On Wednesday, April 6, the Department of Justice (“Justice”) sued to block Halliburton Company’s proposed acquisition of Baker Hughes Inc., alleging the deal threatens to eliminate competition, raise prices and reduce innovation in the oilfield services industry.  According to the complaint, the acquisition would combine two of the three largest oilfield services companies (along with Schlumberger) in the United States and the world, eliminating important head-to-head competition in markets for 23 products or services used for on- and off-shore oil exploration and production in the United States.  In markets for 11 of these products or services, the combined firm would allegedly possess more than a 50% share.

During the merger review, Halliburton proposed to remedy the alleged effects by divesting a mix of assets extracted from both companies, but Justice found that Halliburton would mostly retain the more valuable assets – such as important facilities, employees, contracts, intellectual property, and research and development resources – while selling less significant assets to a third party that would therefore be put at a competitive disadvantage.  Thus, Justice concluded the divesture would not replicate the competition that currently exists between the firms.

Baker Hughes is no stranger to litigating against Department of Justice antitrust merger enforcement.  In 1990, the United States Court of Appeals, District of Columbia Circuit dismissed the Department of Justice’s complaint challenging Baker Hughes’ sale of its hardrock hydraulic underground drilling rigs subsidiary to a rival in the industry.  The D.C. Circuit panel included current Supreme Court Justices Ruth Bader Ginsburg and Clarence Thomas.  Recently promoted Assintant Attorney General Bill Baer was counsel for Baker Hughes in the landmark 1990 case.

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