Mergers, Acquisitions and Divestitures

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Biden Expected to Block U.S. Steel Takeover by Nippon

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The Committee on Foreign Investment in the United States is expected to raise national security concerns about selling the iconic steel producer to Japan’s Nippon Steel.President Biden is preparing to soon block an attempt by Japan’s Nippon Steel to buy U.S. Steel on national security grounds, according to three people familiar with the matter, likely sinking a merger that became entangled in election-year politics in the United States.A decision to block the takeover would come after months of wrangling among lawmakers, business leaders and labor officials over whether a corporate acquisition by a company based in Japan — a key U.S. ally — could pose a threat to national security. A move by Mr. Biden to block the deal on those grounds could roil relations between the two nations at a moment when the United States has been trying to deepen ties with Japan amid China’s growing influence in East Asia.For months, the Committee on Foreign Investment in the United States, or CFIUS, has been scrutinizing the deal over potential risks. There has been mounting speculation that the Biden administration could intervene before the November election.A White House official told The New York Times that CFIUS “hasn’t transmitted a recommendation to the president, and that’s the next step in this process.”CFIUS is made up of members of the State, Defense, Justice, Commerce, Energy and Homeland Security Departments, and is led by the Treasury secretary, Janet L. Yellen.The committee sent a letter to U.S. Steel in recent weeks saying that it had found national security concerns with the transaction, one of the people familiar with the situation said.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Kroger and Albertsons Confront a Skeptical F.T.C. in federal court

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    The Federal Trade Commission, which is trying to block Kroger’s plan to acquire Albertsons, said in court that the merger of grocery giants would also hurt workers’ pay and benefits.A trial that could determine whether the two largest supermarket chains in the United States can merge opened in Portland, Ore., on Monday, pitting the grocery giant Kroger against regulators who argue that its takeover of Albertsons would eliminate competition at the expense of consumers and workers.Before Judge Adrienne Nelson of U.S. District Court, the Federal Trade Commission and the supermarket chains laid out their arguments in court for the first time, as union representatives and workers protested the deal on the courthouse steps. Less competition, the agency’s lawyers said, would give Kroger more leverage to raise prices on millions of consumers.The highly anticipated proceedings, set to last three weeks, come as high food prices have become a critical focus in the presidential race. Vice President Kamala Harris, the Democratic presidential nominee, has backed a federal ban on price-gouging in the food and grocery industries to combat high grocery costs.Kroger and Albertsons defended the $24.6 billion deal, which would be the biggest supermarket merger in U.S. history, saying it would bolster their leverage with suppliers and improve competition against major retailers like Costco, Amazon and Walmart. But the F.T.C. — backed by a chorus of unions, consumer advocates, politicians and independent grocery chains — reiterated its position that the merger would probably result in higher prices for groceries and worse conditions for workers.The deal “would eliminate the competition that shoppers and workers depend on in one fell swoop,” Susan Musser, the F.T.C.’s chief trial counsel, said in her opening statement. “This lawsuit is part of an effort aimed at helping Americans feed their families.”In bringing the case, the F.T.C. has been joined by the attorneys general of eight states, including California and Illinois, as well as the District of Columbia. It’s part of a regulatory push under the Biden administration to rein in corporate consolidation in an array of industries, including airlines, Big Tech, book publishing and pharmaceuticals.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    The Trustbuster Who Has Apple and Google in His Sights

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    Shortly after Jonathan Kanter took over the Justice Department’s antitrust division in November 2021, the agency secured an additional $50 million to investigate monopolies, bust criminal cartels and block mergers.To celebrate, Mr. Kanter bought a prop of a giant check, placed it outside his office and wrote on the check’s memo line: “Break ’Em Up.”Mr. Kanter, 50, has pushed that philosophy ever since, becoming a lead architect of the most significant effort in decades to fight the concentration of power in corporate America. On Thursday, he took his biggest swing when the Justice Department filed an antitrust lawsuit against Apple. In the 88-page lawsuit, the government argued that Apple had violated antitrust laws with practices intended to keep customers reliant on its iPhones and less likely to switch to competing devices.That lawsuit joins two Justice Department antitrust cases against Google that argue the company illegally shored up monopolies. Mr. Kanter’s staff has also challenged numerous corporate mergers, including suing to stop JetBlue Airways from buying Spirit Airlines.“We want to help real people by making sure that our antitrust laws work for workers, work for consumers, work for entrepreneurs and work to protect our democratic values,” Mr. Kanter said in a January interview. He declined to comment on the Google cases and other active litigation.At a news conference about the Apple lawsuit on Thursday, Mr. Kanter compared the action to past Justice Department challenges to Standard Oil, AT&T and Microsoft. The suit is aimed at protecting “the market for the innovations that we can’t yet perceive,” he said.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    An Emboldened F.T.C. Bolsters Biden’s Efforts to Address Inflation

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    With few unilateral options and little hope of legislation from Congress, the president’s early investment in competition policy could pay a political dividend.An independent federal agency has become one of the most reliable executors of President Biden’s attempts to fight inflation, at a time when the White House has few weapons of its own to quickly bring down stubbornly high prices of consumer staples like groceries.The Federal Trade Commission filed a lawsuit on Monday, joined by several state attorneys general, to challenge a merger between the supermarket giants Kroger and Albertsons. The agency’s rationale in many ways echoed Mr. Biden’s renewed attempts to blame corporate greed for rising prices and shrinking portions in grocery aisles.“If allowed, this merger would substantially lessen competition, likely resulting in Americans paying millions of dollars more for food and other essential household goods,” agency officials wrote in a legal complaint. Because grocery prices have risen significantly in recent years, they added, “the stakes for Americans are exceptionally high.”That is true for consumers, and it is true for the president. More Americans disapprove of his handling of the economy than approve of it. Consumer confidence, while improved in recent months, remains relatively weak for an economy with low unemployment and solid growth like the one Mr. Biden is presiding over.An internal analysis by White House economists suggests that no single factor is weighing more on consumer sentiment than grocery prices. Those costs soared in 2022 and have not fallen, though their rate of increase has slowed.White House officials concede that there is little more Mr. Biden can do unilaterally to reduce grocery prices and even less chance of legislative help from Congress. That is why Mr. Biden has resorted to the bully pulpit, calling on stores to reduce prices and chastising snack makers for engaging in “shrinkflation” — reducing portions while raising or maintaining prices.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Private Equity Is Starting to Share With Workers, Without Taking a Financial Hit

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    In 2018, Anna-Lisa Miller was working with agricultural cooperatives in Hawaii, helping them reinvest in their communities through shared ownership.Ms. Miller, who had gone to law school and had planned to do civil rights litigation, loved the principle of workers partaking in the financial success of their employers, and the next year joined Project Equity, a nonprofit that helps small businesses transition to worker ownership. But it was slow going, with each transaction requiring customized assistance.Then she came across an investor presentation from a different universe: KKR, one of the world’s largest private equity firms. In it, a KKR executive, Pete Stavros, discussed a model he had been developing to provide employees with an equity stake in companies it purchased, so the workers would reap some benefits if it was flipped for a profit. When all goes according to plan, KKR doesn’t give up a penny of profit, since newly motivated workers benefit the company’s bottom line, elevating the eventual sale price by more than what KKR gives up.In 2021, the two met up to talk about the idea. By that time, Mr. Stavros had decided to start an organization to promote his model more broadly, hoping to reach the 12 million people who work for companies that private equity firms own. Ms. Miller saw it as a way to move much faster.“Me, as Anna-Lisa working at Project Equity — zero ability to influence private equity in any way — I thought, ‘Oh, gosh, maybe this could be a really efficient scale lever,’” Ms. Miller said. “And here’s Pete, not only doing it but wanting to start this nonprofit.”A few months later, she was the founding executive director of the new group, Ownership Works. The organization now has 25 employees working in a sleek New York office space a couple of blocks from KKR’s soaring headquarters at Hudson Yards. A couple of dozen private equity firms have signed on to give the idea a try.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    U.S. Steel Acquisition Proposal Tests Biden’s Industrial Policy

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    The president is under pressure from Democrats and Republicans to block the sale to Japan’s Nippon Steel, which could upset a key foreign ally.U.S. Steel is an iconic example of the lost manufacturing muscle that President Biden says his economic policies will bring back to the United States.But last month, the storied-but-diminished company announced plans to be acquired by a Japanese competitor. That development has put Mr. Biden in an awkward bind as he tries to balance attempts to revitalize the nation’s industrial sector with his efforts to rebuild international alliances.Mr. Biden’s administration has expressed some discomfort with the deal and is reviewing the proposed $14.1 billion takeover bid by Japan’s Nippon Steel. The company is offering a hefty premium for U.S. Steel, which has struggled to compete against a flood of cheap foreign metal and has been weighing takeover offers for several months.The proposal has quickly become a high-profile example of the difficult political choices Mr. Biden faces in his zeal to revive American industry, one that could test the degree to which he is willing to flex presidential power in pursuit of what is arguably his primary economic goal: the creation and retention of high-paying union manufacturing jobs in the United States.Mr. Biden is under pressure from the United Steelworkers union and populist senators from both parties, including Democrats defending crucial swing seats in Ohio and Pennsylvania this fall, to nix the sale on national security grounds. The senators contend that domestically owned steel production is critical to U.S. manufacturing and supply chains. They have warned that a foreign owner could be more likely to move U.S. Steel jobs and production overseas.“This really should be a no-brainer,” Senator Josh Hawley, Republican of Missouri, said in an interview last week. “I don’t know why it would be difficult to say, my gosh, we’ve got to maintain steel production in this country, and particularly a company like this one, where you have thousands of workers in good union jobs.”U.S. Steel executives say the deal would benefit workers and give the merged companies “world-leading capabilities” in steel production. They announced last month that Nippon Steel had agreed to keep the company’s headquarters in Pittsburgh and to honor the four-year collective bargaining agreement that the steelworkers’ union ratified in December 2022.Other supporters of the takeover bid say blocking the sale risks angering a key American ally. Mr. Biden has courted Japanese collaboration on a wide range of issues, including efforts to counter Chinese manufacturing in clean energy and other emerging technologies, and welcomed Japanese investment in new American manufacturing facilities including for advanced batteries.Wilbur Ross, a former steel company executive who served as commerce secretary under President Donald J. Trump, wrote last week in The Wall Street Journal that there is “nothing in the deal from which the U.S. needs defending. Attacks by Washington pols only create unnecessary geopolitical tensions, and those, not the acquisition itself, could endanger American national security.”Adding to the cross-pressures on Mr. Biden: It is unclear what would happen to the 123-year-old U.S. Steel if the administration scuttles the deal and whether doing so would actually guarantee greater job security for the company’s nearly 15,000 North American employees.U.S. Steel executives say the deal with Nippon Steel would benefit workers, but skeptics of the deal are urging President Biden to review it to prevent lost steel production and jobs.Lawrence Bryant/ReutersU.S. Steel has faced challenges for decades because of intensifying foreign competition, particularly from China, which has flooded the global market with cheap, state-subsidized steel. American presidents have spent years trying to bolster and protect domestic steel makers through a mix of subsidies, import restrictions and so-called Buy America requirements for government purchases.“No U.S. industry has benefited more from protection than the steel industry,” Scott Lincicome, a trade policy expert at the libertarian Cato Institute think tank, wrote in a 2017 research paper.In recent years, presidents have increased those protections further. Mr. Trump imposed tariffs on imported steel, including from Japan. Mr. Biden has partially rolled back those levies in an attempt to rebuild alliances. Mr. Biden also included strict Buy America provisions in sweeping new laws to invest in infrastructure, clean energy and other advanced manufacturing.Those efforts have not come close to bringing back the levels of domestic steel production that the United States enjoyed in the 1970s — or even of recent decades. Raw steel production reached higher levels under Presidents Bill Clinton, George W. Bush and Barack Obama than it has under Mr. Biden or Mr. Trump.Employment in the industry fell steadily in the 1990s and mid-2000s. In 2022, there were just over 83,000 workers in iron and steel mills in the United States, which was less than half the number from 1992.Senators including Sherrod Brown of Ohio and Bob Casey of Pennsylvania, both Democrats, and Mr. Hawley and J.D. Vance of Ohio, both Republicans, urged Mr. Biden to review the proposed U.S. Steel sale to guard against lost steel production and jobs. Mr. Brown cited Nippon Steel’s failure to notify or consult with union leaders ahead of making its bid for the company.“Tens of thousands of Americans, including many Ohioans, rely on this industry for good-paying, middle-class jobs,” he wrote in a letter to Mr. Biden last month. “These workers deserve to work for a company that invests in its employees and not only honors their right to join a union, but respects and collaborates with its work force.”The calls for an administrative review of the deal largely focused on the Committee on Foreign Investment in the United States, which is known as CFIUS and headed by Janet L. Yellen, the Treasury secretary. The committee scrutinizes possible sales of American firms to foreign ones for possible national security threats, then issues recommendations to the president, who can suspend or block a deal.Shortly before Christmas, Mr. Biden appeared to grant the request for review, while stopping short of saying he would block it.Lael Brainard, who chairs the White House National Economic Council, said in a news release that Mr. Biden welcomed foreign investment in American manufacturing but “believes the purchase of this iconic American-owned company by a foreign entity — even one from a close ally — appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability.”The administration, Ms. Brainard said, “will be ready to look carefully at the findings of any such investigation and to act if appropriate.”Steelworkers cheered the move. David McCall, president of United Steelworkers International, said in a statement that Mr. Biden was “demonstrating once again the president’s unwavering commitment to domestic workers and industries.”Independent experts say it would be well within historical norms for the committee to evaluate the sale. That will likely include a detailed economic analysis of whether the deal could lead to diminished steel production capacity in the United States, said Emily Kilcrease, a CFIUS expert and senior fellow at the Center for a New American Security.But Ms. Kilcrease said that based on the committee’s past decisions, she expected the review to stop well short of a recommendation to kill the sale. Instead, she said, CFIUS might require an agreement from Nippon Steel to maintain certain levels of U.S. employment or production as a condition of the sale’s going through.“I would be shocked if this deal got blocked,” she said.Mr. Hawley said the choice was ultimately Mr. Biden’s — and a test of his commitment to the industry.“If the administration wants to block the sale, they absolutely have grounds to do it and the legal authority,” he said. “So it’s just a question of, do they want to? And will they have the guts to do it?” More

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    Choice Hotel Franchise Owners Push Back on Merger With Wyndham

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    Franchisees are fighting Choice Hotels’ attempted takeover of its biggest rival, which would create a dominant player in the budget hotel sector.When Patrick Pacious, the chief executive of a large portfolio of hotel brands, promoted a blockbuster attempt to acquire a competitor in October, he said the proposed merger would lower costs and attract more customers for the families and small businesses that own most of the company’s locations.“Our franchisees instantly grasped the strategic benefit this would bring to their hotels,” Mr. Pacious, who leads Choice Hotels, said on CNBC.As the weeks have passed, however, the reaction has not been positive. Wyndham Hotels and Resorts, the target of the proposed deal, rejected the offer from Choice, which is now pursuing a hostile takeover. And in early December, an association representing the majority of hoteliers who own Choice and Wyndham-branded properties came out strongly against it.“We all don’t know what’s driving this merger. Many of us feel it’s not needed,” said Bharat Patel, the chairman of the organization, the Asian American Hotel Owners Association. The group surveyed its 20,000 members and found that about 77 percent of respondents who own hotels under either brand or both thought a merger would hurt their business.“I’m not against Choice or Wyndham,” said Mr. Patel, who owns two Choice hotels. “We just need robust competition in the markets.”That opposition illustrates a growing resistance to consolidation in industries that have grown more concentrated in recent years. Even some Wall Street analysts have expressed skepticism that Choice’s proposal is a good idea.The views of hotel owners could become a hurdle for Choice as it seeks approval for a merger from the Federal Trade Commission, which has taken an interest in franchising as evidence has mounted that the economic and legal relationship has increasingly tilted in favor of brand owners and away from franchisees.To understand why franchisees are worried, it’s helpful to understand how hotels are structured.About 70 percent of the nation’s 5.7 million hotel rooms operate under one of the several big national brands like Marriott or Hilton, according to the real estate data firm CoStar. The rest are independent.Over the past few decades, franchise chains have bought one another and merged to the point where the top six companies by number of rooms — Marriott, Hilton, InterContinental, Best Western, Choice and Wyndham — account for about 80 percent of all branded hotels.How a Choice/Wyndham merger would stack upCombining the two companies would create America’s largest branded hotel chain

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    Number of hotel rooms in the United States
    Note: Data is as of Dec. 19.Source: CoStar GroupBy The New York TimesUnlike fast food franchisees, hotel owners typically develop or buy their own buildings, representing a multimillion-dollar investment for each property. The industry has drawn thousands of immigrant entrepreneurs from South Asia. Some owners accumulate sprawling portfolios, but most end up with just a few hotels.The average member of the Asian American owners’ group owns just two hotels, most commonly with one of the economy or midscale brands. Choice and Wyndham dominate that segment, with 6,270 and 5,907 hotels in the United States, including Days Inn, Howard Johnson, Quality Inn and Econo Lodge.Being part of a franchise network provides a recognized name, a business plan and collective purchasing that is supposed to give small businesses the benefits of scale. In exchange, hotel owners pay the brands a fee to join, ongoing royalties and other payments for marketing, technology and consulting.As a result, franchisees are effectively customers of the hotel brands. Less competition between hotel chains can leave owners with fewer options and, thus, less leverage to demand better services for a lower cost.Consider the frustrations of Jayanti Patel, who owns a Comfort Inn — one of Choice’s 22 brands — in Gettysburg, Pa.He said Choice had been taking a larger cut, via charges like an $18 monthly fee for reporting his property’s energy use, discounts for rooms booked with rewards programs and penalties when guests file complaints. Mr. Patel also laments declining service, such as from revenue management consultants who are supposed to provide advice that increases his profits. Choice has outsourced this work to a service that operates partly overseas.Mr. Patel said his profit margins had become “thinner and thinner,” and he’s considering signing up with a different brand when his franchise agreement ends in a couple of years. Friends who own Wyndham-branded properties seem happy, so he might adopt one of its brands as long as Choice doesn’t acquire that chain.“When my window comes up in 2026, 99 percent I don’t want to renew my agreement,” Mr. Patel said. “And maybe If I want to go to Wyndham, they have nearly 20 brands, and I lose that opportunity, because it will be the same thing.”Choice argues that as its rivals have expanded and merged, it also needs to grow to offer hotel owners bigger savings on supplies like signage and bedsheets. The company is also promising to bargain down the commissions that hotel owners pay websites like Expedia and Booking.com, which are particularly crucial in the budget segment.“Combining with Wyndham would enable us to continue to deliver enhanced profitability for franchisees — by helping to lower their costs and grow their direct revenue while providing our best-in-class technology platform,” Choice said in a statement.However, many hotel owners say that even if Choice did negotiate lower prices, they are skeptical that they would reap those benefits. In 2020, 90 franchisees filed a lawsuit that accused the company of, among other things, not passing along rebates from contracts with vendors. A judge ruled that hotel owners would have to pursue their claims in separate arbitration cases, and several did.Rich Gandhi, a hotelier in New Jersey, supports a campaign for state legislation that would improve the rights of franchisees in the hospitality industry.Hannah Yoon for The New York TimesChoice prevailed in two of those proceedings. But in one, brought by a hotelier in North Dakota, an arbitrator found this past summer that Choice had “made virtually no efforts to leverage its size, scale and distribution to obtain volume discounts.” He ordered Choice to pay $760,008 in legal fees and compensation. Choice is contesting the award.The case is just one example, but it squares with recent economic research. A 2017 study found that while being part of a hotel franchise system helped bring in guests, it did not lower the cost of doing business compared with operating an independent hotel.But litigating on your own is expensive, which is why few franchisees do so even when they feel they’ve been mistreated.Rich Gandhi, a hotelier in New Jersey, is supporting a campaign for state legislation that would improve the rights of franchisees in the hospitality industry. He leads a three-year-old group called Reform Lodging that is also opposing the merger.Mr. Gandhi has turned four of his Choice-branded hotels into Best Westerns and Red Roof Inns, both non-Choice brands that he said offered better assistance, fewer restrictions and more reasonable fees. Choice, he argued, introduced too many competitors to his area because it makes money from selling new franchises and controlling more of the market, even if the practice squeezes existing owners.“They want the biggest pie, because to them it’s all incremental revenue,” Mr. Gandhi said. “If you keep accumulating all these buildings and provide no support, it’s like one of those old pyramid schemes that’s ready to fall apart, which is exactly what’s happening.”A representative for Choice referred The New York Times to four hoteliers who it said would speak favorably of the merger. Two of them, including the chairman of the Choice Hotels Owners Council — to which all franchisees must belong and pay dues — declined to comment on the record. A third, who owns three Radisson hotels and was happy when Choice bought the brand, said the purchase of Wyndham — a much bigger company — could pose problems.The fourth, a Florida hotelier, Azim Saju, said that despite the loss of competition, if Choice acquired Wyndham the company would still have an incentive to make sure franchisees stayed afloat.“The concern is valid, but the bottom line is that franchising doesn’t do well unless the franchisees are profitable,” Mr. Saju said. “I think Choice has become more conscientious of the importance of franchisee profitability in order to further their success.”The dissatisfaction of hotel owners could hurt Choice’s ability to absorb Wyndham, especially if more franchisees switch to other brands. That prospect has soured some Wall Street analysts on the deal.“In hotel franchising, the critical constituency, as much as consumers walking in the door, is that franchising community,” said David Katz, an analyst who covers the hospitality and gambling industries for Jefferies & Company. “They’re going to own more than 50 percent of the limited service and economy hotels in the United States, and not have the full support of the largest franchisee organization out there? I think that merits further debate.”Franchisee support isn’t important just for morale. It could also sway federal regulators, who have started to take into account the effect of corporate mergers not just on their consumers but also on suppliers like book authors, chicken farmers and Amazon sellers.“Traditionally in antitrust there’s this consumer welfare standard, which is focused on ‘Is this going to be good or bad for consumers?’” said Brett Hollenbeck, an associate professor at the Anderson School of Management of the University of California, Los Angeles. “If the F.T.C. doesn’t feel like this argument will hold sway, they could try a more novel theory, which is that it could hurt franchisees.”Choice said it anticipated that its deal would be approved and was expecting to complete the transaction within a year. Its offer to buy all outstanding Wyndham shares extends through March, when it will try to replace the directors on the company’s board with people who will approve the sale. More

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    The Upshot of Microsoft’s Activision Deal: Big Tech Can Get Even Bigger

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    President Biden’s top antitrust officials have used novel arguments over the past few years to stop tech giants and other large companies from making deals, a strategy that has had mixed success.But on Friday, when Microsoft closed its blockbuster $69 billion acquisition of the video game publisher Activision Blizzard after beating back a federal government challenge, the message sent by the merger’s completion was incontrovertible: Big Tech can still get bigger.“Big Tech companies will certainly be reading the tea leaves,” said Daniel Crane, a law professor at the University of Michigan. “Smart money says merge now while the merging is good.”Microsoft’s purchase of Activision was the latest deal to move forward after a string of failed challenges to mergers by the Federal Trade Commission and the Justice Department, which are also confronting the big tech companies through lawsuits arguing they broke antimonopoly laws. Leaders at the two agencies had tried to block at least 10 other deals over the past two years, promising to dislodge longstanding ideas from antitrust law that they said had protected behemoths like Microsoft, Google and Amazon.But their efforts ran headlong into skeptical courts, largely leaving those core assumptions untouched. In the case of Microsoft’s Activision deal, the idea that the F.T.C. questioned was a “vertical” transaction, which refers to mergers between firms that are not primarily direct competitors. Regulators have rarely sued to block such deals, figuring that they generally do not create monopolies.Yet “vertical” deals have been especially common in the tech industry, where companies like Meta, Apple and Amazon have sought to grow and protect their empires by spreading into new business lines.In 2017, for instance, Amazon bought the high-end grocery chain Whole Foods for $13.4 billion. In 2012, Meta acquired the photo-sharing app Instagram for $1 billion and then shelled out nearly $19 billion for the messaging service WhatsApp in 2014. Of the 24 deals worth more than $1 billion completed by the tech giants from 2013 to mid-August of this year, 20 were vertical transactions, according to data provided by Dealogic.The sealing of the Microsoft-Activision deal has buttressed the notion that vertical deals generally are not anticompetitive and can still go through relatively unscathed.“There continues to be the presumption that vertical integration can be a healthy phenomena,” said William Kovacic, a former chair of the F.T.C. The F.T.C. is proceeding with its challenge to the Microsoft-Activision deal even as it has closed, said Victoria Graham, a spokeswoman for the agency, who added that the acquisition was a “threat to competition.” The Justice Department declined to comment. The White House did not immediately have a comment.The idea that vertical transactions were less likely to harm competition than combinations of direct rivals has been ingrained since the late 1970s. In the ensuing decades, the Justice Department and F.T.C. took no challenges to vertical deals to court, instead reaching settlements that allowed companies to proceed with their deals if they changed practices or divested parts of their business.Then, in 2017, the Justice Department sued to block the $85.4 billion merger between the phone giant AT&T and the media company Time Warner, in the agency’s first attempt to stop a vertical deal in decades. A judge ruled against the challenge in 2018, saying he did not see enough evidence of anticompetitive harms from the union of companies in different industries.Mr. Biden’s top antitrust officials — Lina Khan, the F.T.C. chair, and Jonathan Kanter, the top antitrust official at the Justice Department — have been even more aggressive in challenging vertical mergers since they were appointed in 2021.That year, the F.T.C. sued to stop the chip maker Nvidia from buying Arm, which licenses chip technology, and the companies abandoned the deal. In January 2022, the F.T.C. announced it would block Lockheed Martin’s $4.4 billion acquisition of Aerojet Rocketdyne Holdings, a missile propulsion systems maker. The companies dropped their merger.But judges rejected many of their efforts for lack of evidence and denied Ms. Khan and Mr. Kanter a courtroom win that would have set new precedent. In 2022, after the D.O.J. sued to block UnitedHealth Group’s acquisition of Change Healthcare, a judge ruled against the agency.Lina Khan, the chair of the Federal Trade Commission, challenged Microsoft’s deal for Activision last year. Tom Brenner for The New York TimesThe F.T.C.’s move to block Microsoft’s purchase of Activision last year was a bold effort by Ms. Khan, given that the two companies do not primarily compete with one another. The agency argued that Microsoft, which makes the Xbox gaming console, could harm consumers and competition by withholding Activision’s games from rival consoles and would also use the deal to dominate the young market for game streaming.To show that would not be the case, Microsoft offered to make one of Activision’s major game franchises, Call of Duty, available to other consoles for 10 years. The company also reached a settlement with the European Union, promising to make Activision titles available to competitors in the nascent market for game streaming, which allowed the deal to go through.In July, a federal judge ultimately ruled that the F.T.C. didn’t provide enough evidence that Microsoft intended to forestall competition through the deal and that the software giant’s concession eliminated competition concerns.The agencies are “facing judges who have said 40 years of economics show that vertical mergers are good,” said Nancy Rose, a professor of applied economics at M.I.T. with an expertise in antitrust, who is among a group of scholars who say vertical deals can be harmful to competition. She said the agencies should not back down from challenging vertical mergers, but that regulators would need to be careful to choose cases they can prove with an abundance of evidence.Ms. Khan and Mr. Kanter have said they are willing to take risks and lose lawsuits to expand the boundaries of the law and spark action in Congress to change antitrust rules. Ms. Khan has noted that the F.T.C. has successfully stopped more than a dozen mergers.Mr. Kanter has said that challenges to mergers from the Justice Department and the F.T.C. have deterred problematic deals.“There are fewer problematic mergers that are coming to us in the first place,” he said in a speech at the American Economic Liberties Project, a left-leaning think tank, in August.Still, bigger companies that have the resources to fight back will probably feel more confident challenging regulators after the Microsoft-Activision deal, antitrust lawyers said. The aggressive posture by regulators has simply become the cost of doing business, said Ryan Shores, who led tech antitrust investigations at the D.O.J. during the Trump administration and is now a partner at the law firm Cleary Gottlieb.“A lot of companies have come to the realization that if they have a deal they want to get through, they have to be prepared to litigate,” he said. More

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    Exxon Acquires Pioneer Natural Resources for $60 Billion

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    The acquisition of Pioneer Natural Resources, Exxon’s largest since its merger with Mobil in 1999, increases the company’s presence in the Permian basin in Texas and New Mexico.Exxon Mobil announced on Wednesday that it was acquiring Pioneer Natural Resources for $59.5 billion, doubling down on fossil fuel production even as many global policymakers grow increasingly concerned about climate change and the oil industry’s reluctance to shift to cleaner energy.After decades of investing in projects around the world, the deal would squarely lodge Exxon’s future close to its Houston base, with most of its oil production in Texas and offshore in the Gulf of Mexico and along the coast of Guyana.By concentrating its production close to home, Exxon is effectively betting that U.S. energy policy will not move against fossil fuels in a major way even as the Biden administration encourages automakers to switch to electric vehicles and utilities to make the transition to renewable energy.Exxon executives have said that in addition to producing more fossil fuels, the company is building a new business that will capture carbon dioxide from industrial sites and bury the greenhouse gas in the ground. The technology to do that remains in an early stage and has not been successfully used on a large scale.“The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis,” said Darren Woods, Exxon’s chief executive.American oil production has reached a record of roughly 13 million barrels a day, around 13 percent of the global market, but growth has slowed in recent years. Despite a wave of consolidation among oil and gas companies, and higher oil prices after the Russian invasion of Ukraine last year, producers are having a more difficult time finding new locations to drill.The Pioneer deal is a sign that it is now easier to acquire an oil producer than to drill for oil in a new location.Exxon, a refining and petrochemical powerhouse, needs a lot more oil and gas to turn into gasoline, diesel, plastics, liquefied natural gas, chemicals and other products. Much of that oil and gas is likely to come from the Permian basin, the most productive U.S. oil and gas field, which straddles Texas and New Mexico and where Pioneer is a major player.Exxon’s $10 billion Golden Pass terminal near the Texas-Louisiana border is scheduled to begin shipping liquefied natural gas to the rest of the world next year. Gas bubbles up with oil from the Permian basin, making the basin all the more valuable for exports as Europe weans itself from Russian gas.The Pioneer deal would be Exxon’s largest acquisition since it bought Mobil in 1999. It is bigger than the company’s ill-fated $30 billion acquisition of XTO Energy, a major natural gas producer, in 2010. Exxon had to write off much of that investment later when natural gas prices collapsed from the high levels that prevailed when it bought XTO.By buying Pioneer now, when the U.S. oil benchmark is around $83 a barrel, Exxon is counting on prices remaining relatively high in the next few years.Exxon has been careful in recent years to invest modestly in new production as it raised its dividends and bought back more of its own stock. Buying Pioneer would add production, a big change in its strategy.The acquisition would make Exxon the dominant player in the Permian basin, far outpacing Chevron, its biggest rival.Pioneer has been a darling of Wall Street investors as it has capitalized on the shale drilling boom. Scott Sheffield, its chief executive, got the company out of Alaska, Africa and offshore fields while buying up shale operations in the Permian at cheap prices. By 2020, it had become one of the biggest American drillers, with relatively low cost production.Mr. Sheffield is retiring at the end of the year. His company has a market value of about $50 billion, roughly one-eighth the size of Exxon. Many of its oil and gas fields are still untapped.“While the company has a solid succession plan in place, oil and gas markets have been volatile and the capital available to traditional oil and gas companies in the U.S. has been limited,” said Peter McNally, an analyst at Third Bridge, a research and analytics firm.The deal would be Exxon’s first major acquisition since Mr. Darren Woods became chief executive in 2017, replacing Rex Tillerson, who went on to become secretary of state.Exxon, which reported a record profit of $56 billion last year, is flush with cash that it could invest in Pioneer’s untapped fields. Since Exxon is also a large producer in the Permian, analysts say the merger would bring greater efficiencies in operations of both companies.This is just the latest in a series of mergers and acquisitions in the oil industry in recent years. But it has been consolidating. Occidental Petroleum acquired Anadarko Petroleum four years ago for nearly $40 billion, a deal that made Occidental a major competitor to Exxon and Chevron in the Permian basin. Pioneer spent more than $10 billion buying two other Permian producers, Parsley Energy and DoublePoint Energy, in 2021.Exxon bought Denbury, a Texas energy company that owns pipelines that can transport carbon dioxide, for $4.9 billion this year. More