FTC To Ramp Up Focus On Gas Station Acquisitions
As part of the Biden Administration’s efforts to stem the recent increase in retail gasoline prices, the Federal Trade Commission (FTC) has indicated an intent to increase its scrutiny of mergers and acquisitions in the petroleum industry.
The FTC’s Chairperson, Lina Kahn, stated that the FTC is interested in determining whether large national chain retailers are engaging in “collusive practices” to “to restore” higher prices and that FTC staff will investigate any signs of this type of conduct.
Part of this effort will be to determine whether large gas station acquisitions would substantially lessen competition for the retail sale of gasoline and diesel by putting too many stations in the hands of the same owners.
The Chairperson’s statements come in the wake of the FTC’s decisions to challenge several deals involving large acquisitions of gas stations and convenience stores, including 7-Eleven’s purchase of nearly 4,000 convenience stores from Marathon and Tri-Star Energy’s deal to purchase stores from Hollingsworth Oil Company.
After reviewing these deals, the FTC required the acquiring company to sell some of the stations to lessen its concentration in certain geographic markets (usually terminal areas) where both the seller and acquiring company had a substantial presence.
The Chairperson’s statements may signal closer scrutiny and tougher standards for approving mergers or acquisitions affecting concentrations of gas stations and convenience stores nationwide.
The FTC is authorized to engage in a pre-approval review of such transactions where the purchase price is $92 million or more.
This process involves a comparison of market concentrations before and after the merger or acquisition using the Herfendahl-Hirschman Index applied by the FTC’s Bureau of Competition.
Where post-acquisition concentrations are considered too high, the FTC usually conditions its approval of the merger/acquisition on the divestment by the acquiring company of a portion of the assets to be purchased.
The FTC may now have less tolerance for any increase in concentrations, which may delay the approval process or result in killing deals that would have been approved in other Administrations.
Ultimately, this type of scrutiny could slow the consolidation in the industry which has been prevalent since the major oil company mergers that began in earnest in the late 1990s.