[Federal Register Volume 89, Number 96 (Thursday, May 16, 2024)]
[Notices]
[Pages 42875-42879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10731]


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FEDERAL TRADE COMMISSION

[File No. 241 0004]


Exxon Mobil Corporation/Pioneer Natural Resources Company; 
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 June 17, 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: ``Exxon Mobil 
Corporation/Pioneer Natural Resources Company; File No. 241 0004'' on 
your comment and file your comment online at https://www.regulations.gov 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 X), 
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: 
https://www.ftc.gov/news-events/commission-actions.
    The public is invited to submit comments on this document. For the 
Commission to consider your comment, we must receive it on or before 
June 17, 2024. Write ``Exxon Mobil Corporation/Pioneer Natural 
Resources Company; File No. 241 0004'' 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 
https://www.regulations.gov website.

[[Page 42876]]

    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 https://www.regulations.gov 
website. If you prefer to file your comment on paper, write ``Exxon 
Mobil Corporation/Pioneer Natural Resources Company; File No. 241 
0004'' 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 X), 
Washington, DC 20580.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, 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 https://www.regulations.gov--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 https://www.ftc.gov 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 June 17, 2024. For information on the Commission's privacy 
policy, including routine uses permitted by the Privacy Act, see 
https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Order (``Consent Agreement'') from Exxon Mobil Corporation 
(``Exxon''). Pursuant to an Agreement and Plan of Merger dated October 
10, 2023 (``Merger Agreement''), Exxon and Pioneer Natural Resources 
Company (``Pioneer'') intend to combine their businesses through a 
merger (``the Proposed Acquisition''). The Proposed Acquisition will 
further enlarge Exxon--already the largest multinational supermajor oil 
company--and make Exxon by far the largest producer of crude oil in the 
Permian Basin, the United States' top oil-producing region. The purpose 
of the Consent Agreement is to remedy the anticompetitive effects that 
otherwise would result from the Proposed Acquisition.
    Through public statements and private communications, Pioneer 
founder and former CEO Scott D. Sheffield has campaigned to organize 
anticompetitive coordinated output reductions between and among U.S. 
crude oil producers, and others, including the Organization of 
Petroleum Exporting Countries (``OPEC''), and a related cartel of other 
oil-producing countries known as OPEC+. Rather than seeking to compete 
against OPEC and OPEC+ through independent competitive decision-making, 
Mr. Sheffield's goal in recent years at Pioneer has been to align U.S. 
oil production with OPEC and OPEC+ country output agreements, thereby 
cementing the cartel's position and sharing in the spoils of its market 
power.
    Under the terms of Exxon and Pioneer's Merger Agreement, Exxon is 
required to take all necessary actions to appoint Mr. Sheffield to 
Exxon's Board of Directors. Prior attempts to coordinate between Mr. 
Sheffield and firms representing a substantial share of the relevant 
market are highly informative as to the market's susceptibility to 
coordination. The appointment of Mr. Sheffield to Exxon's board as a 
result of the Proposed Acquisition will expand the scope of his reach 
to promote his anticompetitive messaging and therefore meaningfully 
increases the likelihood that these attempts at coordination will bear 
fruit. In particular, Mr. Sheffield's post-merger appointment to 
Exxon's board would give him a larger platform from which to advocate 
for greater industry-wide coordination as well as decision-making input 
on not only the largest producer in the Permian Basin, but also the 
largest multinational supermajor oil company. Under the terms of the 
proposed Decision and Order (``Order''), Exxon is prohibited from 
appointing Mr. Sheffield, current Pioneer employees, and certain other 
persons affiliated with Pioneer to its board, required to comply with 
section 8 of the Clayton Act, 15 U.S.C. 19, and 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. Sheffield on the Exxon board would harm the 
competitive process. The merger, if consummated, would also violate 
section 5 of the FTC Act by creating a board interlock among 
competitors. Mr. Sheffield currently serves on the board of The 
Williams Companies, Inc. (``Williams''), which operates a host of 
natural gas pipelines; natural gas gathering, processing, and treating 
assets; natural gas and natural gas liquids processing assets; crude 
oil transportation assets; and crude oil and natural gas production. 
Exxon and Williams are competitors of each other.
    The proposed Order presents significant relief for these concerns 
and imposes effective and administrable relief. By restricting Mr. 
Sheffield and other Pioneer representatives from Exxon's board, the 
proposed Order makes clear that signaling coordinated price, output, or 
other competitive terms between market participants,

[[Page 42877]]

particularly in the oil and gas industry, may give rise to legal 
liability. This Consent Order remedies the harm from the agreement to 
place Mr. Sheffield on the Exxon board. The Commission will continue 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.
    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

    Exxon is a public multi-national vertically integrated refiner and 
oil and gas producer, with revenues of over $340 billion and operations 
in the United States and worldwide. Exxon is headquartered in Spring, 
Texas, and operates refineries throughout the world that produce 
transportation fuels and petrochemicals.
    Pioneer is a public independent oil and gas company headquartered 
in Irving, Texas with revenues of nearly $20 billion. Pioneer produces 
crude oil and associated natural gas in the Permian Basin.

III. The Agreement and Plan of Merger

    On October 10, 2023, Exxon and Pioneer entered into the Merger 
Agreement, pursuant to which Exxon agreed to acquire Pioneer for an 
enterprise value of approximately $64.5 billion. The terms of the 
Merger Agreement state that Exxon ``shall take all necessary actions to 
cause Scott D. Sheffield . . . . to be appointed to the board of 
directors'' immediately following the consummation of the Proposed 
Acquisition. The Commission's Complaint alleges that this effect--Mr. 
Sheffield's appointment to the Exxon board--of the Proposed 
Acquisition, if consummated, would violate section 7 of the Clayton Act 
and section 5 of the FTC Act. Moreover, because Mr. Sheffield's 
appointment to Exxon's board would create a board interlock among 
competitors, the Proposed Acquisition, if consummated, would also 
violate 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 is the main input to produce gasoline, 
diesel fuel, heating oil, and jet fuel. Crude oil purchasers generally 
cannot switch to alternative commodities without facing substantial 
costs. Exxon and Pioneer 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 by meaningfully increasing the risk of 
coordination among remaining firms in the relevant market. The 2023 
Merger Guidelines identify three primary factors that indicate a merger 
may increase the risk of coordination, including the existence of prior 
actual or attempted attempts to coordinate in the market. If any of the 
three primary factors are met, the Agencies ``may conclude that post-
merger market conditions are susceptible to coordinated interaction and 
that the merger materially increases the risk of coordination.''
    Mr. Sheffield's history of attempting to coordinate with other oil 
industry participants suggests that the market is susceptible to 
anticompetitive coordination--a risk the Proposed Acquisition would 
only heighten. The Commission's Complaint lays out evidence, including 
from Mr. Sheffield's own public and private statements, of his campaign 
to organize anticompetitive coordinated output reductions between and 
among U.S. crude oil producers, and others, including OPEC and OPEC+. 
Much of this coordination has been with high-ranking OPEC 
representatives, thus indicating that firms with a substantial share of 
the relevant market have engaged in this conduct. By installing Mr. 
Sheffield on Exxon's Board, the Proposed Acquisition risks amplifying 
his public messaging and the effectiveness of his private contacts with 
OPEC, thereby meaningfully increasing the likelihood of coordination in 
the relevant market.

VI. The Proposed Order

    The proposed Order imposes several terms to remedy these concerns. 
First, the proposed Order prohibits Exxon from appointing Scott 
Sheffield to Exxon's board--as required by the Merger Agreement--or to 
serve in an advisory capacity to Exxon's board or Exxon's management. 
Second, for a period of five years, Exxon is also prohibited from 
appointing Pioneer's current employees and certain other persons 
affiliated with Pioneer to its board.
    Third, the proposed Order prohibits Exxon's directors and officers 
from serving as a director or officer of another corporation if that 
interlock would violate section 8 of the Clayton Act. The Order 
requires Exxon to comply with the provisions of section 8 of the 
Clayton Act.
    Fourth, the proposed Order contains provisions to ensure the 
effectiveness of the relief, including obtaining information from 
Exxon's officers and directors that they are complying with the Order; 
requiring Exxon to submit a yearly compliance report containing 
sufficient information and documentation to enable the Commission to 
determine independently whether Exxon is in compliance with the Order; 
and requiring that Exxon maintain specific written communications. The 
proposed Order also requires Exxon to distribute the Order to each of 
its current and any new 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.

April J. Tabor,
Secretary.

Statement of Chair Lina M. Khan

    A core principle that should underpin the Commission's antitrust 
analysis is examining and understanding commercial realities. Sometimes 
the evidence that is most probative of commercial realities is how 
market participants act. Staff's investigation here uncovered troubling 
evidence of Pioneer CEO Scott Sheffield's actions and communications, 
which make clear that he believed and acted as if he could persuade his 
rivals to join him in colluding to restrict output and raise prices. 
When market actors speak and act as if they can collude, we should not 
ignore this direct evidence or subordinate it to less direct indicators 
of market realities.
    The dissent does not dispute that Mr. Sheffield has tried to 
facilitate a cartel, nor does it suggest he will stop doing so after 
being elevated to the Exxon Board of Directors. Instead, the dissent 
suggests that Mr. Sheffield is wasting

[[Page 42878]]

his time because he is unlikely to succeed.
    We should be wary of dispensing with regulatory humility. Corporate 
executives are not always credible narrators. But when corporate 
executives' words or actions reveal, against their interests, a belief 
that they can collude, we should generally believe them.

Concurring Statement of Commissioner Rebecca Kelly Slaughter

    Today's complaint and consent decree are an important step forward 
in merger investigations and enforcement. I'm very glad that we are 
able, through this consent decree, to prevent the substantial lessening 
of competition that would have occurred from one component of the 
merger: elevating Scott Sheffield to the board of directors of Exxon.
    This complaint and consent decree reflect what I have long believed 
to be true: the management and business intentions of merging parties 
should matter to our assessment of the likely effects of a merger on 
competition. When a company agrees, as a condition of a merger, to 
elevate one of the industry's notorious public and private advocates of 
output coordination to its board, we can and should take that seriously 
as a competitive effect of the merger. This principle applies not just 
in oil and gas markets like the ones we assess today, but across the 
American economy.\1\
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    \1\ Indeed, it may be particularly relevant in pharmaceuticals. 
The FTC has an entire division dedicated to investigation 
anticompetititive conduct in healthcare markets with a particularly 
strong enforcement track record in the pharmaceutical space. When 
pharmaceutical companies that have a history of anticompetitive 
conduct merge, I have long believed we should consider that history 
in our assessment of the likely competitive effects of the merger. 
See, e.g., Dissenting Statement of Commissioner Rebecca Kelly 
Slaughter in the Matter of Bristol-Myers Squibb and Celgene (``We 
must carefully consider the facts in each specific merger to 
understand whether or how it may facilitate anticompetitive conduct, 
and therefore be more likely to result in a substantial lessening of 
competition.'') Dissenting Statement of Commissioner Rebecca Kelly 
Slaughter In the Matter of Bristol-Myers Squibb and Celgene, (Nov. 
15, 2019), http://www.ftc.gov/system/files/documents/public_statements/1554283/17_-_final_rks_bms-celgene_statement.pdf. 
This view has been echoed in the academic literature. See, Carrier, 
Michael A. and Lindsay Cooley, Gwendolyn J., Prior Bad Acts and 
Merger Review (October 19, 2022). 111 Georgetown Law Journal Online 
106 (2023), http://ssrn.com/abstract=4252945.
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    This is not to say that we should trust everything merging parties 
say in their effort to get a merger through the review process. The 
economic incentives of the merged firm continue to play a central role. 
If we find reason to believe that the merged firm, acting on those 
incentives, may substantially lessen competition, we should act. 
Corporate executives may profess that they plan to continue to compete 
as if those incentives don't exist. In that situation, enforcers must 
be highly skeptical. The parties have every reason to want to present a 
pro-competitive strategy to try to get their merger through. That is 
why we rely on ordinary course documents and business evidence to give 
us a clearer picture of how parties will behave. And when they openly 
embrace anticompetitive strategies, that is when we should take notice.
    I agree with my dissenting colleagues that another appropriate 
response to the concerning statements around coordinated behavior 
uncovered in this investigation would be to separately scrutinize them 
as a potential antitrust violation. Today's complaint and consent 
decree should not be seen as mutually exclusive with such a conduct 
investigation. Conduct investigations--rightly--are not subject to the 
strict statutory deadlines of merger investigations, and for a variety 
of reasons tend to take much longer. The harms to competition 
identified in the complaint are specific to this merger, and therefore 
they are appropriate to address now, at the time of the merger.
    Lastly, it's important to reiterate here that the FTC does not 
approve mergers under any circumstances. This consent decree, like any 
other consent decree, should not be seen as resolving all competitive 
concerns this merger may present.\2\ Enforcers are always faced with 
tradeoffs to weigh in our decisions. This consent decree will have an 
important and meaningful impact on the market and competition. It is 
worth doing now, whether or not further intervention may be warranted.
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    \2\ This is especially true given that the merging parties often 
have outsized control over the timing and timeline of FTC 
investigations. To ensure that enforcers can adequately and 
thoroughly investigate potentially unlawful mergers, lawmakers 
should amend the HSR Act to extend statutory deadlines.
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Concurring Statement of Commissioner Alvaro M. Bedoya

    The Sherman Act owes its existence to an oilman with a singular 
talent for collusion.\1\ And we owe the Clayton Act, the grounds for 
this suit, to a broad consensus that the courts had enfeebled the 
Sherman Act by reading it in a manner far too favorable to industry.\2\
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    \1\ See Gregory J. Werden, The Foundations Of Antitrust 3 (2020) 
(``. . . without John D. Rockefeller and the Standard Oil Co., the 
United States would not have had competition law until later, and 
this field of the law would not be called 'antitrust'''); see 
generally, id. at 3-16 (documenting Standard Oil's creation, growth, 
and eventual dominance in the American oil industry).
    \2\ See, e.g., Earl W. Kintner, Ed., Legislative History Of The 
Federal Antitrust Laws and Related Statutes 989-997 (1978) (``Based 
upon 24 years of practical experience under the Sherman Act, 
Congress sought in the Clayton Act to remedy certain perceived 
weaknesses in the existing law and to expand its coverage. . . 
Shortly after the Supreme Court's announcement of its decision in 
the Standard Oil case in 1911, pressure to strengthen the Sherman 
Act revived and culminated initially in the introduction of 
[competing bills]. . . The facts surrounding the drafting and 
introduction of these proposals make clear that they constituted an 
integrated and coordinated legislative effort to strengthen and make 
more effective the existing antitrust law.'')
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    This merger would have put an oilman of John Rockefeller's 
persuasions on the board of a direct successor to Mr. Rockefeller's oil 
company--which also happens to be the single largest company in the 
American oil industry.\3\ Our colleagues raise a finger to contend that 
``the merger does not place Mr. Sheffield on the board.'' I fail to see 
how a written and executed ``AGREEMENT AND PLAN OF MERGER'' between the 
companies that stipulates that Exxon ``shall take all necessary actions 
to cause Scott D. Sheffield. . . to be appointed to [its] board of 
directors. . . immediately following the Effective Time'' of the merger 
somehow does not place Mr. Sheffield on that board as a result of the 
merger.\4\
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    \3\ Our History, ExxonMobil (Feb. 9, 2023), https://corporate.exxonmobil.com/who-we-are/our-global-organization/our-history (``Over the past 140 years ExxonMobil has evolved from a 
regional marketer of kerosene in the U.S. to one of the largest 
publicly traded petroleum and petrochemical enterprises in the 
world.''); id. (``1972--Jersey Standard officially changes its name 
to Exxon Corporation.'').
    \4\ See Pioneer Nat Res. Co., Exxon Mobil Corp., & SPQR, LLC, 
Agreement and Plan of Merger Sec.  8.12(a), at 79 (Oct. 10, 2023). 
It should also be noted that Exxon's filing to the Securities and 
Exchange Commission includes Mr. Sheffield's appointment to the 
board in the long list of financial and other consideration to be 
provided by Exxon to Pioneer as part of the acquisition. See Exxon 
Mobil Corp., Amendment no. 1 to FORM S-4 Registration Statement 54 
(Dec. 22, 2023.)
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    Under section 7 of the Clayton Act, we are asked to determine 
whether we have reasonable grounds to believe that the effect of this 
merger ``may be to substantially lessen competition'' ``in any line of 
commerce or in any activity affecting commerce in any section of the 
country.'' \5\ I respect my colleagues' opinion but fail to understand 
how we can answer that question with anything other than a ``yes.''
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    \5\ See 15 U.S.C. 18 (emphasis added).
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Joint Dissenting Statement of Commissioners Melissa Holyoak and Andrew 
N. Ferguson

    The Commission has issued a Complaint and Order against Exxon Mobil 
Corporation (``Exxon'') on the

[[Page 42879]]

ground that the proposed acquisition of Pioneer Natural Resources 
Company (``Pioneer'') would violate section 7 of the Clayton Act.\1\ 
The principal ground on which the Commission proceeds is that the 
merger may substantially lessen competition because of the prospect 
that Exxon's shareholders may elect Scott Sheffield--Pioneer's founder, 
former CEO, and current board member--to Exxon's board of directors. 
The Complaint alleges that Mr. Sheffield has made ``previous efforts to 
organize tacit (and potentially express) coordination of capital 
investment discipline and oil production levels.'' \2\ Mr. Sheffield 
allegedly used both public statements threatening to punish companies 
that expand output and private conversations and messages with OPEC 
representatives where he implemented his ``long-running strategy to 
coordinate output reductions.'' \3\ These accusations are extremely 
troubling and warrant close scrutiny under the antitrust laws. To its 
credit, Exxon intends to exclude Mr. Sheffield from serving on the 
board of directors--a wise decision consistent with sound policy given 
the severity of the allegations against him.
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    \1\ 15. U.S.C. 18.
    \2\ Compl. ] 22.
    \3\ Compl. ] 6.
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    But Exxon's consent to the entry of this order and its decision to 
exclude Mr. Sheffield from its board does not answer the ultimate 
question the Commission must answer before issuing a complaint: Whether 
the Commission has reason to believe this transaction itself violates 
section 7. The Commission's Complaint does not provide us reason to 
believe that it does. The Complaint fails to articulate how the 
``effect of [the] transaction may be substantially to lessen 
competition.'' \4\ We fear instead that the Commission is leveraging 
its merger enforcement authority to extract a consent from Exxon rather 
than addressing the conduct of one misbehaving executive. We therefore 
respectfully dissent.
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    \4\ 15. U.S.C. 18.
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    Antitrust enforcers have long recognized that a transaction which 
increases the risk of coordination also increases the risk of a 
substantial diminution of competition. Until recently, we considered 
three factors in assessing the risk of increased coordination: whether 
the transaction created ``(1) a significant increase in concentration, 
leading to a moderately or highly concentrated market''; whether the 
transaction involved ``(2) a market vulnerable to coordinated 
conduct''; and whether we had ``(3) a credible basis for concluding the 
transaction will enhance that vulnerability.'' \5\ The recently adopted 
2023 Guidelines propose three ``primary factors'' for assessing the 
increased risk of coordination--(1) the existence of a highly 
concentrated market, (2) prior actual or attempted attempts to 
coordinate, and (3) elimination of a maverick.\6\ No court to date has 
endorsed these new factors. Even assuming they accurately summarize the 
state of the law, they are not satisfied here.
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    \5\ U.S. Dept. of Just. & Fed. Trade Comm'n, Horizontal Merger 
Guidelines Sec.  7.1 (2010); see Fed. Trade Comm'n v. RAG-Stiftung, 
436 F.Supp.3d 278, 313 (2020) (citing and quoting from section 7.1 
of the 2010 Horizontal Merger Guidelines); New York v. Deutsche 
Telekom AG, 439 F. Supp. 3d 179, 234 (S.D.N.Y. 2020) (similar).
    \6\ 2023 Guidelines Sec.  2.3.A, at 8-9. The Guidelines also 
propose six ``secondary factors,'' id. Sec.  2.3.B, at 9-10, but the 
Complaint does not appear to rely on them.
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    The Complaint is unclear on which of the three factors are present 
here, but it focuses most on ``actual or attempted attempts to 
coordinate.'' It alleges that ``Mr. Sheffield's history of attempting 
to coordinate with other oil industry participants suggests that the 
market here is susceptible to anticompetitive coordination.'' \7\ We do 
not agree.
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    \7\ Compl. ] 19.
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    The 2023 Guidelines provide that ``attempts to coordinate'' are 
relevant to the risk-of-coordination inquiry where ``firms representing 
a substantial share in the relevant market appear to have previously 
engaged in express or tacit coordination . . . .'' \8\ The Complaint 
alleges only that a combined OPEC and OPEC+ ``account for over 50% of 
global crude oil production.'' \9\ Importantly, it does not allege the 
merging parties' market shares at all. As such, it fails to allege that 
either Exxon or Pioneer represents part of any ``substantial share'' of 
the market, and for good reason: the post-merger firm's share in the 
alleged market will not be substantial. The concentration in this 
market, and thus, the likelihood of successful coordination post-
merger, are virtually unchanged by the proposed acquisition.\10\
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    \8\ 2023 Guidelines Sec.  2.3.A, at 9.
    \9\ Compl. ] 21.
    \10\ To be clear, we do not contend that every individual oil 
producer is a meaningful constraint on coordination. The 
Commission's Complaint is silent, however, on the existence or 
sufficiency of any other firm to constrain the coordination the 
consent purports to prevent with this remedy. For us, this omission 
precludes reason to believe the proposed transaction may 
substantially lessen competition. See Fed. Trade Comm'n v. PPG 
Indus., Inc., 798 F.2d 1500, 1503 (D.C. Cir 1986) (``[W]here 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.''); see also 
Fed. Trade Comm'n v. H.J. Heinz Co., 246 F.3d 708, 715 (2001).
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    The Complaint also focuses on the fact that the merger would give 
Mr. Sheffield ``a larger platform from which to advocate for greater 
industry-wide coordination as well as decision-making input.'' \11\ Mr. 
Sheffield's alleged prior conduct certainly raises serious concern and 
warrants antitrust scrutiny. But the merger does not place Mr. 
Sheffield on the board.\12\ That decision belongs to Exxon's 
shareholders. The Commission acts today based only on the risk that the 
shareholders might elect him to the board, and that his election might 
give him a ``larger platform'' to coordinate--if indeed this market is 
susceptible to coordination. We do not believe this alleged risk 
presents a section 7 problem. Further, we are especially concerned with 
the Complaint's focus on Sheffield's past conduct at Pioneer as an 
indicator of Exxon's future actions, without any discussion of whether 
Exxon has incentives to engage in the same behavior. Focusing on 
individuals' conduct divorced from a firm's incentives could have 
troubling ramifications for future enforcement actions.
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    \11\ Compl. ] 44.
    \12\ The agreement instead requires Exxon to propose Mr. 
Sheffield for election to its board if he meets certain legal, 
regulatory, and corporate governance criteria.
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    The alleged conduct by Mr. Sheffield warrants scrutiny, but that 
does not mean we have reason to believe the transaction violates 
section 7. The Commission should not leverage its merger enforcement 
authority--or any authority--the way it does today. We respectfully 
dissent.

[FR Doc. 2024-10731 Filed 5-15-24; 8:45 am]
BILLING CODE 6750-01-P