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Competition focus of Federal Trade Commission investigations Director of agency’s bureau of competition tells state lawmakers Alaska may have issues beyond those commission will look at Kristen Nelson PNA News Editor
The mission of the Federal Trade Commission is pretty focused, William Baer, director of the commission’s bureau of competition, told a meeting of the Legislature’s Joint Special Committee on Mergers July 28.
“We focus on the issue of competition,” he said. “Will consumers of a particular product or service be worse off if a merger goes through?”
“We’re aware,” he said, “that some of the issues that may concern Alaska’s citizenry may be broader than that and may relate to revenue, may relate to environmental issues, may relate to jobs.”
Those, Baer said, are obviously legitimate public policy issues — but they’re for the governor and the Legislature to work on. They aren’t necessarily antitrust issues, and the FTC’s authority doesn’t cover them, he said.
Pre-merger notification enacted in 1976 Pre-merger notification of both the FTC and the U.S. Department of Justice is required by the Hart-Scott-Rodino Act of 1976 and allows antitrust regulators to review potentially anti-competitive acquisitions before they occur.
Baer said the FTC annually receives about 4,800 pre-merger filings. Those filing must wait at least 30 days before proceeding.
“If, however, the FTC decides there are serious issues we are authorized to issue what is called a second request — request for documents, information that will enable the commission and its staff to determine whether or not the merger is problematic,” he said.
BP Exploration (Alaska) Inc. spokesman Ronnie Chappell told PNA July 28 that BP has received a second request and is in the process of complying with it.
Baer said that in issuing a second request for information, the FTC identifies specific areas where it thinks the merger may raise anti-trust issues. He said the FTC often takes depositions from company witnesses and third parties; hires experts in the industry and experts in the field of industrial organization and economics.
FTC staff recommendations Once the staff at the FTC has finished its review, it makes a recommendation to the commission and the commission makes a decision.
One recommendation may be that the FTC go to court to seek to block the transaction.
“Frankly, that happens only about one out of 100, two out of 100 investigations,” Baer said.
“More often,” he said, “once we’ve told the parties where we have antitrust concerns, we engage in a dialogue with them in an effort to seek a settlement agreement which — if we’re able to reach agreement as a staff, with the companies — we recommend to the commission that we accept the settlement agreement.”
A settlement agreement typically occurs when the deal isn’t fundamentally flawed, but there are discrete markets where competition could be affected by the merger, Baer said.
The third option, he said, is that FTC staff doesn’t see any problems, “and we go away and let the deal close.”
Sense of the process Baer told the committee that as a member of the FTC staff it was his job to investigate and to confidentially recommend action to the commission. Typically, he said, the FTC staff works “under the radar” and public appearances such as he was making before the committee were rare.
As law enforcement officials, Baer said, FTC staff are “under some very strict confidentiality restraints.” The law requires, he said, that staff not reveal details of investigations, so he couldn’t discuss the BP Amoco acquisition of ARCO, but would try to give the committee a sense of “what our process is”.
Several consumers, competition issues The FTC has spent many years investigating oil mergers, Baer said, including a wave of oil mergers in the 1980s and now more recently a second wave. He said there are two areas where the FTC focuses in such mergers:
“One, that a merger may lessen competition and raise the price for the crude oil that is currently or likely to be produced. And second is that competition might be lessened in the bidding for the leases to develop new fields.”
Related to the BP Amoco acquisition of ARCO, Baer said that the crude oil price issue “really comes down to the question of whether the ANS crude that is produced in this state is fully in competition with crude all over the world.”
If there is competition with worldwide crude, then the risk is slight, he said, that merger of the major North Slope producers would result in higher crude oil prices and in turn higher gasoline prices on the West Coast, where most ANS is delivered. If, on the other hand, it looks as though ANS crude is “somewhat uniquely valuable” and not readily replaced with crude from elsewhere in the world, then, he said, there might be antitrust issues the FTC would need to address.
Bidding at lease sales also a concern On the bidding issue, “the concern is somewhat different but quite obvious — lower bid prices if there is a significant bidder who’s eliminated from this process can diminish the revenue of those owning the property.” He noted that both the state of Alaska and the federal government are in the business of leasing and that reductions in competition potentially generate an antitrust issue there.
In addition, Baer said, the FTC is aware of the elaborate infrastructure necessary to do business in Alaska, and the fact that loss of competition could adversely affect smaller firms. Service companies may also be affected where there is only one purchaser of services, “driving firms from the market and reducing opportunity for those services.”
Transportation is also an issue the FTC is aware of, Baer said, noting limited ownership of both the trans-Alaska pipeline and shipping from Valdez. He said that FTC staff had also heard concerns from a number of people about the affect of the merger on development of technology to bring North Slope gas to market, “and whether a merger would eliminate that competition to come up with ways to make that product commercially attractive….”
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