LP Gas, April 2014

LAW AND GOVERNMENT FTC complaint AmeriGas Ferrellgas coordinated on cylinder exchange The Federal Trade Commission FTC issued an administrative complaint March 27 against AmeriGas and Ferrellgas alleging the companies illegally coordinated to reduce the amount of propane in their cylinders sold to Walmart The FTC issues an administrative complaint when it has reason to believe the law has been violated and a proceeding is in the public interest For AmeriGas and Ferrellgas the administrative complaint marks the start of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge According to a press release the FTC complaint alleges that in 2008 AmeriGas and Blue Rhino Ferrellgas cylinder exchange division each decided to implement a price increase by reducing the amount of propane in their tanks from 17 pounds to 15 pounds without a corresponding reduction in the wholesale price This type of collusion may not be direct or visible to consumers but can lead to higher prices or lower quality said Deborah Feinstein director of the FTCs Bureau of Competition So companies should be on notice that when we see this type of conduct we will take action to stop it Walmart which purchased cylinders from AmeriGas and Blue Rhino refused to accept the fill reduction from the companies Faced with Walmarts resistance the FTC alleges that AmeriGas and Blue Rhino colluded by secretly agreeing that neither would deviate from their proposal to reduce the fill level to Walmart The FTC says sales executives from the two propane companies communicated repeatedly for several months by telephone and email to update each other on their discussions with Walmart as well as to work together to take the necessary steps to push Walmart to promptly accept the fill reduction This secret agreement between AmeriGas and Blue Rhino had the effect of raising the price per pound of propane to Walmart and ultimately consumers the FTC alleged Ferrellgas released a statement in response to the FTCs complaint writing The company is disappointed by the commissions decision to file an administrative complaint against Ferrellgas for allegedly agreeing with AmeriGas Partners LP to require Walmart to accept 15 pound tanks These claims are without merit and we will vigorously contest them AmeriGas also released a statement regarding the complaint AmeriGas denies that it was involved in any such collusion While we were surprised and disappointed to see the commission move forward with this complaint we respect the process and look forward to presenting our position to an administrative law judge later this year We continue to believe that the claims against AmeriGas are without merit This is not the first time AmeriGas and Ferrellgas have collectively faced complaints regarding reduced cylinder weights Ferrellgas agreed to pay 1 million in penalties in an unlawful business practices case in California while AmeriGas agreed to pay 800000 for not clearly displaying the reduced weight on cage signs Ventura County District Attorney Gregory Totten announced the penalties in December 2013 According to a press release Ferrellgas and AmeriGas agreed to post notices on propane cylinder enclosures informing consumers of the actual amount of propane in tanks On its website Blue Rhino says it reduced the amount of propane in its tanks in 2008 from 17 pounds to 15 pounds to combat inflating costs of steel diesel fuel and propane Ferrellgas challenges citations issued in 2013 Blue Rhino incident Ferrellgas is contesting citations totaling 73000 levied by the Occupational Safety Health Administration OSHA following a 2013 explosion at the companys Blue Rhino propane tank production facility in Tavares Fla OSHAs 33 page report lists 20 serious violations and six other thanserious violations at the plant following the July 29 incident which injured eight workers and destroyed 53000 propane cylinders We are contesting all of the allegations and the fines Ferrellgas spokesman Scott Brockelmeyer wrote in an email According to OSHA violations covered safety and training as well as operating procedures In some instances employees were exposed to fire and explosion hazards during cylinder refurbishing and filling operations the January report stated State fire investigators believe a sparking forklift ignited a cloud of propane in a storage yard at the plant severely burning five employees the Orlando Sentinel reported The OSHA report was also critical of procedures related to the use of forklifts at the plant LP Gas left a message for OSHA seeking details on the appeals process Both propane marketers responded by stating they plan to contest the Federal Trade Commission claims www LPGasmagazine com April 2014 LPGas 13