ARCO DEAL OPPOSED; FTC STAFF CALL MERGER BAD FOR WEST.

Byline: Stephan Labaton The New York Times

The staff of the Federal Trade Commission has concluded that the proposed $29 billion merger between BP Amoco and Atlantic Richfield violates antitrust law and has recommended that the full commission block the deal, two people who have been briefed about the decision said Tuesday.

The recommendation was based on concerns that the merger could result in significantly higher gasoline prices in California and the West. Those states are supplied with crude oil from the North Slope of Alaska, where exploration and production are dominated by BP Amoco and Arco.

Unless the two companies agree to significant new conditions or divestitures to satisfy the federal government that there would be enough competition on the West Coast for crude oil, the recommendation threatens to kill the deal. Last May, when the agency's staff recommended that it block Barnes & Noble's $600 million bid for Ingram Book Group, that deal collapsed within three days.

The BP Amoco-Arco decision was disclosed the same day that Exxon and Mobil completed the largest industrial merger in history after the commission approved that deal and ordered those companies to sell $2 billion to $3 billion worth of gas stations, pipelines, terminal ports and a refinery.

While the divestiture is the largest ever ordered by the FTC, it represents a fraction of the combined companies' assets.

That $81 billion merger combines the nation's two largest oil companies into a new energy behemoth, which reported a combined $146 billion in revenue last year, the third-largest behind General Motors and DaimlerChrysler. It also reunites two of the biggest chunks of the old Standard Oil empire created by John D. Rockefeller Sr., which was broken up in 1911 for violating federal antitrust law. (Exxon is the successor of Standard Oil of New Jersey, while Mobil was once Standard Oil of New York.)

By a vote of 4-0, the FTC approved the Exxon-Mobil settlement Tuesday morning, a day before the first anniversary of the announcement by the two companies that they planned to merge. Soon after the vote, executives disclosed that they had formally closed the deal.

In the case of BP Amoco and Arco, the agency's procedures give lawyers for the two companies an opportunity to brief the commission and offer further concessions. A spokesman for BP Amoco said Tuesday that he expected that the companies and the FTC would ultimately reach an agreement and that the deal could close.

``Discussions continue with the Federal Trade Commission,'' said the spokesman, Ronnie Chappell. ``We're confident that we will find an outcome that's satisfactory to BP Amoco, Arco and the commission.''

The discussions between government officials and the companies' antitrust lawyers have centered on the Alaskan market for crude oil and whether the merger would result in too much concentration for California and the West. Prices of gasoline in California have been rising sharply higher than the national average - 26.3 cents a gallon higher for regular grade - and a new study completed last week by the California attorney general concluded that the relative lack of competition had been a primary cause of price increases this year.

A chief problem, the study concluded, was that only six refiners control more than 90 percent of the capacity in California and also own the majority of gas stations.

But executives at BP Amoco and Arco say that there is little overlap of their operations on the West Coast and that any concentration of crude oil production in Alaska has been resolved by a preliminary agreement with the state calling for the companies to sell 13 percent of their oil production from the North Slope to other companies. That deal will reduce the combined control of production to about 50 percent.

Federal and many state officials said Tuesday that they were confident that the divestitures by Exxon and Mobil would continue to preserve competition in the oil industry, although the deal will make it harder for BP Amoco and Arco to obtain permission for their merger.

``Every deal has to be examined on its own merits,'' Robert Pitofsky, the chairman of the FTC, said in an interview Tuesday afternoon. ``But we are quickly approaching the point where given the trend toward even greater concentration, we are committed to giving even more scrutiny of the deals that are proposed.''

Pitofsky declined to discuss the BP Amoco-Arco merger, which remains under review, but he said the closing of the Exxon acquisition was certain to affect other pending deals.

``Yes, they certainly have an impact, and I have to be up-front about that,'' he said. He also said the spate of oil mergers over the last few years had begun to move the industry ``from moderate levels of concentration to high levels of concentration'' and that ``we're beginning to approach the limit.''