Trump Likely to Shift FTC's Antitrust Stance on Energy Mergers

During President Joe Biden’s administration, the FTC initiated in-depth investigations into at least six major oil and gas mergers, including Exxon Mobil Corp.’s $60 billion acquisition of Pioneer Natural Resources Co. and Chevron Corp.’s $53 billion acquisition of Hess Corp.

This was a departure from previous administrations that brought few challenges to horizontal mergers of energy exploration and production companies, recognizing these companies operate in increasingly global markets.

Biden’s FTC alleged that Pioneer founder and former CEO Scott Sheffield and Hess CEO John Hess had attempted to collude with the Organization of the Petroleum Exporting Companies and other US oil companies to curtail production and drive prices higher.

The FTC claimed its enforcement actions sought to prevent Sheffield and Hess from gaining a larger platform from which to pursue anticompetitive behavior. To resolve the FTC’s concerns, Exxon and Chevron agreed to prohibit Sheffield and Hess from taking a seat on their respective boards of directors.

One year prior, the FTC filed an enforcement action against EQT Corp.’s acquisition of an oil and gas production company from Quantum Capital Group, arguing that the right for Quantum’s CEO to join the board of EQT would have created an unlawful “interlock” between the two companies’ boards. It was the commission’s first case of this kind in over 40 years.

Concerns about board interlocks also appeared in the complaint against Exxon/Pioneer due to Sheffield’s role on the board of Williams Companies, which the FTC viewed as a direct competitor to Exxon.

It’s unlikely that these deals would have received the same degree of scrutiny in a Trump administration. Republicans Melissa Holyoak and Andrew Ferguson—Trump’s new pick to lead the FTC—weren’t yet commissioners during the EQT investigation. But their dissenting statements in the Exxon and Chevron cases argued that the transactions didn’t violate Section 7 of the Clayton Act, which bars mergers and acquisitions that could create a monopoly or reduce competition.

In their view, nothing about the proposed transaction itself would have substantially lessened competition, though the executives’ conduct may have warranted a separate investigation. The considerable time the commission spent investigating labor market concerns in recent energy deals also seems less likely in a Republican-controlled FTC.

Still, energy companies shouldn’t expect a free pass in a Trump administration, notwithstanding Trump’s stated desire to speed up energy-related antitrust reviews. Transactions directly affecting consumer energy prices, such as those involving retail fuel outlets, terminals, and refineries, are likely to face scrutiny, reflecting bipartisan focus on ensuring affordable energy for consumers.

During the previous Trump administration, the FTC filed complaints and obtained divestitures in at least five transactions involving retail fuel outlets. Similarly, the FTC under Biden forced divestitures in at least three retail fuel transactions. The Department of Justice enforced the Clayton Act’s Section 8 prohibition on board interlocks under both the Trump and Biden administrations as well.

The burgeoning growth of artificial intelligence and cryptocurrency sectors—industries that Trump vigorously supports—and their consequent strain on the national energy grid present a unique challenge. The increasing demand for data centers and supporting infrastructure requires a careful balance between fostering technological advancement and ensuring stable energy prices.

The Trump administration’s political appointees to the FTC and Justice Department will play a pivotal role in navigating these complex issues, assessing whether consolidating natural gas production, power generation, or data infrastructure could harm these nascent technologies or lead to higher prices for consumers.

While a shift toward traditional enforcement may signal less aggressive scrutiny in upstream energy deals compared with the Biden-era FTC, bipartisan concern with consumer energy prices and energy market stability means that antitrust compliance will remain critical.

Legal counsel should prepare clients for continued scrutiny of transactions involving midstream or downstream assets, board interlocks, and the intersection of energy markets with emerging industries such as AI and cryptocurrency.

Read the article on Bloomberg Law here.