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FTC Letter Signals Increased Scrutiny of Oil & Gas M&A Activity

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In a recent exchange of letters with the White House, the chair of the Federal Trade Commission (“FTC”) signaled her intent to ramp up antitrust enforcement in the oil and gas industry. The move comes as part of a broader shift in priorities at the FTC in evaluating mergers and is in line with the Biden administration’s recent efforts to increase antitrust enforcement across industries (about which V&E has previously written). While calls for FTC action to combat high gas prices are fairly common from new administrations and Congress, the agency’s recent response includes specific action items that suggest deviations from past policy. These changes could have significant effects on the regulatory environment for energy companies, especially for the retail fuels sector. Indeed, practitioners who regularly represent oil and gas companies before the FTC have noted that they are already receiving inquiries in line with the chair’s letter.


On August 11, 2021, White House National Economic Council Director Brian Deese, who is also head of the new White House Competition Council, issued a letter to the FTC raising concerns about “divergences between oil prices and the cost of gasoline at the pump” during this past summer season. The letter did not provide any support for this assertion but urged the FTC to use “all of its available tools to monitor the U.S. gasoline market and address any illegal conduct that might be contributing to price increases for consumers at the pump.”

On August 25, 2021, the FTC’s new chair, Lina Khan, responded in a two-page letter that echoed the White House’s concerns and also expressed concern that the FTC’s “approach to merger review in recent years has enabled significant consolidation.” The letter claims that the FTC’s prior approach to retail fuel outlet mergers may have created “conditions ripe for price coordination and other collusive practices.”

New FTC Oil & Gas Initiatives

To address these concerns, the chair’s letter outlines several specific actions the agency plans to take.

First, the FTC will seek to “identify additional legal theories to challenge retail fuel station mergers where dominant players are buying up family-run businesses.” The letter does not provide any additional detail on this potentially significant shift in enforcement policy, the basis for this concern, or how this concern relates to protecting competition.

Second, the FTC will re-examine its approach to merger divestitures, to ensure that they do not encourage further consolidation or enable dominant firms or groups of firms to exercise market power. Khan states that she is “especially interested in ways that large national chains may ‘restore’ higher prices through collusive practices.” This reference to the industry-specific term of price “restorations” suggests that the agency’s leadership is more engaged than previously on the details of retail fuel station transactions.

Third, the FTC will “tak[e] steps to deter unlawful mergers in the oil and gas industry,” including by imposing “prior approval” requirements to deter companies from proposing “illegal mergers” in the first place. The FTC recently voted 3-2 to rescind its 1995 policy against the use of “prior approval” requirements in merger consent decrees.

Fourth, the FTC will ask staff to “investigate abuses in the franchise market,” with a specific focus on determining “whether the power imbalance favoring large national chains allows them to force their franchisees to sell gasoline at higher prices, benefitting the chain at the expense of the franchisee’s convenience store operations.” As with the first action item, how these concerns fit within the antitrust laws, and the basis for these concerns, are unclear at this point.

Expect Increased Scrutiny of M&A Activity

While the FTC regularly monitors oil and gasoline prices to identify unusual price activity that may signal potentially anticompetitive conduct in the industry and has brought numerous merger and non-merger enforcement actions over the years, oil and gas has not recently been a focus for the agency in public statements (unlike, for example, pharmaceuticals or technology companies). The letter suggests that the FTC leadership may be more focused on enforcement in the energy industry and that they may be particularly skeptical of transactions involving the acquisition of smaller local fuel retailers by larger national chains.

Based on our own recent experiences with oil and gas mergers before the FTC, and those of others in the antitrust bar, FTC staff has already begun requesting information from merging parties related to the issues in Chair Khan’s August 25 letter, as well as issues, such as unionization and ESG policies, of merging parties. Though Chair Khan’s letter focused on the retail gasoline level, we have seen similar expansive concerns at other levels of gasoline refining and production as well. These investigations are also taking longer than ever before.  Unless the recent changes are a temporary blip on the radar — which the letter suggests is unlikely — large oil and gas companies and their counsel may need to adjust expectations on transaction timing and the range of issues investigated for matters that go before the FTC.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.