Executives at Hess and Pioneer Natural Resources got blocked from what they thought were their new corporate board seats
President Joe Biden’s approach to the oil industry’s recent megamergers might be one of the most interesting aspects of his economic policy legacy. Forced departures at Hess and Pioneer Natural Resources $PXD have shown both the aggressiveness and limitations of his antitrust policy.
There were two giant oil-company mergers announced last year: Exxon’s $59 billion acquisition of Pioneer and Chevron $CVX’s $53 billion acquisition of Hess. Because of both deals’ size, they naturally drew scrutiny from the Federal Trade Commission (FTC), which seeks to protect consumers from unfair business practices. In both cases, that meant the threat of too little competition and its potential effects on prices.
“The heart of American capitalism is a simple idea: open and fair competition — that means that if your companies want to win your business, they have to go out and they have to up their game; better prices and services; new ideas and products,” Biden said in 2021 when he signed an executive order directing the federal government to “combat the excessive concentration of industry.”
The Biden administration has moved to block deals it believes would pose a threat to consumers’ wallets. In some cases, such as the failed merger between JetBlue Airways and Spirit Airlines, the administration has done so successfully, winning praise from liberal legal minds.
“President Biden and his team from the outset undertook a fundamental rethinking of the role antitrust and competition policy can and should play in the American economy,” said Bill Baer, the former head of Justice Department’s antitrust division under Barack Obama, in a lecture earlier this year.
Conservative scholars have been less enthusiastic.
“Unfortunately, Biden antitrust has so far embodied the paradox of the new antitrust populism—namely, fighting the disruptive innovation of dynamic competition in the name of promoting ‘fairer’ or ‘open’ competition, which nevertheless stifles innovation and distorts the competitive process,” wrote George Washington University research professor Aurelien Portuese in a 2022 issue of the George Mason Law review.
Finding a balance between those two viewpoints is difficult. When it came to Exxon and Chevron, the solution was to let the deals go through — but not unscathed. In each case, the FTC allowed the respective companies to consummate their mergers but blocked the executives of the takeover targets from serving on their new corporate owners’ boards.
Scott Sheffield, founder and former CEO of Pioneer, and John Hess, Hess CEO and the son of Hess’s founder, received such penalization. The logic behind the decision, per the FTC, was that both men had communicated with the oil cartel OPEC in order to collude on setting crude prices worldwide. Both companies decried those allegations, but their blockages were the price their companies had to pay to avoid a bigger legal fight.
“American consumers shouldn’t pay unfair prices at the pump simply to pad a corporate executive’s pocketbook,” Kyle Mach, deputy director of the FTC’s Bureau of Competition, said in a statement regarding the Exxon-Pioneer deal. “The FTC will remain vigilant in its enforcement efforts to protect competition in these vital markets.”
In a similar statement this week, his boss, Henry Liu, said about the Chevron-Hess deal: “The FTC will use all its available enforcement tools to protect competition in this vital market and help ensure American consumers benefit from lower prices at the pump.”
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