The American Antitrust Institute urges the Federal Trade Commission to take an aggressive stance in its review of the Exxon/Mobil merger. This is the largest merger in history, coming within a context of rapid industry consolidation, and there is a widely held belief that if this merger is permitted, other mergers will follow, as the remaining petroleum companies try to increase their scale to keep up with Exxon and BP/Amoco. It is therefore critical that the FTC give broad content to the "incipiency" nature of the Clayton Act, which requires intervention when there may be a substantial lessening of competition.
In the recent BP/Amoco merger, the FTC permitted the merger, subject to various divestitures of gas stations and terminals in specific markets. AAI urges the Commission carefully to consider whether a similar approach will be sufficient, in terms of preventing the further concentration of the industry. When a merger is this large, with as many potential ramifications as it appears to have, the enforcement authorities should not be in the position of restructuring the deal for the merging parties.
The FTC should also take into account the longer-range implications of permitting this merger. For example, although oil prices are at a low, the industry is historically cyclical and if we encourage the departure of profitable firms today, how likely is it that new firms will enter this market later on when prices are higher? When and if OPEC regains its previous market power, would the US consumer be better served if OPEC can negotiate with, say, three or four large oil companies, or with eight or more that have incentives to cheat on the cartel?
Finally, AAI urges the FTC to examine with skepticism claims of Exxon and Mobil that this merger will create large efficiencies. It is common for such predictions to be dramatically overstated. Moreover, in accordance with its own precedents, the FTC should be convinced that whatever efficiencies are credible will be specific to the merger (i.e., they would not have occurred anyway) and will be in large measure passed on to consumers.