FTC Takes Aim at BP Amoco’s Bid for Arco

The Federal Trade Commission on Tuesday sought to demolish a key argument of BP Amoco’s attempt to take over Los Angeles-based Atlantic Richfield Co., contending in court filings that the British oil giant never proved that the $27-billion deal would boost efficiencies.

The FTC said the deal instead was aimed at strengthening BP Amoco’s existing control over Alaska crude oil supplies and hiking crude prices on both the West Coast and in futures trading on the New York Mercantile Exchange.

“BP already exercises significant market power,” the FTC said in its 29-page filing before U.S. District Judge Susan Illston in San Francisco. “This merger will eliminate the greatest threat to the perpetuation of that power.”

The state of Alaska is defending the proposed merger, saying a “charter” agreement between the state and the two oil companies had satisfied state officials that the deal should go forward.

“Oil production is the foundation of Alaska’s economy,” the state said in papers filed Monday. “Alaska should not be forced to sit on the sidelines while vital state interests are litigated, and possibly irreversibly injured, by others.”

The FTC was unswayed. Taking aim at the assertion that combined operations could save millions of dollars through increased efficiencies, the FTC said BP and Arco had failed to prove their case.

“The defendants asserted before the commission that the proposed acquisition would result in significant efficiencies, but did not provide information sufficient to allow the commission to verify these claims,” the FTC said.

BP and Arco between them produce more than 70% of all Alaska North Slope crude oil, supplying refineries up and down the West Coast. The two companies have promised to reduce their combined stake to 58% of output, or about 580,000 barrels a day.

Malcolm Pfunder, an antitrust lawyer with Gibson, Dunn & Crutcher in Washington, said the FTC’s assertions were designed to undercut arguments that such a deal “might hypothetically benefit consumers by creating greater efficiencies.”

The FTC wants Judge Illston to grant a preliminary injunction blocking the deal. A hearing has been set for March 10.

The attorneys general of Washington and Oregon, joined at the last minute by California, filed suit Monday against the merger. The states said it could result in higher oil prices to refiners.

BP and Arco have said that oil prices are set by global markets, not regionally by oil companies.

In New York Stock Exchange trading, American depositary receipts of BP fell 38 cents to close at $48.13 and Arco lost $1.31 to close at $66.31.