FTC BLOCKS MERGER OF OIL GIANTS BP AMOCO, ARCO.

Byline: Chris Sieroty Staff Writer

In a move cheered by consumer advocates in California, the Federal Trade Commission on Wednesday scuttled the proposed $30 billion merger between BP Amoco and Atlantic Richfield Corp., fearing that the combined company would dominate the West Coast's retail gasoline market.

The commission voted 3-2 to seek an injunction blocking the merger, triggering what could be the biggest antitrust oil case since the Standard Oil breakup a century ago.

Los Angeles-based Arco and its suitor, London-based BP Amoco, had planned to complete the merger Monday.

But Richard Parker, director of the FTC's Bureau of Competition, said the government could initiate legal action as early as Friday in federal court in San Francisco.

``This particular merger is anticompetitive,'' Parker said at a news conference in Washington following Wednesday's vote. ``We're going after this merger and we're going to try and stop it.''

Arco spokeswoman Linda Dozier said the companies would fight the FTC's decision in court.

``We believe we have a compelling case in support of our combination, which we will argue vigorously in court,'' BP Amoco and Arco said in a joint statement.

Some consumer activists were surprised by the decision, noting that the FTC has recently approved several large oil industry mergers.

``If the government prevails, the gasoline industry in California can only benefit from more competition,'' said Linda Sherry, a spokeswoman for San Francisco-based Consumer Action.

BP Amoco and Arco account for about 70 percent of Alaskan oil production. Their combination would create the world's second-largest publicly held oil company, behind Exxon Mobil, which completed its merger in November. The proposed deal was announced last April and has been approved by the European Union and shareholders of both companies.

An agreement was also reached with the state of Alaska committing the combined company to reduce its ownership of Alaska North Slope crude oil production. The agreement also calls for the company to sell off exploration acreage and interests in the Trans-Alaska Pipeline and marine tankers.

Despite these proposed divestitures, the combined company would still account for 55 percent of the oil flowing from Alaska's North Slope, the FTC estimated.

Parker said the proposed company could dictate prices to West Coast refiners who rely on Alaska crude oil. Other critics of the merger, including Sen. Barbara Boxer, D-Calif., have argued that such dominance could translate into higher retail prices in California, Oregon and Washington.

``I spoke with FTC Chairman Robert Pitofsky and he assured me that preventing higher gas prices in California was a key factor behind the commission's decision,'' she said in a statement.

BP Amoco said although it remained willing to try to negotiate a settlement that would appease FTC officials, ``the only course open to us is to resolve the issue through litigation.''

If the request for an injunction is successful, the case is expected to go before an FTC administrative law judge, whose decision can be appealed in federal court. The litigation could take months and could end up before the Supreme Court.