BOWLING GREEN, Ky. -- Marathon Petroleum Corp. (MPC) is asking Judge David Hale of the U.S. District Court for the Western District of Kentucky to grant a motion to dismiss a complaint originally filed in May by Kentucky Attorney General Jack Conway over gas prices in the Bluegrass State.
"For all its rhetoric, the Attorney General’s amended complaint fails to allege any unlawful conduct" by MPC, the company said in court documents. "The alleged facts ... do not plausibly suggest any anticompetitive conduct at all, much less the requisite harm to competition."
Marathon is the largest supplier of gasoline in Kentucky and the largest supplier of reformulated gasoline (RFG) in the Louisville and northern Kentucky markets, with an approximate wholesale market share of 90% to 95%, Conway said in the complaint.
"Marathon maintains ... this market dominance through the combined use of deed restrictions on real property at the retail level which limit the number of retail gasoline locations in the state and, in some instances, require that only Marathon gasoline be sold by the property purchaser; through anticompetitive supply arrangements with independent retail sellers of gasoline; and through manipulation of the market for RFG in Louisville and northern Kentucky between May 1 and September 15 of each calendar year through exchange agreements with its competitors, other major refiners of gasoline," he said.
The deed restrictions constitute "anticompetitive conduct intended to restrict real property owners from participating in the retail market for gasoline as sellers of motor fuels or as owners of retail gas stations or convenience stores," said the complaint. Some deed restrictions further restrict competition by requiring the purchaser to sell only Marathon petroleum products.
The complaint does not allege how many deed restriction exist, and how many are on suitable properties, Marathon argued. "Common sense indicates that there are numerous properties in the Louisville metropolitan and northern Kentucky regions that are suitable for gas stations," it said, and the complaint does not--"and could not"--allege that there are so many properties with deed restrictions that a non-Marathon retailer couldn't find a suitable property.
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"This conduct deprives consumers of an increase in the number of retail gasoline stations selling competitively priced gasoline, suppresses unbranded or other branded retailers as a competitive force throughout Kentucky, and illegally restricts a potential seller of motor fuels from choosing a supplier other than Marathon," the AG said.
"Marathon has required certain independent retail sellers of gasoline to execute anticompetitive supply arrangements that, on information and belief, limit the retailers’ ability to obtain gasoline from Marathon’s competitors and bind the retailers to adhere to stated volumetric purchases from Marathon subject to penalty. Furthermore, these supply agreements require retailers to waive their right to claim that Marathon’s pricing is unfair or anticompetitive," said the complaint.
Meanwhile, the exchange agreements with other major refiners--ExxonMobil, Shell, and BP--"disincentivize Marathon’s horizontal competitors from entering these markets and allow Marathon to raise prices," he said.
Exchange agreements allow other refiners to compete in the relevant geographic market without investing in a new refinery and transportation infrastructure. So the agreements enable ExxonMobil, Shell and BP to compete more effectively, argued Marathon. "Without exchange agreements, oil companies would be confined to selling gasoline in the area where their respective refineries are located and there would be an area of natural monopoly around each oil company’s refinery, where only the owner of that refinery could economically afford to market gasoline. … Exchange agreements have the purpose and effect of creating additional competition in an area, which might not otherwise exist," it said.
The AG sought to charge MPC with two counts of violating the Sherman Act, one count of violating the Clayton Act, three counts of violating the Kentucky Consumer Protection Act and one count of "unjust enrichment."
As for consumer protection, Marathon said the statute generally prohibits unfair and deceptive practices, but it "does not apply to alleged antitrust violations" and that consumers are not contractually bound or forced to purchase gas at Marathon stations.
The company would not discuss pending or active litigation, a spokesperson told CSP Daily News.
MPC is the nation's fourth-largest refiner, with a crude oil refining capacity of approximately 1.7 million barrels per day in its seven-refinery system. Marathon brand gasoline is sold through approximately 5,500 independently owned gas stations across 19 states. In addition, Speedway LLC, an MPC subsidiary, owns and operates the nation's second-largest convenience-store chain, with approximately 2,760 stores in 22 states. MPC also owns, leases or has ownership interests in approximately 8,300 miles of pipeline. Through subsidiaries, MPC owns the general partner of MPLX LP, a midstream master limited partnership (MLP). MPC's fully integrated system provides operational flexibility to move crude oil, feedstocks and petroleum-related products efficiently through the company's distribution network in the Midwest, Southeast and Gulf Coast regions.
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