Skip to Content

Notice

Pilot Corporation, Propeller Corp., and Flying J Inc.; Analysis of Proposed Agreement Containing Consent Orders to Aid Public Comment

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble

AGENCY:

Federal Trade Commission.

ACTION:

Proposed Consent Agreement.

SUMMARY:

The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the draft complaint and the terms of the consent order — embodied in the consent agreement — that would settle these allegations.

DATES:

Comments must be received on or before July 30, 2010.

ADDRESSES:

Interested parties are invited to submit written comments electronically or in paper form. Comments should refer to “Pilot-Flying J, File No. 091 0125” to facilitate the organization of comments. Please note that your comment — including your name and your state — will be placed on the public record of this proceeding, including on the publicly accessible FTC website, at (http://www.ftc.gov/​os/​publiccomments.shtm).

Because comments will be made public, they should not include any sensitive personal information, such as an individual’s Social Security Number; date of birth; driver’s license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. Comments also should not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, comments should not include any “[t]rade secret or any commercial or financial information which is obtained from any person and which is privileged or confidential. . . .,” as provided in Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule 4.9(c), 16 CFR 4.9(c).1

Because paper mail addressed to the FTC is subject to delay due to heightened security screening, please consider submitting your comments in electronic form. Comments filed in electronic form should be submitted by using the following weblink: (https://public.commentworks.com/​ftc/​pilot-flyingj) and following the instructions on the web-based form. To ensure that the Commission considers an electronic comment, you must file it on the web-based form at the weblink: (https://public.commentworks.com/​ftc/​pilot-flyingj). If this Notice appears at (http://www.regulations.gov/​search/​index.jsp), you may also file an electronic comment through that website. The Commission will consider all comments that regulations.gov forwards to it. You may also visit the FTC website at (http://www.ftc.gov/​) to read the Notice and the news release describing it.

A comment filed in paper form should include the “Pilot-Flying J, File No. 091 0125” reference both in the text and on the envelope, and should be mailed or delivered to the following Start Printed Page 39018address: Federal Trade Commission, Office of the Secretary, Room H-135 (Annex D), 600 Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

The Federal Trade Commission Act (“FTC Act”) and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives, whether filed in paper or electronic form. Comments received will be available to the public on the FTC website, to the extent practicable, at (http://www.ftc.gov/​os/​publiccomments.shtm). As a matter of discretion, the Commission makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC website. More information, including routine uses permitted by the Privacy Act, may be found in the FTC’s privacy policy, at (http://www.ftc.gov/​ftc/​privacy.shtm).

Start Further Info

FOR FURTHER INFORMATION CONTACT:

Mary N. Lehner (202-326-3744), Bureau of Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Pursuant to section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and § 2.34 the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for June 30, 2010), on the World Wide Web, at (http://www.ftc.gov/​os/​actions.shtm). A paper copy can be obtained from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, either in person or by calling (202) 326-2222.

Public comments are invited, and may be filed with the Commission in either paper or electronic form. All comments should be filed as prescribed in the ADDRESSES section above, and must be received on or before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

The Federal Trade Commission has accepted for public comment, subject to final approval, an Agreement Containing Consent Orders (“Consent Agreement”) from Pilot Corporation and Propeller Corp. (collectively, “Pilot”), and Flying J Inc. (Pilot and Flying J Inc., collectively, “Respondents”). Pursuant to agreements dated December 18, 2009, Pilot intends to acquire the interests and assets of Flying J Inc.’s travel center and related businesses for approximately $1.8 billion (the “acquisition”). The Commission’s Complaint alleges that the acquisition, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, by removing actual, direct, and substantial competition between Pilot and Flying J and increasing the likelihood that Pilot will exercise market power unilaterally. The proposed Consent Agreement would resolve the competitive concerns from the acquisition by requiring the divestiture of 26 travel centers to Love’s Travel Stops and Country Stores. The divestiture will make Love’s a stronger competitor and replace competition weakened by the acquisition.

The proposed Consent Agreement has been placed on the public record for thirty (30) days to solicit comments from interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will review the proposed Consent Agreement again and the comments received, and decide whether it should withdraw from the Consent Agreement or make it final.

The sole purpose of this analysis is to facilitate public comment on the Consent Agreement. The analysis does not constitute an official interpretation of the Consent Agreement or the proposed Decision and Order (“Order”), nor does the analysis modify their terms in any way.

I. Respondents and Other Relevant Entities

A. Pilot and Propeller

Pilot Travel Centers LLC is the largest travel center operator in the United States. Pilot Travel Centers LLC is a privately held, for-profit limited liability company and is controlled equally by Pilot Corporation and Propeller Corp.

Respondent Pilot Corporation holds 52.5 percent of the non-corporate interests of Pilot Travel Centers LLC and a right to 50 percent representation on Pilot Travel Centers LLC’s Board of Managers. Pilot Corporation is a privately held, for-profit corporation.

Respondent Propeller Corp. holds 47.5 percent of the non-corporate interests of Pilot Travel Centers LLC and a right to 50 percent representation on Pilot Travel Centers LLC’s Board of Managers. Propeller Corp. is a for-profit corporation, privately held in its entirety by five stockholders managed by CVC European Equity V Limited and three stockholders managed by CVC European Equity Tandem Fund Limited.

B. Flying J

Respondent Flying J Inc., a privately held, for-profit corporation, is a fully integrated oil company with operations throughout the United States and Canada. Flying J Inc. owns and operates, among other things, travel center, trucking, fuel card, and related businesses. Flying J Inc., its wholly-owned subsidiary, and wholly-owned subsidiaries of ConocoPhillips jointly control the CFJ Entities.

The CFJ Entities own Flying J-branded travel centers operated by Flying J Inc. in 36 U.S. states. It is jointly controlled by Flying J Inc., its wholly-owned subsidiary, and wholly-owned subsidiaries of ConocoPhillips. The CFJ Entities consist of: (1) CFJ Properties, a general partnership that is 50% owned by wholly-owned subsidiaries of ConocoPhillips and 50% owned by a wholly-owned subsidiary of Flying J Inc.; (2) CFJ I Management Inc., CFJ II Management Inc., and CFJ III Management Inc. (“CFJ Management Companies”), each of which is 50% owned by a wholly-owned subsidiary of ConocoPhillips and 50% owned by Flying J Inc.; and (3) CFJ Plaza Company I LLC, CFJ Plaza Company II LLC, and CFJ Plaza Company III LLC, each of which is 49.5% owned by a wholly-owned subsidiary of ConocoPhillips, 49.5% owned by Flying J Inc., and 1% owned by its corresponding CFJ Management Company.

II. The Proposed Complaint

Pilot’s acquisition of Flying J presents substantial antitrust concerns in the market for over-the-road sale of diesel to long-haul fleets by national travel center operators in the contiguous United States. Travel centers provide locations for long-haul trucks to fuel and serve as the long-haul driver’s home away from home, offering amenities including parking for tractor-trailers, truck service centers, truck washes, certified Start Printed Page 39019automated truck scales, fast food restaurants, shower facilities, internet access, and financial services for drivers. Four travel center operators - Pilot, Flying J, TravelCenters of America (“TA”), and Love’s (collectively, “national travel center operators”) - have the scale and scope to compete for any substantial portion of long-haul over-the-road diesel business although not all the major travel center operators are able to compete for all customers. Pilot and Flying J are the first and second choices for a number of long-haul fleets.

The acquisition may substantially lessen competition in the relevant market by, among other things: (a) eliminating actual, direct, and substantial competition between Pilot and Flying J; and (b) increasing the likelihood that Pilot will exercise market power unilaterally.

De novo entry or fringe expansion into the relevant market is unlikely to deter or counteract the likely anticompetitive effects. Entry is difficult and time-consuming and potential entrants would face substantial barriers.

III. The Proposed Consent Agreement

The proposed Consent Agreement is intended to remedy the acquisition’s alleged anticompetitive effects by, among other things, requiring the divestiture of travel center assets to Love’s. Love’s is a growing national travel center operator that is currently concentrated in the South. It is the smallest of the four national travel center operators and some long-haul fleets do not encounter Love’s on the routes they travel, especially in the Midwest and the Eastern portion of the United States.

Respondents have reached an agreement to sell to Love’s 26 specific travel center sites, the majority of which are located in the Midwest or the Eastern portion of the United States. These sites, along with Love’s aggressive and independent expansion plan, will enhance Love’s market position as a national travel center operator, allowing it to compete for more long-haul over-the-road diesel business. Love’s possesses the existing infrastructure, resources, and capability to acquire the divested sites and operate them within Love’s existing network. The divestiture will allow Love’s to replace competition lost because of the acquisition of Flying J by Pilot. In particular, Love’s will now be able to compete for those customers who viewed Pilot and Flying J as their first and second choices and who did not encounter Love’s on their routes prior to the divestiture.

The Order contains provisions designed to ensure the successful implementation and remedial intent of the proposed Consent Agreement. Some of these provisions are highlighted below.

A. Access to and Use of the TCH Fuel Card System

The Order requires Respondents to provide access to and use of the TCH LLC (“TCH”) Fuel Card System upon request from Love’s. Paragraph II.C. of the Order provides that at Love’s option, and upon reasonable notice, Respondents shall provide non-discriminatory access to and use of the TCH Fuel Card System for a period of up to three years pursuant to a TCH Merchant Agreement. If Love’s elects to use the TCH Fuel Card System, Respondents shall institute a firewall protocol whereby: (a) Respondents’ employees affiliated with the TCH Fuel Card System are prohibited from providing TCH Customer Confidential Business Information to either the TCH Executive Board or to a Respondent; and (b) Pilot shall appoint an internal compliance officer who will be responsible for assuring that the firewall protocols are met.

B. Continued Operation of Restaurants

The Order also provides for the continuity of operation at Wendy’s restaurants affiliated with the sites acquired by Love’s. Paragraph II.E. of the Order provides that, for a period of one year, Pilot shall manage and operate the Wendy’s Restaurants affiliated with those sites.

To assure the efficient transfer and continuity of operation of the divested travel centers, the Order requires Respondents to provide assistance for, and information regarding, employees of those travel centers. Paragraphs II.F. and II.G. of the Order require Respondents to provide, for a period no longer than six months, assistance for, and employment and salary information regarding, knowledgeable employees of Respondents in the transfer of the travel centers from Respondents to Love’s. Paragraphs II.H. and II.I. of the Order provide that, for a period of one year, Respondents shall not interfere with the hiring or employing of employees by Love’s relating to the divested sites, and shall remove any impediments within the control of Respondents that may deter these employees from accepting employment with Love’s. Paragraph II.J. of the Order prohibits Respondents from directly or indirectly soliciting, inducing, or attempting to solicit or induce any employees of the divested travel centers who have accepted offers of employment with Love’s to terminate that employment.

C. Transfer of Confidential Businesses Information and Maintenance of Economic Viability

To further assure the efficient transfer and economic viability of the acquired travel centers, Paragraphs II.K. and II.L. of the Order require Respondents to provide all Confidential Business Information relating to the Travel Centers Businesses and to maintain the full economic viability and marketability of such assets until Respondents complete the divestiture required by the Order.

D. Compliance and Notification Requirements

Paragraph III. of the Order allows the Commission to appoint an Interim Monitor to assure that Respondents expeditiously comply with their obligations and perform all of their responsibilities as required by the Order.

To assure that Respondents fully comply with the obligations of the Order, Paragraph IV. of the Order allows the Commission to appoint a Divestiture Trustee to assign, grant, license, divest, transfer, deliver, or otherwise convey the travel centers.

Paragraph V. of the Order provides that each Remedial Agreement related to the divested sites shall be incorporated by reference into the Order and that Respondents shall not modify or amend the terms of any Remedial Agreement without prior approval of the Commission.

Paragraphs VI.A. and VI.B. of the Order require official notification of the date on which the acquisition occurs and subsequent periodic reports until the Commission is satisfied that the divestiture has been completed in a timely manner and in good faith. Paragraph VI.C. of the Order requires annual written reports of compliance, upon the Commission’s request, until the Order terminates in ten years.

Paragraph VII. of the Order requires Respondents to give the Commission prior notice of certain events that might affect compliance obligations arising from the Order.

E. Additional Provisions

Paragraph VIII. of the Order provides that the Commission shall, with proper notice, have access to documents and personnel at the offices of Respondents for the purpose of determining or securing compliance with the Order.

Paragraph IX. of the Order provides that the Order shall terminate after ten years.Start Printed Page 39020

IV. Order to Maintain Assets

The Commission also has issued an Order to Maintain Assets in this proceeding. The purpose of the Order to Maintain Assets is: (a) to maintain the full economic viability, marketability and competitiveness of the travel centers through their full transfer and delivery to Love’s; (b) to minimize any risk of loss of competitive potential for the travel centers; (c) to prevent the destruction, removal, wasting, deterioration, or impairment of any of the travel centers, except for ordinary wear and tear; and (d) to prevent disclosure of any Confidential Business Information related to the travel centers to any person except Love’s or persons specifically authorized by Love’s to receive such information. The Commission may appoint an Interim Monitor to assure that Respondents expeditiously comply with all of their obligations and perform all of their responsibilities as required by the Order to Maintain Assets.

By direction of the Commission, Commissioner Brill not participating.

Start Signature

Donald S. Clark

Secretary.

End Signature End Supplemental Information

Footnotes

1.  The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission’s General Counsel, consistent with applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 4.9(c).

Back to Citation

[FR Doc. 2010-16433 Filed 7-6-10; 8:45 am]

BILLING CODE 6750-01-S