On May 14, 7-Eleven closed its $21 billion acquisition of approximately 3,800 Speedway retail gasoline and convenience store outlets from Marathon Petroleum, despite FTC commissioners unanimously asserting objections to the transaction.
All four commissioners acknowledged that the transaction presented antitrust issues, but the Commission evidently failed to reach a majority-supported resolution before the Hart-Scott-Rodino (HSR) waiting period expired and the parties’ timing agreements with FTC staff lapsed – paving the way for closure of the transaction. Lack of Commission resolution within the prescribed framework highlights the uncertainty parties face under a politically and ideologically divided (i.e., 2 Democrats:2 Republicans) Commission.
Fork in the Road
Commission Democrats and Republicans issued split statements in the wake of the closing. Acting Chairwoman Rebecca Kelly Slaughter and Commissioner Rohit Chopra claimed to be “extremely troubled” by the parties’ decision and warned that they had “closed their transaction at their own risk.” However, fellow Commissioners Noah Joshua Phillips and Christine S. Wilson criticized their counterparts for issuing a “strongly worded statement” instead of taking action, stating that there was “no good reason for the Commission to be in this mess” and that there had been “plenty of time” to resolve the concerns of all commissioners. In apparent support of 7-Eleven, Phillips and Wilson also stated that “to the extent that our colleagues insinuate that the parties have acted in bad faith in this process, we have been given no information suggesting the parties failed to work constructively with staff to negotiate a timely and effective resolution.”
In a subsequent letter to Acting Chairwoman Slaughter, US Senator Mike Lee also expressed his alarm over the deadlock, which he said “raises issues of basic competence,” suggests a “grave failure on the government’s part” and is “inexplicable and inexcusable.”
Pit-Stops Along the Way
In its own statement, 7-Eleven explained that the statement from Acting Chairwoman Slaughter and Commissioner Chopra “fails to acknowledge the facts that led to 7-Eleven closing the transaction.” In particular, it asserted that:
- 7-Eleven entered into a timing agreement with FTC staff, which it extended four times at the request of staff, that permitted the transaction to close on May 14.
- 7-Eleven had also negotiated a settlement agreement involving divestiture of 293 fuel outlets that FTC staff recommended the Commission approve.
- On May 11 – less than three days before the scheduled closing date – Acting Chairwoman Slaughter and Commissioner Chopra asked for more time to review the settlement agreement. According to 7-Eleven, the only concern articulated by the two Commissioners was that the agreement allowed too much time for divestiture, with 7-Eleven contending it had offered to shorten this period several times.
At the Finish Line
While 7-Eleven indicated that it took the request to further extend its timing agreement “very seriously,” the parties ultimately closed the transaction as planned on May 14. 7-Eleven explained that: (i) there was “no legal basis” for the last-minute delay; (ii) 7-Eleven was abiding by the settlement agreement negotiated with FTC staff; and (iii) further delay would have created “enormous disruption.”
Furthermore, the Purchase and Sale Agreement for the deal provides for closing on the third business day following satisfaction of all closing conditions. When both the HSR waiting period and the parties’ timing agreements lapsed, all conditions precedent to closing the transaction appear to have been satisfied and the wheels set in motion for closing.
While the parties could have agreed to delay closing, in its position as the seller, it is unclear whether Marathon would have had an incentive to do so. Closing provided ultimate deal certainty to Marathon and, regardless of any preference to the contrary, 7-Eleven may have been contractually obligated to drive across the finish line once the conditions to the transaction were satisfied.
The Road Ahead
This lack of resolution within the established HSR framework underscores the uncertainty merging parties face under the current 2:2 Commission split – where stalemates of this nature cannot be rectified by a deciding swing vote – and it is unclear what route the Commission will now take, particularly as Commission nominee Lina Khan (Democrat) awaits Senate confirmation. 7-Eleven has apparently abided by the terms of its negotiated settlement agreement (and announced on May 19 that it has signed agreements to sell 293 stores), but the statement by Acting Chairwoman Slaughter and Commissioner Chopra suggests an appetite to drive toward post-closing enforcement. Although the agreement between 7-Eleven and Marathon included a divestiture cap, it is now theoretically possible that 7-Eleven will be forced to divest more than it bargained for in a post-closure enforcement action – but to do so, the FTC may face an uphill battle as to why statutory and negotiated pre-merger enforcement timelines and settlements were insufficient in the first place.
As noted by Commissioners Phillips and Wilson, the HSR Act was enacted to create a framework allowing the government to review and either challenge or resolve anticompetitive mergers before they close. In this transaction, the detour from the standard framework has created roadblocks out of uncertainty.