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In the face of the producers' opposition to this inquiry, it is now impossible to make any firm judgments about the integrity and accuracy of the AGA reporting system. The limited amount of evidence my staff has been able to get through non-producer sources, however, confirms the need for thorough review of AGA's procedures. But until we have obtained the requested material from the producers, it is impossible to appraise the significance of this evidence.

Three attorneys in the Bureau of Competition have been working on this investigation. Two attorneys in the General Counsel's Office have been preparing Court enforcement proceedings. Additional attorneys will be assigned as the need arises. It seems likely that the investigation will not be finished during this fiscal year.

GASOLINE MARKETING INVESTIGATION

Your letter expressed concern over the precarious competitive existence of many gasoline retailers. Since receipt of your letter the Commission has issued complaints against the marketing practices of two major oil companies. In Standard Oil Company of Ohio (Sohio), Docket 8910 (complaint issued January 18, 1973), the Commission has charged Sohio with price fixing and coercion of dealers. The complaint alleges that Sohio controls its dealers by use of short term leases, and in the Notice of Contemplated Relief, the Commission indicated that a guaranteed five-year lease for Sohio's dealers may be part of an appropriate remedy in the case.

On November 6, 1972, the Commission announced its intention to issue a complaint against Phillips Petroleum Corporation. The proposed complaint charges that Phillips has a standard form lease which provides for short term leasehold interest, and which allows Phillips to arbitrarily cancel on 10 days written notice. Additionally, Phillips is charged with causing dealers to accept cancella. tion without an explanation or cause, requiring dealers to purchase Phillips' tires, batteries and accessories (TBA), requiring dealers to maintain minimum levels of Phillips products to secure loans from Phillips, and requiring a stated minimum gasoline purchase, which constitutes a dealer's total requirement or a major percentage of a dealer's gasoline sales.

The Notice of Contemplated Relief in this case also includes a ban on lease agreements with terms of less than five years, a ban on lease cancellations or threats to cancel except for good cause and a ban on requirements that dealers deal exclusively in TBA products manufactured, distributed or sponsored by Phillips. Settlement negotiations with Phillips, so far, have not been successful. The Commission's zone pricing inquiry, still in the investigatory stage, is primarily centered in the Detroit area and involves Shell, Mobil, American and Texaco. Subpoenas and a request for a special report have been served, partial subpoena returns have been made, and investigational hearings have been held. We expect to make our recommendations to the Commission in this matter in early summer.

To a large extent, the problems we see manifested at the marketing level of the petroleum industry may be symptoms of serious competitive problems in the production, refining and transportation segments of the industry. Recognizing this, the Commission in December 1971 directed us, working with the Bureau of Economics, to determine the effects of vertical integration and joint ownership and operating arrangements on the structure, conduct and performance of the petroleum industry. In connection with this directive, numerous interviews and file searches are now being conducted at all levels of the petroleum industry. At this stage of the investigation, we have not reached any firm conclusions about the existence of antitrust violations.

"CRASH PARTS" INVESTIGATION

The heart of the problem in the automobile crash parts industry is the control maintained by GM, Ford and Chrysler over manufacture and distribution of replacement crash parts. Production of these parts is either handled by the auto makers or contracted out according to rigid specifications. In the latter case, the auto makers exercise exclusive ownership or rights over the blueprints and resultant tools and dies necessary to produce crash parts for each of their respective car models. The contractors produce only the quantity requested by the auto makers, and, it would seem, are effectively precluded from selling to anyone but them. Here, too, gathering evidence has been time consuming and difficult. The

staff foresees, however, that by year's end a decision can be made as to the appropriate disposition of this matter.

I am hopeful that this letter has provided you with the information you desire. If you need further assistance, please do not hesitate to call upon me.

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U.S. Senate, Dirksen Senate Office Building,
Washington, D.C.

DEAR SENATOR ABOUREZK: Your June 17, 1975 statement opening the Senate Judiciary Antitrust Subcommittee hearings on S. 489 stated that "a free and open marketplace acts as the best allocator of resources." Exxon fully supports that view. On the other hand, S. 489 would have the opposite effect and would inhibit free marketplace competition within the energy industry.

On January 21, 1975 I testified on behalf of Exxon before the Senate Judiciary Antitrust Subcommittee. Our filed statement set forth the facts regarding the intense competition within the petroleum industry. To our knowledge, the validity of the information presented in our January 21 statement has not been challenged by any member of Congress, by staff, or by others.

In your June 17 statement, you made reference to my January 21 testimony. From all the data which we supplied demonstrating the absence of anything approaching "monopoly concentration" in the petroleum, coal, and uranium industries, you chose to mention only the higher concentration numbers which we reported in the uranium area. You neglected to mention that the 28 percent concentration figure for oil companies in uranium production in 1973 included the largest uranium producer (Kerr-McGee) which has less than one-half percent of domestic oil and gas production. As set forth in my statement, if that producer is excluded, the oil company concentration figure in uranium production drops to 11 percent. In addition, your June 17 statement also failed to mention the reasons which we cited explaining the circumstances surrounding the 50-55 percent oil company concentration figure in uranium reserves. You also did not choose to refer to the FTC's 470-page staff report, published in January, 1974, and cited in our statement, whose conclusion (page 232) we quoted: "The impact on production concentration due to coal and uranium acquisitions by petroleum companies appears to have been small, at least up to 1970." This same FTC report also went on to conclude (page 261):

"This study does not provide any positive support for the proposal that petroleum companies be banned from acquiring coal or uranium companies; nor does it suggest that petroleum companies be banned from acquiring coal or uranium reserves."

Nothing has occurred since the FTC study that would alter these conclusions. The facts clearly demonstrate that there is no monopoly power by any oil company or group of oil companies in any individual fuel sector or in total energy. There is no monopoly power in oil and gas to be "transferred" to coal, nuclear, or other energy sources. To the contrary, firms in the petroleum business are and can continue to be a positive force in improving the economic performance of the coal, nuclear, and synthetic industries.

Oil companies by no means dominate other energy sources. The leading oil and gas producers are not the leading coal and uranium producers. Oil firms accounted for only about 20 percent of coal output and 28 percent of uranium output in 1973; and these percentages overstate the degree of overlap since many of the "oil" firms involved in coal and uranium are quite small oil and gas producers. Oil companies also are pursuing projects in oil shale, coal synthetics, and solar energy. Given the competitive structure of the existing energy markets, the structure of these new energy industries undoubtedly will also be competitive. The greater the number of potential entrants, including oil companies, the greater the potential competition of new ideas.

57-567 76-36

In examining firms engaged in development of alternate energy sources, the effects of participation or non-participation cannot be judged on the limited criterion of whether a participant also is engaged in any other particular industry, be it energy-related or not. At a time when it is in the national interest to maximize the production of all energy sources, it would be ironic if Congress were to enact legislation which immunized the current operators in any of the energy fields from the vigorous competition of companies in other energy fields, be they oil companies or not.

Oil company diversification into alternate energy sources has clearly been beneficial to the U.S. economy and the consumer. Diversification has led to increased competition. Proposed legislation such as S. 489 would protect firms in coal, nuclear, synthetics, and solar energy from a large number of present and potential competitors. Moreover, such proposals would discourage existing firms in coal or uranium from entering the oil and gas business. It would, at best, retard non-energy companies from entering into any fuel sector as they sought to determine if later investments in other fuels might become more attractive.

Current antitrust laws are adequate to insure continued competition in energy markets. The Sherman Act, the Clayton Act, the FTC Act, and the RobinsonPatman Act have proven to be effective safeguards of competition. New legislation creating arbitrary limits on entrants into selected businesses is not warranted by the record.

Proposals such as S. 489 are counter to our nation's goals of increased energy independence through the development of increased domestic coal, nuclear, synthetics, and solar energy. S. 489 would deprive these sectors of new sources of capital, technology, and management skills. The United States is fortunate in being endowed with a tremendous energy resource base. We have a large untapped potential that can and should be developed by private enterprise. More than anything else, the solution to our energy problem involves the development of new energy sources and technologies. Competition already assures that energy resources are being developed efficiently. Such competition will continue to benefit the consumer as long as artificial restraints on growth and opportunities are not enacted.

We respectfully request that this letter and the attached copy of my January 21, 1975 testimony,1 “Competition in the Petroleum Industry," before the Senate Judiciary Antitrust and Monopoly Subcommittee be entered into the record of the present hearings regarding S. 489.

Sincerely,

W. T. SLICK, Jr. EXXON COMPANY, U.S.A., December 2, 1975.

Hon. JAMES ABOUREZK,

U.S. Senate,

Dirksen Senate Office Building,
Washington, D.C.

DEAR SENATOR ABOUREZK: On July 22, 1975 I addressed a letter to you concerning your June 17, 1975 opening statement at the Senate Judiciary Antitrust and Monopoly Subcommittee hearings on S. 489. I have followed with interest the hearings on S. 489 that have been held subsequent to my letter.

On September 11, 19752 I testified before the House Judiciary Subcommittee on Antitrust and Commercial Law regarding oil company diversification into other energy areas with primary emphasis on coal. Since the issues dealt with in that testimony are substantially the same as those issues raised by S. 489, I have enclosed for your information a copy of Exxon's written submission filed with Representative Rodino's Subcommittee. Hopefully this information will be of assistance to you and other subcommittee members in deliberating the propriety of legislation such as S. 489.

I respectfully request that this letter and the attached submission be entered into the record of the present hearings on S. 489.

Sincerely,

W. T. SLICK, Jr.

1 Editor's note.-See 1975 hearings, Subcommittee on Antitrust and Monopolv, Industrial Organization Act. S. 1167. Part 9.

2 Editor's note, September 11, 1975 testimony of Mr. Slick is retained in committee files.

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STATEMENT

on

S. 2387, S. 2761 and S. 489
PETROLEUM INDUSTRY DIVESTITURE

for submission to the

SUBCOMMITTEE ON ANTITRUST AND MONOPOLY
of the

SENATE JUDICIARY COMMITTEE

for the

CHAMBER OF COMMERCE OF THE UNITED STATES

by

Barry A. Friedman*
January 29, 1976

The Chamber of Commerce of the United States opposes legislation that seeks to dissolve the vertically-integrated petroleum companies and prevent them from diversifying into other energy-related areas. These proposals, as developed in S. 489, S. 2387 and S. 2761 among others, represent the wrong way to solve our nation's energy problems.

The National Chamber includes in its membership many petroleum companies which have a direct interest in legislative proposals relating to the economic organization of their industry. Our membership includes a much larger number of companies which relate to the petroleum industry as consumers rather than as producers. Their concern over these proposals is scarcely less direct, both in terms of jobs for their employees and a reasonable return to their stockholders.

Our membership in the auto industry, for example, is absolutely dependent on the petroleum industry to provide auto users with an adequate supply of gasoline and oil at a price they can pay. Our membership in the electrical industry is at least presently dependent on the supply of fuel oil for electric utilities in adequate amounts and at reasonable prices to sustain the market for electricity-using products. Our members in the chemical industry depend heavily on the oil industry for petroleum-based raw materials. Our transportation industry members are major users of diesel fuel. The impact of high fuel prices on farmers is a source of concern to our members in the farm equipment industry.

Both commercial and domestic users of oil products are deeply interested in two principal questions about dissolution proposals:

*

Member, New York Bar; Antitrust and Trade Regulation Staff, Chamber of Commerce of the United States.

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