FTC Calls Ethanol Market Competitive

In a report to Congress, the Federal Trade Commission says it has concluded that the ethanol market is "not unduly concentrated" and is unlikely to provide an "opportunity or incentive" for companies to fix prices or take other anticompetitive actions. The Energy Policy Act of 2005, passed by Congress this summer, directs FTC to examine competitiveness in the ethanol industry. The new law created a renewable-fuels standard that requires the ethanol industry to nearly double its production capacity to 7.5 billion gal per year by 2012. Using an index that provides guidelines on whether there is sufficient competition among industry participants to prevent price-fixing and other anticompetitive behavior, FTC found that the ethanol industry ranks between "unconcentrated" and "moderately concentrated." "These concentration levels do not justify the presumption that one firm, or a small group of firms, could wield the market power necessary to set prices or coordinate prices or output," says the study, which was released on Dec. 5. "This report answers ethanol's critics who say the industry is dominated by a handful of firms," says Robert Dinneen, president of the Renewable Fuels Association.