FTC Reports Ethanol Industry 'Not Unduly Concentrated'

Level of concentration in ethanol production keeps industry competitive. Compiled by staff  

Published on: Dec 5, 2005

According to a new report from the Federal Trade Commission, the U.S. ethanol market concentration is categorized as "unconcentrated" to "moderately concentrated." The FTC concluded, "The level of concentration in ethanol production would be unlikely to provide the opportunity or incentive for one or more firms to act anticompetitively."

FTC, as required by the Energy Policy Act of 2005, released a report detailing the ethanol industry's market concentration. A complete copy of the FTC study is available at www.ftc.gov/reports/ethonal05/20051202ethanolmarket.pdf.

"The conclusions of the FTC come as no surprise to those familiar with the ethanol industry," says RFA President Bob Dinneen. "This report answers ethanol's critics who say the industry is dominated by a handful of firms. The fact is the ethanol industry is highly competitive and provides consumers with a cost-effective, renewable, high-octane gasoline additive."

Using the Herfindahl-Hirschman Index, the FTC calculated market concentration in a number of ways, coming up with findings that ranged from 499 to 1259. Such scores indicate an "unconcentrated" market up to a "moderately concentrated" ethanol market. According to the FTC, however, "...the concentration figures overstate the likelihood of anticompetitive behavior in light of significant new entry in ethanol production and marketing that will occur in the next year and is expected to continue for several more years."