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mergers and acquisitions
Khanna, Schumer Lead Call for FTC Probe of Big Oil Consolidation
"Americans are paying the price for Big Oil's greed and are still struggling to keep up with gas prices higher than pre-pandemic levels."
Mar 06, 2024
U.S. Congressman Ro Khanna and Senate Majority Leader Chuck Schumer on Wednesday led dozens of congressional colleagues in urging federal regulators to investigate the recent historic surge in oil and gas industry consolidation.
In a bicameral letter to Federal Trade Commission (FTC) Chair Lina Khan, the lawmakers took aim at what analysts say is the biggest-ever wave of Big Oil mergers and acquisitions (M&A), which totaled a staggering $190 billion last year, including $144 billion worth of industry consolidation in the fourth quarter alone.
"Contrary to disinformation spread by industry groups, these deals are not about efficiency, international competitiveness, or lowering costs; they are designed to pump more profits out of Americans' pockets—plain and simple," the letter led by Khanna (D-Calif.) and Schumer (D-N.Y.) states. "Fossil fuel companies have overwhelmingly identified investor pressure as the reason to keep prices high so they can continue to benefit from record profits. Americans are paying the price for Big Oil's greed and are still struggling to keep up with gas prices higher than pre-pandemic levels."
The lawmakers urged the FTC to "consider all harms that past and future mergers present to American consumers" and "oppose any acquisitions it determines to be in violation of antitrust law."
The FTC is currently investigating last year's megamergers involving Chevron and Hess, ExxonMobil and Pioneer, and Occidental Petroleum and CrownRock.
"Oil and gas is undergoing a historic consolidation wave comparable to what occurred in the late 1990s and early 2000s giving rise to the modern supermajors," Andrew Dittmar, a senior vice president at the analytics firm Enverus, said earlier this year. "After a decade of lowered investment in exploration and with the major U.S. shale plays largely defined, M&A has become the preferred tool to replace declining reserves and secure longevity in these companies' profitable upstream businesses."
The lawmakers' letter warns that "if a small group of dominant firms is allowed to control this industry, American consumers and industry competition will only suffer."
"Therefore, we urge the FTC to extend its current investigations, open inquiries into these new deals, and take all appropriate actions to protect competition in this industry," the letter adds. "Lax enforcement during the last generation, such as allowing Exxon and Mobil to merge, resulted in market manipulation, unstable supply, and price hikes for Americans. We must avoid similar mistakes going forward."
The letter is backed by advocacy groups including Food & Water Watch, Public Citizen, Friends of the Earth, Center for Biological Diversity, Indigenous Environmental Network, Greenpeace USA, Zero Hour, and Sierra Club.
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Warren Calls On Regulators to 'Immediately' Block Capital One-Discover Merger
The Massachusetts Democrat said the $35.3 billion deal "threatens our financial stability, reduces competition, and would increase fees and credit costs for American families."
Feb 20, 2024
U.S. Sen. Elizabeth Warren on Tuesday led calls for federal regulators to "immediately" block Capital One Financial's $35.3 billion purchase of Discover Financial Services, warning that "this Wall Street deal is dangerous and will harm working people."
The proposed all-stock deal would create the nation's sixth-largest bank by assets in a credit card industry dominated by Visa and MasterCard. Capital One CEO Richard Fairbank called the acquisition "a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payment companies."
However, Warren (D-Mass.) warned that the proposed merger "threatens our financial stability, reduces competition, and would increase fees and credit costs for American families. Regulators must block it immediately."
The proposed acquisition comes days after the
publication of a new U.S. Consumer Financial Protection Bureau (CFPB) report revealing the "predatory" practices of credit card companies including Capital One, which charge interest rates that can exceed 30%. According to the CFPB, lack of competition "likely contributes to higher rates at the largest credit card companies."
Critics say the proposed merger will only make matters worse.
"The Capital One-Discover deal will create another colossal too-big-to-fail bank while supercharging consolidation in the credit card sector," Shahid Naeem, senior policy analyst at the American Economic Liberties Project, said in a statement. "Greenlighting the creation of the nation's sixth-largest bank and the largest credit card issuer is indefensible, particularly as the harms of bank and credit card consolidation are already causing enforcers and Congress to chart a stricter approach to both."
"It's time for bank regulators to step up and do their jobs to protect the safety and stability of the financial system, the economy, and the American consumer—starting with blocking this deal," Naeem added.
Liz Zelnick, who directs the economic security and corporate power program at the watchdog Accountable.US, said that "banking giants like Capital One have long exploited the lack of competition to price gouge families with predatory credit card interest rates and hidden junk fees."
"Even less competition under this merger means these companies will have less incentive to check their greedy practices that nickel and dime consumers into the billions of dollars," she continued. "Federal regulators should take a hard look into whether this deal runs afoul of antitrust rules at the expense of consumers."
"It's a reminder why the Biden administration's ongoing efforts to crack down on excessive and hidden junk fees from big banks are a critical step towards lowering costs for Americans," Zelnick added.
University of Michigan business law professor Jeremy Kress—a former Federal Reserve official who oversaw bank mergers—toldReuters that the deal "will provoke a significant pushback and receive heightened regulatory scrutiny."
"It will be the first big test of bank merger regulation since the Biden administration's executive order on promoting competition in 2021," he added.
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FTC-DOJ Merger Guidelines Aim to 'Restore Competition and Strengthen Democracy'
One expert called the guidance "a game-changer for antitrust enforcement, incorporating decades of new learnings and thousands of public comments from working families and small businesses."
Dec 18, 2023
Antitrust campaigners and experts on Monday celebrated the Biden administration's new guidelines for mergers and acquisitions, which supporters say will "restore competition and strengthen democracy."
Farm Action co-founder and chief strategy officer Joe Maxwell commended the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ) "for delivering on their commitment to restore competition to our economy."
"For more than 40 years, the merger guidelines have been void of a review for competition," he said. "During this period of time, unprecedented concentration across U.S. markets has driven farmers and small businesses out of business."
"The new guidelines provide a roadmap to bring first principles of the antitrust laws into the 21st century."
Erik Peinert, research manager and editor at the American Economic Liberties Project, declared that "the finalized merger guidelines are a game-changer for antitrust enforcement, incorporating decades of new learnings and thousands of public comments from working families and small businesses."
"After almost 50 years of significant underenforcement, we're thrilled to see the antitrust agencies make a comprehensive update to the merger guidelines, and look forward to seeing them vigorously enforced," he continued. "The new guidelines provide a roadmap to bring first principles of the antitrust laws into the 21st century."
"Previous guidelines ignored or underappreciated the harms from practices like vertical mergers and serial acquisitions, as well as the harms to workers," he highlighted. "A generation of these deals has suppressed worker pay, increased prices, and embrittled our supply chains."
Open Markets Institute legal director Sandeep Vaheesan also praised the agencies behind the new guidelines, which he said "put fealty to law front and center again and seek to implement congressional intent, instead of their own ideological preferences."
"By relying on market share tests for deciding the legality of certain mergers, the new guidelines are more faithful to the Clayton Act than the 2010 horizontal merger guidelines were," Vaheesan explained. "They are also more in accord with empirical research on the effects of mergers and acquisitions, which finds that corporate consolidation can harm democratic balances and institutions, as well as workers, producers, and consumers."
"In our comments on the draft guidelines, we called on the DOJ and the FTC, in the final guidelines, to adopt lower market share tests to cover consolidations outside the most highly concentrated markets and to reject unequivocally an efficiencies defense for presumptively illegal mergers," he noted. "Although the agencies stuck with their original approach in the final document, these guidelines are a material improvement over the status quo and will help the two agencies do a better job of stopping and deterring harmful corporate consolidation going forward."
The guidelines released Monday reflect feedback the agencies received after putting out a draft in July.
FTC Chair Lina Khan expressed gratitude for "the thousands of comments submitted by American workers, consumers, entrepreneurs, farmers, business owners, and other members of the public," stressing that "this input directly informed the guidelines and allowed us to pursue this work with a deeper understanding of the real-life stakes of merger enforcement."
Attorney General Merrick Garland said in a statement that the guidelines "provide transparency" into Justice Department action and pledged that the DOJ "will continue to vigorously enforce the laws that safeguard competition and protect all Americans."
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