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Refilling Your Propane Tank More Often? FTC and Purchasers Allege Propane Exchange Tank Producers Collusively Reduced Fill Weight

Summer is the perfect time for grilling. You can avoid adding extra heat indoors associated with using the oven or stove by cooking outside. The chargrilled taste of a burger or steak on a hot summer day cannot be beat and having friends, family and neighbors over for a barbeque is always a festive experience. Running out of propane in your tank can ruin your meal or your party. In recent years, that may have happened more often as propane exchange tank suppliers—Blue Rhino and AmeriGas lowered the weight of propane supplied in those tanks from 17 pounds to 15 pounds. However, consumers may not have noticed this reduction, because the suppliers did not lower the price accordingly.

A propane exchange tank is a propane tank that a consumer purchases pre-filled from a distributor such as a hardware store, gas station, convenience store, or mass merchandiser such as WalMart, Lowe’s, or The Home Depot. The propane exchange tanks can be purchased either by exchanging an empty tank for a new pre-filled one or as a stand-alone purchase. People who use propane to fuel grills or patio heaters usually purchase propane exchange tanks.

In March 2014, the Federal Trade Commission (FTC) filed a complaint against the two biggest propane exchange tank suppliers—Ferrellgas, whose propane exchange tank business operates under the name Blue Rhino, and AmeriGas. Collectively, Blue Rhino and AmeriGas supply 80 percent of the propane exchange tank market in the United States and are the only suppliers of propane exchange tanks capable of servicing mass merchandisers on a national level. The FTC complaint alleges that Blue Rhino and AmeriGas used their collective market power to force their customers to accept a reduction in propane exchange tank fill levels—from 17 pounds to 15 pounds—without a corresponding reduction in price.

That complaint alleges that the two propane exchange tank suppliers had an agreement both to lower the fill levels from 17 pounds to 15 pounds and also, to force that reduction on their customers. The complaint states that because AmeriGas and Blue Rhino lowered the weight of propane in the tanks without implementing a corresponding reduction in price, purchasers pay a higher price per pound for propane than they would have absent the concerted action of the suppliers.

The complaint explains that if Blue Rhino and AmeriGas did not agree with each other to implement the fill reduction without a corresponding decrease in price, their scheme would have failed. It further alleges that Lowe’s, the biggest customer of Blue Rhino, would not agree to accept the fill weight reduction, which increased the per pound price of propane, unless all other customers agreed to accept the same reduction. WalMart, the second biggest customer of Blue Rhino, initially would not accept the reduction at all. If Blue Rhino and AmeriGas could not convince WalMart to accept the reduction, Lowe’s would also not accept it.

According to the FTC, Blue Rhino and AmeriGas are the only propane exchange tank suppliers capable of serving WalMart on a national level. Together, they account for 95 percent of WalMart’s propane exchange tank supply. When WalMart indicated that it would not accept the reduction, Blue Rhino and AmeriGas realized their whole scheme to increase the per pound price of propane was in jeopardy. The FTC alleges that as a result, Blue Rhino and AmeriGas agreed that they would present a united front to WalMart and would stand firm on the fill reduction. As a result of that agreement, WalMart eventually accepted the fill reduction and corresponding increase in price per pound for propane, and Lowe’s was satisfied.

The FTC complaint alleges that Blue Rhino’s and Amerigas’s agreements amount to illegal price fixing under federal law. In addition to the Federal Trade Commission action, in recent weeks, several purchasers of propane exchange tanks filed lawsuits in courts throughout the country under both state and federal laws to recover damages suffered as a result of the alleged illegal scheme. Among other measures, consumers and direct purchasers seek to recover for the higher price they paid per pound for propane in propane exchange tanks. These lawsuits are brought on behalf of both consumers—those who purchase the propane exchange tanks for use in the grills and patio heaters, and direct purchasers—distributors of propane exchange tanks, such as gas stations, hardware stores, convenience stores, and mass merchandisers.