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Consumer News Release

For immediate release -- July 28, 2000.
Contact Bob Brammer -- 515-281-6699

Statement of the Iowa Attorney General's Office Update on Gas-Price Investigations

The Federal Trade Commission, the U.S. agency with whom Iowa and several other states are cooperating to investigate extraordinary gas price increases in June 2000, issued an interim report to Congress today on the Midwest Gasoline Price Investigation. The Iowa Attorney General's Office wants to report to Iowa officials and citizens on the situation, underscoring several of the points included in the FTC report and adding information on several other elements specific to activity in Iowa.

  1. The FTC's initial findings include that several key factors may have resulted in unusually short supplies of gasoline, especially in the Upper Midwest, at the end of spring and beginning of summer. The possible factors include reduced global supply of crude oil, with a result that worldwide consumption of crude oil exceeded production; EPA rules effective May 1 that required reformulated gasoline in certain areas and with other factors resulted in abnormally low inventories; and a break in the Explorer pipeline in March that also caused disruption in supply of gas to already-tight Midwest markets. The FTC so far concludes that it is likely each of these factors contributed to short supply and high prices - but none alone seems to suffice as a full explanation.
  2. The FTC investigation continues, in cooperation with the attorneys general of eleven states, including Iowa. The investigation focuses especially on the possibility of activity that would be antitrust violations in the form of collusion or tacit coordination that affected the supply and prices of gasoline. Such behavior could include illegal contact, communication, signaling, or understandings among competitors. The FTC is dedicating substantial staff resources in this phase, which it says may take at least three or four months, and is using compulsory process tools such as subpoenas and depositions under oath. Subpoenas have been issued to refiners that supply Midwest markets, and to pipelines. (Two hundred boxes of documents have been obtained already.) Depositions under oath will be taken of key officials in the decision-making chain for Midwest gas.
  3. The Iowa Attorney General's Office has done parallel review and investigation in Iowa - seeking explanations for the price increases, and investigating if illegal collusion or contact is a factor. Consumer Protection Division Director Bill Brauch reported on the status of the State's investigation at a meeting July 18 of the Legislature's joint Oversight Committee. Attorney General staff have met with key players and observers of the gas price situation, including oil producers, petroleum marketers, and Corn Growers associations of Iowa. The Office also remains in consultation with Iowa Dept. of Natural Resources staff who are experts in examining motor fuel markets, price trends and industry operations. The Consumer Division also notes that calls, letters, and e-mail complaints to the Office have fallen sharply since about the Fourth of July as prices for gasoline have declined significantly in the U.S., the Midwest, and Iowa.

State consumer protection staff also have conducted a local investigation of potentially questionable pricing, where there were local concerns in a community of possible gas price-fixing. Although that investigation remains open, the Consumer Protection Division has stated that it does not think gas retailers should be blamed for the sharp price hikes in June, which were region- and nation-wide. However, the Office has taken action in the past against local retailers for illegal collusion, and it will do so again if warranted. Because insider information usually is necessary to document illegal collusion, the Consumer Protection Division always welcomes tips from local retailers or others who may have such information.

The Attorney General's investigation continues. The Office will continue sharing information with the FTC and other states, and it may join federal officials if the FTC should develop a legal action based on its continuing investigation.

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