Notice2024-22874
Chevron Corporation and Hess Corporation; Analysis of Agreement Containing Consent Order To Aid Public Comment
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Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 3, 2024
Issuing agencies
Federal Trade Commission
Abstract
The consent agreement in this matter settles alleged violations of Federal law prohibiting unfair methods of competition. The attached Analysis of Proposed Consent Order to Aid Public Comment describes both the allegations in the complaint and the terms of the consent order--embodied in the consent agreement--that would settle these allegations.
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<title>Federal Register, Volume 89 Issue 192 (Thursday, October 3, 2024)</title>
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[Federal Register Volume 89, Number 192 (Thursday, October 3, 2024)]
[Notices]
[Pages 80559-80565]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-22874]
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FEDERAL TRADE COMMISSION
[File No. 241 0008]
Chevron Corporation and Hess Corporation; Analysis of Agreement
Containing Consent Order To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement; request for comment.
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SUMMARY: The consent agreement in this matter settles alleged
violations of Federal law prohibiting unfair methods of competition.
The attached Analysis of Proposed Consent Order to Aid Public Comment
describes both the allegations in the complaint and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before November 4, 2024.
ADDRESSES: Interested parties may file comments online or on paper by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Please write: ``Chevron/Hess;
File No. 241 0008'' on your comment and file your comment online at
<a href="https://www.regulations.gov">https://www.regulations.gov</a> by following the instructions on the web-
based form. If you prefer to file your comment on paper, please mail
your comment to the following address: Federal Trade Commission, Office
of the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex
M), Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Albert Teng (202-326-3272), Bureau of
Competition, Federal Trade Commission, 400 7th Street SW, Washington,
DC 20024.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule Sec. 2.34, 16 CFR
2.34, notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of 30 days. The following
Analysis of Agreement Containing Consent Order to Aid Public Comment
describes the terms of the consent agreement and the allegations in the
complaint. An electronic copy of the full text of the consent agreement
package can be obtained from the FTC website at this web address:
<a href="https://www.ftc.gov/news-events/commission-actions">https://www.ftc.gov/news-events/commission-actions</a>.
The public is invited to submit comments on this document. For the
Commission to consider your comment, we must receive it on or before
November 4, 2024. Write ``Chevron/Hess; File No. 241 0008'' on your
comment. Your comment--including your name and your State--will be
placed on the public record of this proceeding, including, to the
extent practicable, on the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
Because of the agency's heightened security screening, postal mail
addressed to the Commission will be delayed. We strongly encourage you
to submit your comments online through the <a href="https://www.regulations.gov">https://www.regulations.gov</a>
website. If you prefer to file your comment on paper, write ``Chevron/
Hess; File No. 241 0008'' on your comment and on the envelope, and mail
your comment to the following address: Federal Trade Commission, Office
of the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex
M), Washington, DC 20580.
Because your comment will be placed on the publicly accessible
website at <a href="https://www.regulations.gov">https://www.regulations.gov</a>, you are solely responsible for
making sure your comment does not include any sensitive or confidential
information. In particular, your comment should not include sensitive
personal information, such as your or anyone else's Social Security
number; date of birth; driver's license number or other State
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. You are also
solely responsible for making sure your comment does not include
sensitive health information, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule Sec.
4.10(a)(2), 16 CFR 4.10(a)(2)--including competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule Sec. 4.9(c). In
particular, the written request for confidential treatment that
accompanies the comment must include the factual and legal basis for
the request and must identify the specific portions of the comment to
be withheld from the public record. See FTC Rule Sec. 4.9(c). Your
comment will be kept confidential only if the General Counsel grants
your request in accordance with the law and the public interest. Once
your comment has been posted on <a href="https://www.regulations.gov">https://www.regulations.gov</a>--as legally
required by FTC Rule Sec. 4.9(b)--we cannot redact or remove your
comment from that website, unless you submit a confidentiality request
that meets the requirements for such treatment under FTC Rule Sec.
4.9(c), and the General Counsel grants that request.
Visit the FTC website at <a href="https://www.ftc.gov">https://www.ftc.gov</a> to read this document
and the news release describing this matter. The FTC Act and other laws
the Commission administers permit the collection of public comments to
consider and use in this proceeding, as appropriate. The Commission
will consider all timely and responsive public comments it receives on
or before November 4, 2024. For information on the Commission's privacy
policy, including routine uses permitted by the Privacy Act, see
<a href="https://www.ftc.gov/site-information/privacy-policy">https://www.ftc.gov/site-information/privacy-policy</a>.
Analysis of Agreement Containing Consent Order To Aid Public Comment
I. Introduction and Background
The Federal Trade Commission (``Commission'') has accepted for
public comment, subject to final approval, an Agreement Containing
Consent Order (``Consent Agreement'') from Chevron Corporation
(``Chevron'') and Hess Corporation (``Hess''). Pursuant to an Agreement
and Plan of Merger dated October 22, 2023 (``Merger Agreement''),
Chevron has agreed to acquire Hess (``the Proposed Acquisition''). The
purpose of the Consent Agreement is to remedy the anticompetitive
effects that otherwise would result from the Proposed Acquisition.
Chevron and Hess compete with members of the Organization of
Petroleum Exporting Countries (``OPEC'') and ten affiliated non-OPEC
participating countries (collectively ``OPEC Oil Producers'') in the
global
[[Page 80560]]
production and sale of crude oil. Hess Chief Executive Officer
(``CEO'') John B. Hess (``Mr. Hess'') has communicated publicly and
privately with OPEC representatives and oil ministers of OPEC member
states about global output and other dimensions of crude oil market
competition, including encouraging OPEC representatives in their stated
mission to stabilize global oil markets. Mr. Hess has also made public
statements praising OPEC for its role in stabilizing the oil market and
oil prices.
Under the terms of the Merger Agreement, Chevron is required to
take all actions necessary to appoint Mr. Hess as a member of the board
of directors of Chevron. The appointment of Mr. Hess to Chevron's board
as a result of the Proposed Acquisition would amplify the importance
and likely effect of any such public or private communications, and
therefore heighten the risk of harm to competition. In particular, Mr.
Hess's post-merger appointment to Chevron's board would give him a
larger platform from which to communicate on these issues, as well as
decision-making input to one of the leading public integrated energy
companies.
Under the terms of the proposed Decision and Order (``Order''),
Chevron is prohibited from appointing Mr. Hess to its board or allowing
him to serve in an advisory or consulting capacity to, or as a
representative of, Chevron or the Chevron board, with a limited
exception. Chevron may consult with Mr. Hess and allow him to serve in
an advisory or consulting capacity to, or as a representative of,
Chevron solely related to interactions and discussions with Guyanese
government officials about Hess's oil-related and health ministry-
related activities in Guyana, and with the Salk Institute's Harnessing
Plants Initiative. Chevron is required to attest on a regular basis
that it is complying with the Order.
The Consent Agreement is thus designed to remedy allegations in the
Commission's Complaint that the Proposed Acquisition, if consummated,
would violate section 7 of the Clayton Act, as amended, 15 U.S.C. 18,
and section 5 of the FTC Act, as amended, 15 U.S.C. 45, by meaningfully
increasing the risk of coordination in the relevant market. Absent a
remedy, placing Mr. Hess on the Chevron board would harm the
competitive process.
The Consent Agreement has been placed on the public record for 30
days for receipt of comments from interested persons. Comments received
during this period will become part of the public record. After 30
days, the Commission will review the comments received and decide
whether it should withdraw, modify, or finalize the proposed Order.
II. The Merging Parties
Chevron is a public integrated energy company, with reported
revenues in 2023 of $196.9 billion. Chevron has crude oil production
operations in the United States and operates all around the world.
Chevron is headquartered in San Ramon, California. Hess is a public
multinational corporation headquartered in New York, New York, engaged
in the exploration and production of crude oil with operations in the
United States and other countries. In 2023, Hess reported $10.6 billion
in revenue.
III. The Agreement and Plan of Merger
Pursuant to the Agreement and Plan of Merger between Chevron and
Hess dated October 22, 2023, Chevron agreed to acquire Hess in an all-
stock transaction valued at approximately $53 billion. Section 1.3(a)
of the Merger Agreement states that Chevron and its board of directors
shall, subject to Mr. Hess's acceptance, take all actions necessary to
appoint Mr. Hess to the Chevron board of directors. The Commission's
Complaint alleges that this effect--Mr. Hess's appointment to the
Chevron board--of the Proposed Acquisition, if consummated, would
violate section 7 of the Clayton Act and section 5 of the FTC Act.
IV. Relevant Market
A relevant product market in which to assess the Proposed
Acquisition's anticompetitive effects is the development, production,
and sale of crude oil. Crude oil purchasers generally cannot switch to
alternative commodities without facing substantial costs. Chevron and
Hess are engaged in the development, production, and sale of crude oil.
A relevant geographic market in which to analyze the Proposed
Acquisition is global.
V. Effects of the Proposed Acquisition
The Commission's Complaint alleges that the Proposed Acquisition
poses risks to competition including meaningfully increasing the risk
of coordination among remaining firms in the relevant market. As stated
in the Commission's Complaint, Mr. Hess's history of communications and
supportive messaging to OPEC demonstrates encouragement of OPEC's
output stabilizing agenda and may also signal how OPEC's decisions may
be received by other market participants. Such encouragement reduces
the unpredictability of the non-OPEC response to OPEC's output
decisions. Because Chevron is substantially larger than Hess--Chevron
is one of the world's ten largest oil enterprises by market
capitalization and the fourth largest public, non-state-owned oil
company--Mr. Hess's elevation to the Chevron board would amplify the
importance and likely effect of any public or private communications on
these issues, and meaningfully increase the risk of industry
coordination.
The proposed Order presents significant relief for these concerns
and imposes effective and administrable relief. The Commission's
Complaint and the proposed Order make clear that communications by oil
executives that support and encourage OPEC members and foreign oil
ministers to stabilize oil output and prices can facilitate
opportunities for other oil executives to act in support of these
objectives and may give rise to legal liability. This proposed Order
remedies the harm to competition from the agreement to place Mr. Hess
on the Chevron board, including meaningfully increasing the risk of
industry coordination. The Commission continues to investigate mergers
and acquisitions activity in the oil and gas industry and its risks to
competition, as well as problematic unilateral signaling and
coordination and attempted coordination among market participants.
VI. The Proposed Order
The proposed Order imposes several terms to remedy these concerns.
First, the proposed Order prohibits Chevron from appointing Mr. Hess to
Chevron's board--as required by the Merger Agreement--or allowing him
to serve in an advisory or consulting capacity to, or as a
representative of, Chevron or the Chevron board. The proposed Order
allows Chevron to consult with Mr. Hess and allows him to serve in an
advisory or consulting capacity to, or as a representative of, Chevron
solely related to interactions and discussions with Guyanese government
officials about Hess's oil-related and health ministry-related
activities in Guyana, and with the Salk Institute's Harnessing Plants
Initiative.
The proposed Order also contains provisions to ensure the
effectiveness of the relief, including obtaining information from
Chevron that it is complying with the Order; requiring Chevron to
submit a yearly compliance report containing sufficient information and
documentation to enable the Commission to determine independently
whether Chevron is in compliance with the Order; and requiring that
Chevron maintain specific
[[Page 80561]]
written communications. The proposed Order also requires Chevron to
distribute the Order to each of its officers and directors.
The purpose of this analysis is to facilitate public comment on the
Consent Agreement and proposed Order to aid the Commission in
determining whether it should make the proposed Order final. This
analysis is not an official interpretation of the proposed Order and
does not modify its terms in any way.
By direction of the Commission, Commissioners Holyoak and
Ferguson dissenting.
Joel Christie,
Acting Secretary.
Statement of Chair Lina M. Khan Joined by Commissioner Rebecca Kelly
Slaughter and Commissioner Alvaro Bedoya
The Organization of the Petroleum Exporting Countries (OPEC) is
a cartel that, for decades, has enjoyed outsized control over oil
prices in the United States. When OPEC and its allies, collectively
known as OPEC+, decide to limit or cut back oil production, American
consumers pay more at the pump and American businesses face higher
costs. In the early 2010s, technological advances led to a surge in
U.S. production--an increase that has let the United States emerge
as the world's largest oil producer.\1\ This development has
positioned U.S. crude oil producers to serve as a competitive check
on OPEC+, protecting Americans from the whims of a foreign cartel.
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\1\ United States produces more crude oil than any country,
ever, U.S. Energy Information Administration (Mar. 11, 2024),
https://www.eia.gov/todayinenergy/
detail.php?id=61545#:~:text=The%20United%20States%20produced%20more,s
ix%20years%20in%20a%20row.
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Greater production at home should mean Americans enjoy lower
prices when filling their tanks or heating their homes. But when
U.S. oil executives communicate privately and publicly with high-
level OPEC representatives to support them in their stated mission
to ``stabilize'' or limit global production, it threatens to replace
the churn and dynamism of a competitive market with the ossification
of a cartel. While this may boost the companies' bottom lines, it
means Americans pay inflated prices.
Today's complaint identifies statements by Hess Corporation CEO
John Hess that signaled support for efforts by OPEC+ to stabilize
production.\2\ The proposed order would prohibit Chevron Corporation
from appointing Mr. Hess to its Board of Directors. This action
builds on the Commission's action in Exxon-Pioneer, which surfaced
troubling statements by Pioneer CEO Scott Sheffield that suggested
efforts to coordinate with members of OPEC+.\3\
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\2\ See, e.g., Compl. ]] 25-49.
\3\ Press Release, Fed. Trade Comm'n, FTC Order Bans Former
Pioneer CEO from Exxon Board Seat in Exxon-Pioneer Deal (May 2,
2024), <a href="https://www.ftc.gov/news-events/news/press-releases/2024/05/ftc-order-bans-former-pioneer-ceo-exxon-board-seat-exxon-pioneer-deal">https://www.ftc.gov/news-events/news/press-releases/2024/05/ftc-order-bans-former-pioneer-ceo-exxon-board-seat-exxon-pioneer-deal</a>; see also Statement of Chair Lina M. Khan in the Matter of
Exxon Mobil Corporation, No. 241-0004 (May 2, 2024), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/2410004exxonpioneerlmkstmt1_0.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/2410004exxonpioneerlmkstmt1_0.pdf</a>; Concurring Statement of Comm'r
Rebecca Kelly Slaughter in the Matter of ExxonMobil Co., No. 241-
0004 (May 2, 2024), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/2410004exxonrksstmt_0.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/2410004exxonrksstmt_0.pdf</a>; Concurring Statement of Comm'r Alvaro M.
Bedoya in the Matter of ExxonMobil Co./Pioneer Natural Resource Co.,
No. 241-0004 (May 2, 2024), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/2410004exxonpioneerambstmt_0.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/2410004exxonpioneerambstmt_0.pdf</a>.
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Commissioners Ferguson and Holyoak dissent from this matter, as
they do not believe that a CEO communicating with a foreign cartel
about output should be central to the antitrust analysis here.\4\
Commissioner Ferguson writes, for example, that a sophisticated firm
like Chevron would have a ``strong incentive to ensure that its
officers and directors avoid risky conversations with OPEC
representatives.'' \5\ We are unaware of any research showing that
sophisticated firms are less likely to violate the antitrust laws,
or studies finding that the extent to which a firm complies with the
law correlates with the size of its legal department. We do not
believe that the Commission should use a firm's sophistication, or
the elite credentials of its executives, as an input into our
assessment of their likely behavior.
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\4\ See Dissenting Statement of Commissioner Andrew N. Ferguson
in the Matter of Chevron Corporation and Hess Corporation, No. 241-
0008 (Sep. 27, 2024); Dissenting Statement of Commissioner Melissa
Holyoak in the Matter of Chevron Corporation and Hess Corporation,
No. 241-0008 (Sep. 27, 2024).
\5\ Dissenting Statement of Commissioner Andrew N. Ferguson in
the Matter of Chevron Corporation and Hess Corporation, at 2.
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The Commission's actions in Chevron-Hess and Exxon-Pioneer mark
an important step towards ensuring that U.S. oil producers are
serving as a competitive check on OPEC+ rather than subordinating
their independent decision-making to the goals set by a cartel.
Indeed, news outlets last week reported that OPEC+ and its members
are preparing to increase oil production rates amid increasing
supply from U.S. producers.\6\ Rivals responding to one another by
increasing production, rather than coordinating to hold it back,
represents the type of competitive dynamic the antitrust laws were
designed to protect.
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\6\ See Tom Wilson, Saudi Arabia ready to abandon $100 crude
target to take back market share, Financial Times (Sep. 26, 2024),
<a href="https://www.ft.com/content/1d186f62-5941-4f9e-aef1-7d93a8a696cd">https://www.ft.com/content/1d186f62-5941-4f9e-aef1-7d93a8a696cd</a>.
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Dissenting Statement of Commissioner Melissa Holyoak
For the second time in five months, the Majority has used its
leverage in the HSR process to extract a consent from merging
parties with no reason to believe the law has been violated.\1\ To
make it worse, once again, the consent targets an individual and
deprives him of his contractual rights. I dissent.
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\1\ 15 U.S.C. 53(b).
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The two largest mergers announced in 2023 were the $64.5 billion
acquisition of Pioneer Natural Resources by Exxon Mobil Corporation
and the $53 billion acquisition of Hess Corporation by Chevron
Corporation.\2\ Not only were they the two largest mergers of 2023,
the mergers involved oil companies and attracted the ire of certain
elected officials. In November of 2023, right after the mergers were
announced, 23 senators wrote to the FTC expressing their ``concerns
about two blockbuster oil-and-gas deals.'' \3\ The letter urged the
Commission to ``carefully consider all the possible anticompetitive
harms'' from the proposed mergers because the ``Industry Is Already
Too Concentrated'' \4\ and ``The FTC Must Protect Americans from Big
Oil.'' \5\ The letter classified the Commission's efforts as ``[t]he
fight against Big Oil'' and concluded that the Commission should be
investigating ``to determine whether these energy giants should be
broken up once again.'' \6\ After the Commission published its
complaint and order in Exxon back in May,\7\ there was still
significant opposition to the deal between Chevron and Hess
Corporation.\8\
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\2\ See Devensoft, The Top Mergers and Acquisitions of 2023--
Meet the Power Players Behind the Year's Largest Deals (Feb. 1,
2024), <a href="https://www.devensoft.com/blog/the-top-mergers-and-acquisitions-of-2023/">https://www.devensoft.com/blog/the-top-mergers-and-acquisitions-of-2023/</a>; Press Release, Fed. Trade Comm'n, FTC Order
Bans Former Pioneer CEO from Exxon Board Seat in Exxon-Pioneer Deal
(May 2, 2024), <a href="https://www.ftc.gov/news-events/news/press-releases/2024/05/ftc-order-bans-former-pioneer-ceo-exxon-board-seat-exxon-pioneer-deal">https://www.ftc.gov/news-events/news/press-releases/2024/05/ftc-order-bans-former-pioneer-ceo-exxon-board-seat-exxon-pioneer-deal</a> (listing $64.5 billion as the value of Exxon's
acquisition of Pioneer); Compl., In re Chevron Corp., No. 241-0008
at ] 17 (F.T.C. Sept. 26, 2024) (listing $53 billion as the value of
Chevron's acquisition of Hess Corporation) [hereinafter Compl.].
\3\ Letter from Charles E. Schumer, U.S. Senator, et al., to
Lina Khan, Chair, Fed. Trade Comm'n, at 1 (Nov. 1, 2023) <a href="https://www.democrats.senate.gov/imo/media/doc/Letter%20to%20FTC%20re%20Exxon-Pioneer.pdf">https://www.democrats.senate.gov/imo/media/doc/Letter%20to%20FTC%20re%20Exxon-Pioneer.pdf</a>.
\4\ Id..
\5\ Id. at 3.
\6\ Id. at 4.
\7\ See Press Release, Fed. Trade Comm'n, FTC Order Bans Former
Pioneer CEO from Exxon Board Seat in Exxon-Pioneer Deal (May 2,
2024), <a href="https://www.ftc.gov/news-events/news/press-releases/2024/05/ftc-order-bans-former-pioneer-ceo-exxon-board-seat-exxon-pioneer-deal">https://www.ftc.gov/news-events/news/press-releases/2024/05/ftc-order-bans-former-pioneer-ceo-exxon-board-seat-exxon-pioneer-deal</a>; Joint Dissenting Statement of Commissioners Melissa Holyoak
and Andrew N. Ferguson in the Matter of Exxon Mobil Corporation,
Commission File No. 241-0004 (May 2, 2024), <a href="https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/joint-dissenting-statement-commissioners-melissa-holyoak-andrew-n-ferguson-matter-exxon-mobil">https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/joint-dissenting-statement-commissioners-melissa-holyoak-andrew-n-ferguson-matter-exxon-mobil</a> [hereinafter Exxon Dissent].
\8\ See e.g., @SenSchumer, X (May 12, 2024, 4:07 p.m.), <a href="https://x.com/SenSchumer/status/1789749253956399528">https://x.com/SenSchumer/status/1789749253956399528</a>.
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But herein lies the problem: no legitimate and factually
supported theory of harm existed for the Commission's Majority to
execute the bidding of the political left. Still, the fact that the
Commission opted not to challenge the biggest merger of 2023 seems
to have been lost on the press. So the Majority got what it wanted.
And they are trying to repeat the play here. Rather than accept
reality and any political blowback, the Majority creates a sequel to
the fairy tale in Exxon where section 7 of the Clayton Act means
whatever the Majority needs it to mean to appease political demands.
[[Page 80562]]
Unfortunately for Mr. Hess, the CEO of Hess Corporation, the author
of every fairy tale must also fabricate a villain, and today's
action unjustifiably gave him that label.
To violate section 7 of the Clayton Act, Chevron must ``acquire
. . . assets . . . where . . . the effect of such acquisition may be
substantially to lessen competition or tend to create a monopoly.''
\9\ But the Majority's complaint does not take issue with Chevron's
acquisition of Hess Corporation's assets. Nor could it. There is no
evidence to suggest Chevron, post-merger, could diminish competition
in the global market for oil. Even if one were to accept the
Majority's fetish with concentration levels, post-merger Chevron
would have a low single-digit share of the world market for oil and
natural gas. And the delta in concentration from the merger is
miniscule. Thus, the tangible and intangible assets of Hess
Corporation have nothing to do with the violation of law--it's all
about the acquisition of Mr. Hess. Of course, I assume the Majority
is not endorsing a view that Mr. Hess is an asset or transferrable
human chattel. Certainly no court would endorse such a view--further
highlighting the farcical nature of today's complaint.
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\9\ 15 U.S.C. 18.
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Even if one were to accept arguendo the outlandish antitrust
theory of harm the Majority puts forward, the facts and arguments
alleged in the complaint to justify the theory are no less
ridiculous. Section 7 requires a ``probable anticompetitive effect''
that is based on ``reasonable probabilit[ies],'' not ``ephemeral
possibilities.'' \10\ The Majority's complaint does not reach even
ephemeral possibilities. And as the Majority surely knows, if it
were litigated, the complaint would not survive a motion to
dismiss.\11\ Nothing in the complaint alleges that Mr. Hess has ever
attempted to, or coordinated with, a rival.\12\ At most, the
complaint alleges that he was a cheerleader for OPEC's efforts. And
yet somehow Chevron, despite its low share of the market, has
violated the law by agreeing to make efforts to appoint Mr. Hess as
one of Chevron's twelve board members.\13\ Such a theory of
coordinated effects is so bizarre that no court--or even scholarly
work--has endorsed it or even discussed it.\14\
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\10\ Brown Shoe Co. v. United States, 370 U.S. 294, 323, 325
(1962).
\11\ See Fed. R. Civ. P. 12(b)(6); see generally Ashcroft v.
Iqbal, 556 U.S. 662 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S.
544 (2007).
\12\ My analysis is limited to whether his conduct is sufficient
to create anticompetitive coordinated effects that may substantially
lessen competition under section 7 of the Clayton Act.
\13\ Chevron Leadership, <a href="https://www.chevron.com/who-we-are/leadership#boardofdirectors">https://www.chevron.com/who-we-are/leadership#boardofdirectors</a> (last visited Sep. 16, 2024) (listing
the company's twelve board members); Compl. ] 10.
\14\ To my knowledge, the only other circumstance where such a
novel theory has been advanced was in the Commission's complaint
against Exxon and Pioneer. See Compl., In the Matter of Exxon Mobil
Corp., No. 241-0004 (F.T.C. May 1, 2024).
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The implausibility of the alleged theory is heightened by a few
additional observations. First, under section 7 the harm must result
from the merger. But the merger transitions Mr. Hess from the role
as Chief Executive Officer of a company to a role as one of 12 board
members of another company. Pre-merger, Hess Corporation has an
infinitesimally small share of the global market for oil, and post-
merger Chevron will still only have low single digits. It strains
credulity to argue that Mr. Hess will have more power or ability to
orchestrate coordination while serving as one of twelve board
members than he had while serving as a CEO for the last several
decades. If anything, it seems more plausible that a CEO is better
equipped to orchestrate coordination than the same individual
serving as one of twelve board members.
Second, coordinated effects normally manifest when one firm
buys, and thereby removes, a maverick who has undermined the ability
to coordinate.\15\ But Mr. Hess is the alleged coordinator, not the
maverick, and his firm is the one being acquired. Thus, Chevron's
acquisition does not remove an impediment to successful
coordination, making this situation very different from the normal
manifestation of merger-specific coordinated effects.
---------------------------------------------------------------------------
\15\ See, e.g., F.T.C. v. Arch Coal, Inc., 329 F. Supp. 2d 109,
146 (D.D.C. 2004), case dismissed, No. 04-5291, 2004 WL 2066879
(D.C. Cir. Sept. 15, 2004) (``An important consideration when
analyzing possible anticompetitive effects is whether the
acquisition would result in the elimination of a particularly
aggressive competitor in a highly concentrated market. . . . The
loss of a firm that does not behave as a maverick is unlikely to
lead to increased coordination.'' (citations, ellipses, and internal
quotation marks omitted); U.S. Dept. of Just. & Fed. Trade Comm'n,
Horizontal Merger Guidelines at section 7.1 (Aug. 19, 2010) (``An
acquisition eliminating a maverick firm . . . in a market vulnerable
to coordinated conduct is likely to cause adverse coordinated
effects.'').
---------------------------------------------------------------------------
Third, the complaint does not allege that the firms in the
alleged market will have the post-merger incentive to engage in
coordinated behavior. Focusing merely on an individual's conduct--
without allegations about the incentives of Chevron and all the
other firms in the industry--does not amount to a plausible pleading
of coordinated effects.\16\
---------------------------------------------------------------------------
\16\ See, e.g., F.T.C. v. H.J. Heinz Co., 246 F.3d 708, 724-25
(D.C. Cir. 2001) (``Where rivals are few, firms will be able to
coordinate their behavior, either by overt collusion or implicit
understanding, in order to restrict output and achieve profits above
competitive levels. The creation of a durable duopoly affords both
the opportunity and incentive for both firms to coordinate to
increase prices.'' (brackets, citations, and internal quotation
marks omitted)); U.S. Dept. of Just. & Fed. Trade Comm'n, Horizontal
Merger Guidelines at section 7.1 (Aug. 19, 2010) (``The Agencies
seek to identify how a merger might significantly weaken competitive
incentives through an increase in the strength, extent, or
likelihood of coordinated conduct.'').
---------------------------------------------------------------------------
An appeal to the Majority's own 2023 Merger Guidelines \17\
would not provide refuge from a motion to dismiss either. According
to the Guidelines, three primary factors are used to ``assess the
extent to which a merger may increase the likelihood, stability, or
effectiveness of coordination:'' \18\ (1) highly concentrated
market, (2) prior actual or attempted attempts to coordinate; and
(3) elimination of a maverick.\19\ The complaint alleges none of
these factors. It avoids making allegations of concentration because
the combined share of the two firms in the alleged global market
would not exceed low single digits, the HHI is very low, and the
delta is miniscule. Taking the allegations and the implications
against Mr. Hess as true, neither he nor Hess Corporation ever
coordinated or attempted to coordinate with Hess Corporation's
rivals.\20\ Nor does the complaint allege that Hess Corporation is a
maverick eliminated by the merger. The Guidelines also include a
list of six secondary factors used to assess coordinated
effects,\21\ but again, the complaint does not rely upon any of
them.
---------------------------------------------------------------------------
\17\ U.S. Dept. of Just. & Fed. Trade Comm'n, Merger Guidelines
(Dec. 18, 2023).
\18\ Id. at section 2.3.
\19\ Id. at section 2.3.A.
\20\ See supra note 7.
\21\ Id. at section 2.3.B.
---------------------------------------------------------------------------
Setting aside the dubious section 7 claim, the hypocrisy of the
process is apparent from the Majority's express willingness in
today's order to allow Mr. Hess to consult with Chevron on projects
that align with the climate agenda of the political left.\22\ For
the Majority, Mr. Hess is too dangerous to be allowed to participate
as a board member or generally ``in an advisory or consulting
capacity.'' \23\ But Mr. Hess ceases to be dangerous if his services
further climate change-related activity.
---------------------------------------------------------------------------
\22\ The order allows Mr. Hess to consult with Chevron as long
as his consulting services are ``solely related to interactions and
discussions with (a) Guyanese government officials about Hess's oil-
related and health ministry-related activities in Guyana, and (b)
the Salk Institute's Harnessing Plants Initiative.'' Decision &
Order, In re Chevron Corp., No. 241-0008 at section II.B. (F.T.C.
Sept. 26, 2024).
\23\ Id.
---------------------------------------------------------------------------
Today's case is the most recent example of the Majority's
unfortunate proclivity to ignore statutory text to reach politically
beneficial outcomes.\24\ And they appear even more comfortable when
embracing indefensible positions in the context of settlements
\25\--knowing very well that the substance of their pleadings will
never be litigated. Today's approach, which is becoming increasingly
common, allows the Majority to coerce concessions from parties
without pleading facts that satisfy what the statute requires.\26\
Because so many of the Commission's cases settle without litigation,
the Majority has the luxury of advancing
[[Page 80563]]
unsound legal theories below the radar.\27\ However the Majority
wants to move the law, it cannot do so by manufacturing change
through some fictitious body of extracted settlements.
---------------------------------------------------------------------------
\24\ See, e.g., Dissenting Statement of Commissioner Melissa
Holyoak, Joined by Commissioner Andrew N. Ferguson, In the Matter of
the Non-Compete Clause Rule, Matter Number P201200 (June 28, 2024),
<a href="https://www.ftc.gov/system/files/ftc_gov/pdf/2024-6-28-commissioner-holyoak-nc.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/2024-6-28-commissioner-holyoak-nc.pdf</a>; cf. generally Dissenting Statement of Commissioner
Melissa Holyoak, Joined by Commissioner Andrew Ferguson, Health
Breach Notification Rule, File No. P205405 (Apr. 26, 2024), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/p205405_hbnr_mhstmt_0.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/p205405_hbnr_mhstmt_0.pdf</a>.
\25\ See, e.g., Exxon Dissent, supra note 7, at 1, 3.
\26\ See, e.g., id. at 1, 3 (explaining that ``the Commission is
leveraging its merger enforcement authority to extract a consent
from Exxon'' and that ``[t]he Commission should not leverage its
merger enforcement authority--or any authority--the way it does
today'').
\27\ Cf. Dissenting Statement of Commissioner William E.
Kovacic, In the Matter of Negotiated Data Solutions, LLC, File No.
051-0094 (Jan. 23, 2008) (``The prospect of a settlement can lead
one to relax the analytical standards that ordinarily would
discipline the decision to prosecute if the litigation of asserted
claims was certain or likely.''), <a href="https://www.ftc.gov/sites/default/files/documents/cases/2008/01/080122kovacic.pdf">https://www.ftc.gov/sites/default/files/documents/cases/2008/01/080122kovacic.pdf</a>.
---------------------------------------------------------------------------
Dissenting Statement of Commissioner Andrew N. Ferguson
The Commission today authorizes the filing of an administrative
complaint and proposed decision and order against Chevron
Corporation and Hess Corporation. The Complaint alleges that
Chevron's proposed $53 billion acquisition of Hess Corporation would
violate section 7 of the Clayton Act.\28\ The Complaint does not
plead a traditional section 7 theory because the Commission has
none. Chevron and Hess together have a two percent share of the
relevant market.\29\ No court has ever blocked a merger between
companies with such small shares. The aggressive new Merger
Guidelines presume that a merger would harm competition when it
combines companies with market shares of over thirty percent.\30\ A
two percent market share does not raise any competitive concerns at
all.
---------------------------------------------------------------------------
\28\ Compl. ] 50, In re Chevron Corp. and Hess Corp., FTC File
No. 241-0008 (Sept. 26, 2024) (``Complaint'') (citing 15 U.S.C. 18).
\29\ See BP Statistical Review of World Energy (2023); Chevron
2022 10-K; Hess 2022 10-K.
\30\ Dep't. of Justice & Fed. Trade Comm'n, Merger Guidelines,
section 2.1 (Dec. 18, 2023); see also United States v. Philadelphia
Nat'l Bank, 374 U.S. 321, 364 (1963) (establishing a rebuttable
presumption that a merger resulting in a single firm's control of at
least thirty percent of the relevant market violates section 7).
---------------------------------------------------------------------------
The Complaint instead alleges that adding John Hess--Hess
Corporation's CEO--to Chevron's twelve-member board of directors
turns an unobjectionable merger into a section 7 violation. The
Commission's Complaint alleges that while serving as Hess
Corporation's CEO, Mr. Hess ``communicated publicly and privately
with OPEC representatives . . . about global output and other
dimensions of crude oil market competition.'' \31\ This conduct, the
Commission suggests, is dangerous to competition. The Commission
then contends that Mr. Hess's position on Chevron's board would give
him even more power to harm competition in global oil markets than
he currently wields as Hess Corporation's CEO and as a member of its
board.\32\ This increase in power, the Commission claims, would
``substantially lessen competition, or tend to create a monopoly''
in the global market for crude oil.\33\ Because the increase in
power is a function of Chevron's acquisition of Hess Corporation,
the Commission reasons that the acquisition therefore violates
section 7 of the Clayton Act.
---------------------------------------------------------------------------
\31\ Compl. at ] 4.
\32\ Id. at ] 50.
\33\ Ibid. (citing 15 U.S.C. 18).
---------------------------------------------------------------------------
The Commission's section 7 theory does not hold water. It rests
on a series of implausible and unsupported assumptions that fall
well short of pleading a violation of the Clayton Act. But it does
satisfy a constituency important to the Commission majority--
Democratic politicians who have repeatedly and publicly urged the
Commission to block this merger in order to advance their climate
agenda.\34\ Bending section 7 to political pressure is incompatible
with the rule of law. I therefore dissent from the filing of the
Complaint.
---------------------------------------------------------------------------
\34\ See, e.g., Letter from U.S. Senator Charles E. Schumer,
Representative Ro Khanna, et al., to Lina Khan, Chair, Fed. Trade
Comm'n (Mar. 6, 2024) (``We write concerning the wave of oil-and-gas
consolidation, building on top of a longstanding trend, that
threatens competition in the industry . . . In just the most recent
months . . . Chevron moved to acquire Hess. Many of us warned in a
November letter that [this] mega-deal[ ] could provoke a wave of
mergers and acquisitions in the energy sector and trigger a new
`consolidation trend' to the detriment of industry competition and
American consumers. . . . We applaud the FTC for opening
investigations of the . . . Chevron-Hess . . . acquisition[ ] . . .
[W]e urge the FTC to extend its current investigations. . . .'');
Letter from U.S. Senator Charles E. Schumer, U.S. Senator Amy
Klobuchar, et al. to Lina Khan, Chair, Fed. Trade Comm'n (Nov. 1,
2023) (``We write regarding our concerns about two blockbuster oil-
and-gas deals announced in October: ExxonMobil's (Exxon) proposed
$60 billion acquisition of Pioneer Natural Resources (Pioneer) and
Chevron's proposed $53 billion acquisition of Hess Corporation
(Hess)--two of the largest oil-and-gas deals of the 21st century. By
allowing Exxon and Chevron to further integrate their extensive
operations into important oil-and-gas fields, these deals are likely
to harm competition, risking increased consumer prices and reduced
output throughout the United States.'').
---------------------------------------------------------------------------
First, the majority necessarily assumes that Mr. Hess would
continue his communications with OPEC representatives after joining
Chevron's board. If that were not the case, then the transaction
would be at worst competitively neutral or even pro-competitive
insofar that Mr. Hess's previous communications were injurious to
competition.\35\ This assumption is utterly implausible. Discussing
output with representatives of Hess Corporation's competitors at
OPEC is obviously risky.\36\ Mr. Hess's past communications with
OPEC officials have landed him and Hess Corporation in hot water.
The statements to which the majority objects attracted the attention
of government regulators and formed the basis of several private
class-action lawsuits pending against Hess Corporation.\37\ It is
unreasonable to assume that Mr. Hess would continue his OPEC
discussions unabated in light of the consequences those statements
have generated.
---------------------------------------------------------------------------
\35\ Section 7 is a forward-looking statute, intended to prevent
future harm to competition, not punish past conduct. See United
States v. Baker Hughes Inc., 908 F.2d 981, 991 (D.C. Cir. 1990)
(Thomas, J.) (``By focusing on the future, section 7 gives a court
the uncertain task of assessing probabilities''); Deborah Feinstein,
then-FTC Director of the Bureau of Competition, The Forward-Looking
Nature of Merger Analysis, Advanced Antitrust U.S., 3 (2014) (``In
markets, the past is not always prologue. For example, the
Commission recently closed its investigation of the Office Depot/
OfficeMax transaction without action, 17 years after obtaining an
injunction to block the Staples/Office Depot combination.'').
\36\ In re Domestic Airline Travel Antitrust Litig., 691 F.
Supp. 3d 175, 219 (D.D.C. 2023) (finding that defendant airlines'
statements regarding restrained output could support inference of a
conspiracy violating the Sherman Act).
\37\ Compl., Rosenbaum v. Permian Res. Corp., No. 2:24-cv-00103
(D. Nev. 2024); Compl., Mellor v. Permian Res. Corp., No. 2:24-cv-
00253 (D. Nev. 2024). The United States Judicial Panel on
Multidistrict Litigation consolidated these two lawsuits with three
others and transferred them to the District of New Mexico. See
Transfer Order, In re: Shale Oil Antitrust Litig., MDL No. 3310
(Aug. 1, 2024). The parties also ``informed the Panel of eleven
potentially-related actions pending in four districts.'' Id.
---------------------------------------------------------------------------
Even if Mr. Hess could not appreciate the risk of discussing
output with OPEC officials, Chevron has a strong incentive to ensure
that its officers and directors avoid risky conversations with OPEC
representatives. The Complaint does not allege that any current
Chevron officer or director had any potentially unlawful discussions
with OPEC officials. In fact, one private lawsuit against Hess
Corporation specifically alleges that Chevron rejected OPEC's calls
for constrained output in favor of increased production.\38\ But for
the proposed order, Mr. Hess would become a director of Chevron. He
would then be subject to Chevron's direction, and Chevron's
incentive to prevent its officers and directors from cavorting with
OPEC officials would apply to Mr. Hess. The Commission's assumption
that Mr. Hess's behavior as a Chevron board member would be
identical to his behavior as Hess Corporation's CEO is not only
implausible; the only plausible inference is precisely the opposite.
---------------------------------------------------------------------------
\38\ Compl., Rosenbaum v. Permian Res. Corp., No. 2:24-cv-00103,
] 104 (D. Nev. 2024) (``the supermajors started investing in shale
in 2021 and 2022 at rates previously unseen, in direct response to
U.S. shale producers underinvesting as an industry . . . Mid way
through 2022, Chevron anticipated a `15% year-over-year increase' in
shale oil production from 2021 and promised to continue `bolstering
production' '').
---------------------------------------------------------------------------
Second, the majority must also assume that Mr. Hess's post-
merger behavior would have a sufficiently major effect on global oil
markets ``substantially to lessen competition or tend to create a
monopoly.'' \39\ No other aspect of this transaction poses any risk
at all of substantially lessening competition or tending to create a
monopoly. The Commission's entire theory rests on a prediction about
the competitive effects of Mr. Hess's conduct.
---------------------------------------------------------------------------
\39\ 15 U.S.C. 18.
---------------------------------------------------------------------------
The proposition that Mr. Hess's comments could move global oil
markets is laughable. The Complaint does not allege that Mr. Hess
encouraged other U.S. producers to reduce output. Instead, the
Complaint's primary theory of harm is that ``Mr. Hess's supportive
messaging to OPEC encourages OPEC's output stabilizing agenda, and .
. . reduces the unpredictability of the non-OPEC response to OPEC's
output decisions.'' \40\ The
[[Page 80564]]
Complaint does not allege that Mr. Hess ever discussed non-public
information with OPEC. Yet it suggests that the international oil
cartel hangs on his every word, and his musings and suggestions spur
national governments to action. Mr. Hess should be flattered that
the Commission thinks so much of his influence. But I do not share
my colleagues' view about the reach of Mr. Hess's powers. OPEC's
raison d'etre for decades has been to manage output and raise crude
oil prices to maximize its member nations' monopoly rents.\41\ OPEC
does not need the encouragement of the CEO of a midsized American
producer to pursue its cartel goals.
---------------------------------------------------------------------------
\40\ Compl. at ] 50.
\41\ See Org. of the Petroleum Exporting Countries, OPEC: Our
Mission (``In accordance with its Statute, the mission of the
Organization of the Petroleum Exporting Countries (OPEC) is to
coordinate and unify the petroleum policies of its Member Countries
and ensure the stabilization of oil markets . . .'').
---------------------------------------------------------------------------
Third, even if the Commission were correct that Mr. Hess's
conduct would continue unabated as a Chevron director and that the
conduct substantially affects competition, the majority does not
state a section 7 claim unless it can show that Mr. Hess's addition
to the Chevron board would injure competition more than if he were
to remain Hess Corporation's CEO. If his addition to the Chevron
board is no more dangerous to competition than his service as Hess
Corporation's CEO, then the transaction poses no competitive
risks.\42\ The Complaint proposes two theories for why his addition
to the Chevron board is worse than the status quo. Both fail.
---------------------------------------------------------------------------
\42\ See Dep't. of Justice & Fed. Trade Comm'n, Merger
Guidelines, section 2.3 (Dec. 18, 2023) (``Guideline 3: Mergers Can
Violate the Law When They Increase the Risk of Coordination'')
(emphasis added).
---------------------------------------------------------------------------
The Commission first argues that because Chevron is larger than
Hess Corporation, Mr. Hess's position on Chevron's board would
``amplify the importance and likely effect'' of his statements on
OPEC.\43\ This statement is pure ipse dixit. No allegations in the
Complaint lend that allegation any plausibility.\44\ And common
sense suggests otherwise. The CEO of an oil producer directs the
daily operations of the company. He exercises far more control over
the company on a daily basis--including on pricing and output
decisions--than one member of a twelve-person board of directors.
The statements of an oil-company CEO would therefore likely carry
much greater weight than the same statements made by one of twelve
oil-company directors. The Complaint contains nothing suggesting
that the opposite is true.
---------------------------------------------------------------------------
\43\ Compl. at ] 50.
\44\ See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)
(requiring that a complaint plead ``enough facts to state a claim to
relief that is plausible on its face.'').
---------------------------------------------------------------------------
The Complaint also contends that Mr. Hess's service on Chevron's
board would ``meaningfully increas[e] the likelihood that Chevron
would align its production with OPEC's output decisions to maintain
higher prices.'' \45\ But this allegation too is conclusory ipse
dixit. Nothing in the Complaint explains how this would happen. For
example, the Complaint does not allege that Mr. Hess's
communications with OPEC officials had any effect on Hess
Corporation's capital plans, output decisions, or any other behavior
by the company. Indeed, under his leadership, Hess Corporation's
production growth routinely exceeded that of peer companies.\46\ If
Mr. Hess as CEO, did not curtail Hess Corporation's output in
response to conversations with OPEC, it beggars belief that he
could, and would, do so as one of the twelve members of Chevron's
board.
---------------------------------------------------------------------------
\45\ Compl. at ] 11.
\46\ See, e.g., Fitch Maintains Rating Watch Positive on Hess'
`BBB' Ratings, Fitch Ratings, Inc., (Aug. 21, 2024) (``Hess' growth
profile differentiates it from most exploration and production (E&P)
peers''); Sourasis Bose and Sabrina Valle, Oil producer Hess beats
profit estimates on U.S. production boost, Reuters (July 26, 2023).
---------------------------------------------------------------------------
But even if the Commission's assumptions were all correct--and
they are not--the Commission still fails to state a section 7
violation. Even if Chevron were, at Mr. Hess's instigation, to
reduce its output, the Complaint does not explain how that output
would meaningfully affect competition. The combined Chevron-Hess
Corporation entity will control two percent of the global oil
market. A reduction in its output would hardly remove a drop from
the metaphorical bucket.
That is not to say that I favor Mr. Hess's alleged conduct. (I
emphasize that the conduct is merely alleged; the Commission has not
proven anything.) OPEC is not a friend to the American people. Just
ask any American who lived through 1973. OPEC's goal is to keep oil
prices high to extract monopoly rents from every consumer of
petroleum products on the planet--including every single American.
OPEC's member states include some of America's bitterest foes. I am
not fond of the idea that American oil executives would share
encouraging messages with an organization that includes America's
enemies, the goal of which is to keep our oil prices high. But
section 7 does not forbid disquieting conduct.\47\ It forbids
transactions ``the effect'' of which ``may be substantially to
lessen competition, or to tend to create a monopoly.'' \48\ Nothing
in the Commission's Complaint suggests that this transaction will
have such an effect. The Commission should not twist section 7 into
knots to get at Mr. Hess's alleged conduct.
---------------------------------------------------------------------------
\47\ Whether Mr. Hess's alleged conduct violated some other
antitrust law or, any other Federal law, is not at issue in this
case and I therefore take no position on that question.
\48\ 15 U.S.C. 18.
---------------------------------------------------------------------------
Neither judicial nor Commission precedent supports the
Complaint's theory of section 7. The only time we have ever posited
this sort of theory before was in a recent unlitigated settlement
complaint involving the merger of Exxon Corporation and Pioneer
Natural Resources Company.\49\ And we did so over my dissent.\50\ I
cannot imagine that the majority Commission would ever risk
litigating a section 7 claim involving two percent shares of the
market simply because of one potential director's speeches and
texts. I therefore doubt that the Commission will ever risk letting
the courts review the interpretation of section 7 embodied in
today's Complaint.
---------------------------------------------------------------------------
\49\ Compl., In re Exxon Mobil Corp., FTC File No. 241 0004 (May
2, 2024).
\50\ See Joint Dissenting Statement of Melissa Holyoak, Comm'r,
Fed. Trade Comm'n, and Andrew N. Ferguson Comm'r, Fed. Trade Comm'n,
In re ExxonMobil Corp., FTC Matter No. 241 0004 (May 1, 2024).
---------------------------------------------------------------------------
It is not a coincidence that the Commission has trotted out this
theory only in settlements. I have lamented repeatedly that the
majority has a penchant for pressing far-fetched, novel theories in
complaints it knows will not be litigated, and relying on those
unadjudicated complaints as a form of precedent for subsequent
Commission action.\51\ No court should give this consent, or its
equally lawless predecessor in Exxon-Pioneer, any precedential
value.\52\ Unadjudicated complaints tell us nothing about the law.
This Complaint is an accusation leveled by three Commissioners,
nothing more.\53\
---------------------------------------------------------------------------
\51\ See Concurring Statement of Andrew N. Ferguson, Comm'r,
Fed. Trade Comm'n, In re Asbury Automotive Group, Inc., et al., FTC
Matter No. 222 3135, 2 (Aug. 16, 2024) (``In re Asbury''); see also
Concurring and Dissenting Statement of Andrew N. Ferguson, Comm'r,
Fed. Trade Comm'n, In re Invitation Homes, FTC Docket No. 9436, 5
(Sep. 16, 2024).
\52\ See Joint Dissenting Statement of Melissa Holyoak, Comm'r,
Fed. Trade Comm'n, and Andrew N. Ferguson, Comm'r, Fed. Trade
Comm'n, In re ExxonMobil Corp., FTC Matter No. 241 0004 (May 1,
2024).
\53\ See In re Asbury, supra note 24, at 2 (``[U]nadjudicated
complaints are not the law. A complaint is an accusation, nothing
more. It is subject neither to adversarial testing--the defining
feature of the American legal tradition--nor to adjudication by the
Commission or an impartial Article III judge.'').
---------------------------------------------------------------------------
One might wonder why I object to a complaint that the merging
parties are voluntarily settling. The Complaint is the Commission's
statement of what section 7 means. I believe that statement to be
woefully incorrect and therefore cannot join it. And the fact of
settlement should lend no credibility to the majority's outlandish
interpretation of section 7. Parties settle civil cases when it
suits their interests even if they would prevail in litigation.\54\
This consent agreement is a stark example. The Commission leveraged
its Hart-Scott-Rodino Act \55\ authority by threatening to hold up
Chevron and Hess's $53 billion dollar merger even though the lack of
a plausible section 7 theory had long been obvious. And yes, the
parties could have told the Commission to make their day and file a
lawsuit. But that lawsuit would cause months of delay and cost
countless millions of dollars in legal fees. The merging parties
surely would have prevailed on this section 7 claim, but the victory
could very well have been Pyrrhic if market conditions changed in
the intervening months. They therefore rationally took the quick and
easy path opened to them by this consent agreement. For Hess
Corporation's
[[Page 80565]]
shareholders, the consent is all upside: with the merger cleared,
they will soon get paid. And for Chevron's shareholders, the benefit
is clear and the cost is minimal: a valuable asset in exchange for
keeping one person off of the board of directors.
---------------------------------------------------------------------------
\54\ See id. at 3 (``[M]any firms settle even if they honestly
believe that they did nothing wrong and that they would prevail in
litigation. Those firms reasonably conclude that a swift end to the
Commission's investigation or threatened enforcement advances their
interests more than a litigation victory.'').
\55\ 15 U.S.C. 18a.
---------------------------------------------------------------------------
The Commission majority and the Democratic politicians who urged
them on will hail today's Complaint and proposed order as a victory.
Those politicians have loudly urged the Commission to block this
merger, and today the Commission majority can pretend it delivered,
even as it allows the merger to proceed.\56\ Fawning press coverage
will surely follow--a nice bonus for the Democrats as voters head to
the polls to pick the next President. The American public rightly
loathes OPEC and has little affection for its perceived friends. Few
apart from seasoned antitrust practitioners will look under the hood
of the Commission's antitrust theory. The Commission will tout this
modest, coerced settlement as a ``win'' and add it to the list of
``wins'' it uses to calculate a supposed ``90% win rate.'' \57\
---------------------------------------------------------------------------
\56\ See supra note 7.
\57\ See Douglas Farrar, X, (Sept. 13, 2024), <a href="https://x.com/DouglasLFarrar/status/1834727643171733651">https://x.com/DouglasLFarrar/status/1834727643171733651</a> (``FTC Chair Khan has won
more than 90% of her lawsuits'') (quoting remarks of Rep. Alexandria
Ocasio-Cortez).
---------------------------------------------------------------------------
But this settlement is not a victory for the rule of law. ``A
settlement extracted from an innocent party reveals much about the
Commission's power, but nothing about the law.'' \58\ The
Commission's power under the Hart-Scott-Rodino Act is considerable
and coercive. We do not approve or forbid mergers, but we may sue to
block them. Lawsuits are expensive and time-consuming, and the mere
risk of an enforcement action can make an otherwise valuable
transaction too costly to pursue.\59\ Our gatekeeping function
therefore gives us the power to exact tolls on merging parties even
if our legal theory is bunk.\60\ The risk, time, and expense
associated with convincing a judge that the Commission's theory is
bunk is coercive enough that merging parties will pay for the
Commission to go away. But such a settlement does not vindicate the
rule of law. It is instead a sort of tax on mergers made possible by
the fact that Congress has made the Commission a merger gatekeeper.
---------------------------------------------------------------------------
\58\ In re Asbury, supra note 24, at 3.
\59\ Id. at 4 (``That a firm may break this cycle by litigating
is no answer to my objection. For most small businesses--and many
large ones--a Commission investigation is costly. Lawyers are
expensive, and investigations sometimes last for years. Litigation
may take many years more. The mere risk of a Commission
investigation is coercive and can be enough to force some businesses
to yield.'').
\60\ See Joint Dissenting Statement of Melissa Holyoak, Comm'r,
Fed. Trade Comm'n, and Andrew N. Ferguson, Comm'r, Fed. Trade
Comm'n, In re ExxonMobil Corp., FTC Matter No. 241 0004 (May 1,
2024).
---------------------------------------------------------------------------
Today, two merging companies pay a toll to pass through the
Hart-Scott-Rodino gate. They do not pay the toll because section 7
requires it. Nothing in section 7 requires Mr. Hess to stay off the
Chevron board. They pay the toll because the Commission has
threatened to make their lives difficult if they do not, and they
have concluded that it is easier to pay than to resist. The
Commission collects the toll and proclaims victory. But reducing
antitrust enforcement to a pay-for-peace racket inflicts serious
injury on the rule of law--and on the Commission's credibility.
I therefore respectfully dissent.
[FR Doc. 2024-22874 Filed 10-2-24; 8:45 am]
BILLING CODE 6750-01-P
</pre></body>
</html>Indexed from Federal Register on October 3, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.