton Act by seekig to enjoin this merger.

4 Letter from Robert A. McCormell, Asistat Attorney Genera! for Legislative Affair, to Congressman James J- Florio, June 13, 1984, p.

Modifying Order 104 F.