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The Justice Department on Wednesday sued to stop Halliburton Co. from acquiring oilfield services rival Baker Hughes Inc., saying the deal would eliminate head-to-head competition and harm consumers.

The proposed transaction, valued at nearly US$35 billion, would combine two of the world’s three leading providers of those services to oil and gas companies and create a bigger rival to the industry leader, Schlumberger Ltd.

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But the Justice Department warned in its complaint that the proposed consolidation would lead to higher prices and stifle innovation in an industry that fiercely competes for the business of exploration and production companies and to develop technologies for deeper drilling.

“The U.S. economy, American consumers, and those who engage in the production of energy consumed in the United States cannot be asked to accept the risk to competition posed by this transaction,” the department said in its complaint.

The deal would harm competition in 23 separate markets, creating “non-competitive duopolies,” Attorney General Loretta Lynch said in a conference call with reporters.

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Halliburton and Baker Hughes announced their plan to combine in November 2014, shortly after oil prices began to fall. Few, however, predicted the depth and duration of lower prices caused by a global oversupply of oil.

The glut has slowed demand for drilling services and crushed the stock price of both companies.

In a joint statement Wednesday, the companies called the deal “pro-competitive” and said customers would benefit “from a more flexible, innovative, and efficient oilfield services company.

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“The transaction will provide customers with access to high quality and more efficient products and services, and an opportunity to reduce their cost per barrel of oil equivalent,” the statement said.

Justice Department officials say the companies were well aware at the time of their proposal that it raised antitrust concerns but went ahead with it anyway. They say the companies’ proposed fix — in which assets would an array of products and services would be sold off — is “complicated and convoluted” and does nothing to address the problem.

“I’ve seen a lot of problematic mergers in my time, but I have never seen one that poses so many antitrust problems in so many markets,” said Assistant Attorney General Bill Baer, head of the Justice Department’s antitrust division.

 

Originally published on Advisor.ca
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