7-Eleven Closes Speedway Deal at its Own Risk

7 Eleven and Speedway  announced the transaction in August 2020.  The FTC issued Second Requests for information to the parties and investigated the transaction because it raised a number of competitive concerns in various local geographic markets. 

The parties negotiated a divestiture of approximately 300 stores with the FTC staff to remedy the antitrust concerns.  The staff advised the four sitting commissioners to accept the negotiated settlement agreement.  A settlement, however, requires a majority vote of the four sitting FTC Commissioners.  Two Democratic members of the Commission were not comfortable with the proposed divestiture remedy, creating a deadlock with the two Republican Commissioners that followed the staff’s recommendation.  The deadlock allowed 7-Eleven to close its acquisition without any remedy at all.   

The two Democratic Commissioners, Acting Chairwoman Rebecca Kelly Slaughter and Commissioner Rohit Chopra, together issued a statement stating there is “reason to believe that this transaction is illegal under Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act, raising significant competitive concerns in hundreds of local retail gasoline and diesel fuel markets across the country.”  Expressing concern that the transaction presents a “merger-to-monopoly” or at least reduces the number of competitors from three to two in many local markets, the Democratic Commissioners warned the parties that the agency’s investigation would continue and that they were closing the harmful merger “at their own risk.” 

In a separate statement, Republican Commissioners Noah Joshua Phillips and Christine S. Wilson took issue with the lack of action by the FTC in this case: “Rather than resolve the issues and order divestitures (or sue to block the transaction), the Acting Chairwoman and Commissioner Chopra have issued a strongly worded statement” which does not bind the parties.  Commissioners Phillips and Wilson declared that “[t]here is no good reason for the Commission to be in this mess.”  According to the Republican Commissioners, the FTC had plenty of time to negotiate a resolution to resolve competitive concerns, and failure to do so has left consumers completely unprotected and created uncertainty for business.

 7-Eleven issued a statement defending its decision to close the transaction, explaining that the parties negotiated a settlement agreement with FTC staff at the end of April involving the divestiture of 293 stores that purportedly resolved all competitive concerns raised by the FTC.  According to 7-Eleven, the FTC staff, including leaders in the Bureau of Competition, recommended to the FTC Commissioners that they approve that settlement.  7-Eleven had also entered into a timing agreement with the FTC staff that was extended four times to provide additional time to negotiate a mutually acceptable divestiture package, with the final extension on April 9, 2021 allowing for the merger parties to close on May 14.

According to 7-Eleven’s statement, “[d]espite FTC staff’s recommendation that the Commission approve the negotiated settlement, on May 11, 2021—less than three days before close—Acting Chairwoman Slaughter and Commissioner Chopra indicated that they wanted more time to review the settlement agreement.  7‑Eleven took the request very seriously, but such a last-minute delay would have created enormous disruption to the lives of our new colleagues at Speedway and to the business.  Given that there was no legal basis for such a delay and given that 7‑Eleven was abiding by the negotiated settlement agreement, we closed today on schedule.”

Notably, 7-Eleven applauded the FTC staff “for their hard work and commitment in reviewing the Speedway transaction” and stated that it intends to abide by the negotiated settlement and complete the agreed-upon divestitures.

Lessons Learned:

This case serves as a reminder that when the FTC is operating with a 2 Republicans and 2 Democrats, the FTC cannot take action unless the FTC votes to do so.  If the FTC has a party-line split vote whereas they did here 2-2, no action will be taken by the Commission.  This allowed the parties to close the transaction without a formal consent decree.  Fortunately, 7 Eleven is abiding by the agreement that it entered with staff.

Merging parties with transactions that may raise competitive issues should take note that there is potential for continued stalemates at the FTC, at least in the near future.