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California refinery acquisition not a violation of antitrust laws

Tesoro Corp has received approval from state and federal officials to purchase a refinery from BP for in excess of $2 billion. There had been some question as to whether such an acquisition would bring oil refiner into conflict with various antitrust provisions, but Federal Trade Commission (FTC) decision makers determined that such a move would be highly beneficial to the California economy.

Part of the problem is that there already a declining demand for "California-grade gasoline." The decline in demand was in part price-induced, and state officials were in a bind as to resolving this situation. However, in return for state and federal approval of the acquisition, Tesoro also had to agree to changes in the way it conducted its business. For example, protections are to be input to prevent spikes in gas prices, and various upgrading of the refinery that was being purchased also needed to take place.

Whenever we are talking about areas of industry facing a great deal of regulation, there will be a give and take between the regulators and corporate businesses. As in the above instance, corporations will not wish to commit to a multi-billion dollar deal only to have the venture taken away due to non-compliance with federal or state law. Mistakes can mean costs of hundreds of millions of dollars.

Corporations will likely require experienced business attorneys to negotiate with regulators and to review any kind of paperwork that is required. Attorneys can also demonstrate to the officials that the actions of the corporation will be in accordance with federal and state regulations. Such advance negotiations can also prevent these sorts of acquisitions from being challenged in court.

Source: Reuters, "Tesoro wins antitrust OK to buy California BP refinery," by Diane Bartz and Erwin Seba, May 17, 2013