Thought Leadership

Baker Botts Washington Recap - Episode 7

Client Updates

In the latest installment of our video series on important regulatory and legislative events in the first year of the Biden Administration, Special Counsel Christine Ryu-Naya discusses the letter FTC Chair Lina Khan sent to the White House outlining a new three-part enforcement plan setting its sights not on big tech, but on an older industry: energy.

 

Congress’ annual August recess may have left parts of DC a little quieter last month… but all is not quiet on the antitrust front. On August 25, Federal Trade Commission ("FTC") Chair Lina Khan sent a letter to the White House outlining a new three-part enforcement plan. And while a host of recent antitrust developments – including the flurry of reform proposals on the Hill – have focused on Big Tech, Khan’s letter sets its sights on an older industry: energy.


In an August 11 letter to the FTC, Brian Deese – a White House advisor and Director of the National Economic Council – asked the FTC to investigate elevated fuel prices. Specifically, Deese requested the Commission investigate why “gas prices tend to rise more quickly to adjust in spikes in oil prices than they fall when the price of oil declines.”

In her reply sent two weeks later, Khan outlines a three-part enforcement plan tightly focused on the energy industry. Khan writes that she first plans to “identify additional legal theories” to challenge retail fuel station mergers “where dominant players are buying up family-run businesses.” This is a remarkably specific initiative that suggests new legal theories untethered to traditional concerns about customer impact. Practically speaking, it could mean longer and less predictable reviews for deals involving the sale of independent gas stations.

Next, Khan says she will be “taking steps to deter unlawful mergers in the oil and gas industry.” Specifically, her letter refers to the FTC’s recent decision to rescind the “prior notice and approval” policy. The 1995 policy limited the use of “prior notice” and “prior approval” requirements in consent decrees, but was rescinded during an open FTC meeting in July. Khan writes that the FTC “will impose ‘prior approval’ requirements to deter those who propose illegal mergers, including in retail gas markets.”

Finally, Khan writes that she will be asking FTC staff “to investigate abuses in the franchise market” and hypothesizes that “large national chains” might be forcing their “franchisees to sell gasoline at higher prices, benefiting the chain at the expense of the franchisee’s convenience store operations.” She closes the letter by promising to continue assessing “how the FTC can use its tools to police unlawful business practices in oil and gas markets.”

Khan’s letter is a clear signal that players in the energy industry should expect new hurdles for proposed transactions and new conduct investigations. The Biden administration has made aggressive antitrust enforcement a central plank in its platform and the president’s appointees, including Khan, are clearly intent on implementing an elevated level of antitrust scrutiny.

 

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