Amoco, FTC fail to agree on Arco deal

WASHINGTON -- The Federal Trade Commission is expected to vote Friday to block the $30 billion merger of BP Amoco and Atlantic Richfield after lengthy settlement talks failed to produce a deal.

The matter is expected to end up in court. BP Amoco said on Jan. 14 that it would proceed with the merger within 20 days -- with or without government approval. It has hired law firm Kirkland & Ellis to litigate.

BP Amoco spokesman Tom Koch and Arco spokeswoman Marylou Ferry wouldn't comment other than to say the two companies are continuing to meet with the FTC.

Negotiations Friday between oil company attorneys, FTC officials and West Coast state attorneys general made no progress.

The government believed that meeting might be the last chance for serious negotiations, but BP Amoco did not make the kind of major concessions antitrust enforcers say are needed, according to attorneys familiar with the talks.

BP Amoco has been unwilling to reduce the amount of crude oil it buys from Arco to a level that would satisfy the FTC, the lawyers say.

Critics are concerned that the merger would put too much crude oil production in the hands of one company.

Together, the two companies would control about 55 percent of Alaska's crude oil production, down from 70 percent before a deal reached with Alaskan state regulators.

Because some West Coast refineries were set up to use only crude oil from Alaska's North Slope refineries, the FTC apparently is concerned that the two companies' increased concentration there could boost gas prices on the West Coast.

Attorneys close to the negotiations say FTC chairman Robert Pitofsky was likely to oppose any proposed settlement but might not have had the votes to back him up.

But they say that without major concessions, there are at least the three votes needed to block the deal. The attorneys say the FTC plans to vote before BP Amoco's 20-day time limit is up to give a judge time to consider a request for an injunction.

The oil companies pulled out all the stops to pressure the FTC into approving the deal, even trying to enlist states to lobby antitrust enforcers.

The plan apparently hasn't worked, but some antitrust lawyers say there still could be an 11th-hour settlement.

"In such a substantial merger -- with the stakes and risks of litigation so high -- the merging parties will pursue negotiations with the government at any and all pressure points to get a deal," says Jonathan Schiller of law firm Boies Schiller & Flexner, which represented Alaska in the deal.

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