FTC Order Bans Hess CEO from Chevron Board in Chevron-Hess Deal

The Federal Trade Commission is taking action to resolve antitrust concerns related to Chevron Corporation’s acquisition of rival oil producer Hess Corporation by approving a proposed consent order that would prohibit Chevron from appointing Hess CEO John B. Hess to its Board of Directors.

The FTC’s complaint alleges that Mr. Hess communicated publicly and privately with the past and current Secretaries General of the Organization of Petroleum Exporting Countries (OPEC) and an official from Saudi Arabia. In these communications, Mr. Hess stressed the importance of oil market stability and inventory management and encouraged these officials to take actions on these issues and speak about them at different events, the complaint alleges.

Mr. Hess further encouraged his OPEC competitors to stabilize production and draw down inventories, the complaint alleges. As Mr. Hess has noted publicly, there is a direct correlation between inventory levels and oil prices. Reductions in crude oil exploration and production generally lead to higher oil prices and higher prices for products derived from oil, including transportation fuels such as gasoline, diesel, and jet fuel, and heating oil.

“Mr. Hess’s communications with competitors about global oil output and other dimensions of crude oil market competition disqualify him from serving on Chevron’s Board of Directors,” said Henry Liu, Director of the FTC’s Bureau of Competition. “The FTC will use all its available enforcement tools to protect competition in this vital market and help ensure American consumers benefit from lower prices at the pump.”

As detailed in the complaint, the merger agreement between Chevron and Hess Corporation requires Chevron to take all actions necessary to appoint Mr. Hess to its Board of Directors. The FTC’s complaint alleges that, as a Chevron Board member, Mr. Hess would gain a much larger platform to amplify his supportive messaging to OPEC and others about OPEC’s market stability goals, increasing the likelihood that Chevron could align its production with OPEC’s output decisions to maintain higher oil prices. The complaint alleges that, given his prior conduct, Mr. Hess’s appointment to Chevron’s Board of Directors would heighten the risk of harm to competition, including meaningfully increasing the risk of industry coordination.

The FTC’s proposed consent order would prohibit Chevron from nominating, designating, or appointing Mr. Hess to the Chevron Board, and from allowing Mr. Hess to serve in an advisory or consulting capacity to, or as a representative of, Chevron or the Chevron Board. The proposed consent order would allow Chevron to consult with Mr. Hess and allow him to serve as an advisor, consultant, or representative of Chevron, solely related to interactions and discussions with (a) Guyanese government officials about Hess’s oil-related and health ministry-related activities in Guyana, and (b) the Salk Institute’s Harnessing Plants Initiative.

Further details about the order can be found in the analysis to aid public comment.

The Commission voted 3-2 to accept the consent agreement and place the complaint and order on the record for public comment. Chair Lina M. Khan issued a statement joined by Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya. Commissioners Melissa Holyoak and Andrew N. Ferguson each issued a dissenting statement.

The FTC will publish the consent agreement package in the Federal Register in the coming days. Instructions for filing comments appear in the published notice. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions.