Oil giants say merger would help competition

Hearing that may decide merger's fate scheduled for March 20

Posted: Thursday, March 02, 2000

SAN FRANCISCO - BP Amoco and Atlantic Richfield Co. urged a federal judge Wednesday to approve their merger over government objections, saying the combination ``will benefit competition worldwide and in the United States.''

In papers filed in U.S. District Court, the two oil companies called the Federal Trade Commission's argument for an injunction against the merger ``a fatally flawed attack'' that ignores legal standards and the FTC's own guidelines.

There was no hint in the court papers of settlement discussions that have been widely reported. Those include suggestions that BP might sell off all of Arco's Alaska assets to meet FTC concerns.

A seven-day hearing on the injunction is scheduled to start March 20 before U.S. District Judge Susan Illston. Absent a settlement, that hearing likely to determine the fate of the merger.

London-based BP Amoco agreed last March to acquire Los Angeles-based Atlantic Richfield, known as Arco. The purchase would create the second-largest nongovernment oil company, behind Exxon Mobil.

The two companies together control 70 percent of Alaska's crude oil production. In an agreement with Alaska Gov. Tony Knowles, who supports the merger, they promised to sell enough of their holdings to reduce their share to 55 percent if the merger goes through.

However, the FTC, joined by California, Oregon and Washington, argued the new company would effectively control the supply of Alaska crude oil shipped to West Coast refineries, with the power to force increases in gasoline prices.

The companies dispute the existence of a separate West Coast oil market and say oil prices are set by the international market.

``The worldwide sale of crude oil is the relevant market,'' attorney Frank Cicero said in court papers.

He said the FTC's claim of reduced competition in sales to West Coast refineries is contradicted by the commission's own guidelines.

Properly applied, the guidelines show that the two companies do not compete on the West Coast because BP Amoco sells Alaska crude oil there, but Arco provides crude oil to its own refineries and sells only refined products, Cicero said.

Likewise, he said, the assertion of reduced competition for oil leases in Alaska flies in the face of antitrust law because there will be no overall decrease in crude oil production.

He said the merger would promote competition ``by strengthening BP Amoco's competitive position in West Coast refining and marketing, in Asian natural gas production, and by eliminating substantial duplication of activities between the companies in Alaska.''

``Insecurities and uncertainty in Alaska, permanent losses in revenues to Alaska, the U.S. government, and others because of delay in achieving increased production, loss of expected efficiencies and injury to employees and shareholders of the (companies) will occur if closing is delayed,'' Cicero wrote.

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