BRADFORD, PA – AUGUST 13: A drilling crew move a section of steel pipe at a natural gas well site near Bradford, Pennsylvania August 13, 2008. The 1800 foot well will take three days to reach the gas deposit cutting through shale formations into a layer of porous sandstone. Recent interest in natural gas in the Appalachian Basin has been focused on the Marcellus Shale, a formation of hard rock more than 5000 feet below stretching from West Virginia north through Ohio, Pennsylvania and New York State. Pennsylvania has issued more than 7000 permits for oil and gas drilling in 2008, more than twice as many as five years ago. (Photo by Robert Nickelsberg/Getty Images)
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Two of the largest United States shale energy companies, announced their merger in early February in a $58B all-stock deal. The transaction now must be approved by the Justice Department. If approved, the merger is expected to close in the second quarter of 2026. (Source).
Critics of the deal complain about its anti-competitive features because it would combine Devon’s current top position in the Permian Basin of Texas with Coterra’s already commanding role in the Marcellus Basin of Pennsylvania, Ohio, and West Virginia, as well. However, this proposed merger comes amid declining oil and natural gas prices generally, as well as the possibility of a return to the market of massive amounts of oil and gas from Venezuela. Also, many of the current energy majors, including Chevron and ExxonMobil, who for years refrained from taking a large position in shale, have recently switched course and now expect to remain substantial competitors with the newly combined company, to be known as Devon Energy.
Indeed, even if the merger does go through, the newly combined company still would be smaller than ExxonMobil is at present in shale assets and production, to say nothing of overall oil and gas assets, so one is left to wonder whether the new company would or could present any new anti-trust concerns based on its expected market share. (Source).
All of this raises the seminal question for the Justice Department, which is the following: As the DOJ weighs this merger, it must consider what the “market” truly is and what, post-merger, Devon Energy’s power over it will actually be.
That is, during the Biden Administration, the DOJ took a very expansive position on antitrust by attempting to define “the market” very narrowly.
A classic example of this approach was the Biden-era DOJ’s antitrust action against the credit card company, Visa, regarding its debit card business. Ironically, this suit—which has been continued under the second Trump Administration—could have adverse effects on the broader antitrust landscape by “muddying the waters” regarding anticompetitive outcomes.
Specifically, in the Visa matter, the DOJ seems to overlook the fact that numerous stakeholders with existing divergent interests are already involved. As noted by Max Gulker, Managing Director of the Reason Foundation, “Visa’s debit network connects two groups of customers, debit cardholders, and merchants, allowing the former to make purchases with the latter using a debit card. This business model, known as a two-sided platform, has become an increasingly important part of many industries and markets with the rise of information and networking technology.”
The Durbin Amendment to the Dodd-Frank Act, passed with bipartisan support in 2010 and was signed into law under the Obama Administration. It requires that every debit card must be issued by at least two unaffiliated networks, one shown on the front of the card and the other on the back. It also caps the fees that banks with assets of $10 billion or more are permitted to charge. The competitive rationale was, and is, that this would result in lower “swipe fees” being charged, with merchants able to route charges through either of the unaffiliated networks, thereby resulting in a reduced overall cost to consumers, generally, for services.
The Durbin Amendment has been on the books for well over ten years, and the results have been mixed at best. The net effects have seemed to include a rise in small-ticket transaction fees, a significant reduction in fee-free checking accounts, and higher minimums and fees for checking accounts. These effects, in turn, have contributed to an increase of approximately 1 million Americans—most of them low-income—going either entirely without bank accounts or without adequate banking services, and—last but not least—a shift on the part of consumers away from debit cards to credit and prepaid cards not subject to the price controls.
That said, the existence of the Durbin Amendment brings up an important point: because it mandates two unaffiliated networks on each card, isn’t adequate competition already built into today’s debit card industry?
Visa holds the largest market share in the U.S., with MasterCard, American Express, and Diners Club as the runners-up for the “front of the card” position. There are also a host of other networks, depending on the region, appearing as “back of the card” providers, such as Accel and STAR. It can be argued that, due to the Durbin Amendment, the networks appearing on the back side of these debit cards are being provided something of a “free ride”.
With federal law requiring banks to place at least two networks on every debit card, smaller regional networks gain guaranteed access to transactions without having to build nationwide consumer recognition or invest at Visa’s scale. That regulatory structure complicates any claim that Visa exercises unilateral market power.
Are these debit networks one market or separate markets? Since they all compete, it seems odd to separate them to make an antitrust claim against Visa.
The same is true for the energy market in the Devon/Coterra merger. The combined energy company may have a substantially increased position in the shale market, but in the end, natural gas is natural gas, regardless of whether it is derived from conventional or unconventional methods.
The apparent failure of the DOJ to recognize the rapidly evolving nature of numerous markets could have serious implications across other industries beyond financial services or oil and gas. One such implication is that, by following outdated policies, the DOJ could wind up stifling innovation, which is, of course, the opposite of what should be its antitrust mandates and goals. Indeed, in doing so, the DOJ may even wind up taking companies that collectively can compete and reduce them to fragments that cannot.
During the recent appearance at the World Economic Forum, Citadel founder Ken Griffin noted that the Biden Administration had blocked Spirit Airlines’ attempt to merge with fellow ultra-low-cost carrier, JetBlue. Now Spirit is in bankruptcy. (Source).
In short, whether we are dealing with the energy sector, the financial services market, or other areas, a logical goal under any rational antitrust policy would be to create a regulatory environment that encourages innovation while simultaneously preventing anti-competitive behavior. Should we fail to follow that path, we risk strangling the American economy with policies that may have once made sense decades ago but no longer do so in the modern world.