Merger enforcement is a key component of the FTCs program to maintain competition in the petroleum industry.
The FTC carefully analyzes proposed mergers reviewing all pertinent facets of the relevant petroleum markets
and challenges transactions that likely would substantially reduce competition or result in higher prices.
Since 1981, the FTC has alleged that 15 proposed petroleum mergers would have resulted in significant
reductions in competition and harmed consumers in one or more relevant markets. Four of the mergers were
abandoned or blocked as a result of FTC or court action. In the other 11 cases, the FTC required the merging
companies to divest substantial assets in the markets where competitive harm was likely to occur.
The FTC uses the
Horizontal Merger Guidelines approach to measuring market concentration, which is a useful indicator for
determining the likely potential competitive effect of a merger. The Merger Guidelines invoke a measure of
market concentration known as the Herfindahl-Hirschman Index (HHI), which reflects both the overall composition
of the market and the distribution of the market shares of the competing firms. The FTC will consider both the
post-merger market concentration and the increase in concentration resulting from the merger.
FTC Merger Enforcement Actions in the Petroleum
Industry Since 1981 is a guide to publicly available information on what would have been post-merger HHI
levels and what would have been the change in HHI for markets of concern in petroleum mergers challenged
by the FTC. Note that the last column of the table lists the actions the FTC required the merging parties to
take to resolve competitive risks.
[Click here for a PDF version of the table]
The FTC's Horizontal Merger Investigation Data, Fiscal Years 1996-2007 (Dec 1, 2008) show that the FTC has sought and obtained relief at lower levels of concentration in mergers involving petroleum markets than in mergers involving other industries. See Table 3.3.