Recent Merger Challenge by California Attorney General Heralds Increased State AG Antitrust Enforcement During Trump Administration

October 2, 2017

State Attorneys General ("State AGs") have the authority to challenge M&A transactions under federal (and most state) antitrust laws but ordinarily do so in partnership with federal antitrust enforcers.  It has historically been the case, however, that State AGs with active antitrust divisions have sought to elevate their antitrust enforcement levels during periods when they have anticipated or perceived a reduction in federal enforcement.  Such an uptick in state antitrust enforcement is now in evidence and the business community should take note of the resulting enhanced risk when planning transactions and developing clearance strategies.  As the Chief of the Antitrust Bureau for the New York Attorney General’s office recently confirmed, New York and other states are preparing to increase their antitrust enforcement activities due to the possibility of reduced enforcement during the Trump Administration.[1]  This development is vividly reflected in the recent successful effort by the California Attorney General to block the acquisition by Valero Partners of two petroleum terminals in Northern California.

In June, the California Attorney General—on its own—brought a federal lawsuit seeking to block Valero Partners’ acquisition of the two petroleum terminals in question.[2]  The two terminals are used to store and ship petroleum from refineries in Northern California to an interstate pipeline.  Other terminals provide the same service in the region, but California was concerned that those alternative terminals generally operate at or near capacity, thus allegedly making the two terminals in question the only ones with spare capacity.  Also of concern to California was the fact that the largest customers of the two terminals are competitors of Valero Energy Corporation, which California believed exercised effective control over Valero Partners (a limited partnership).

In response to the lawsuit, the merging parties agreed to delay making any changes to the terminals’ operations, staff, or contracts pending a trial on the merits.  Due to that commitment, the Court denied California’s request for a temporary restraining order and preliminary injunction but expressed "serious concerns that the transaction [would] lead to higher prices at the pump."[3]  After the Court’s decision, the parties abandoned the transaction.[4]

The Valero matter is not the only concrete sign of aggressive state AG antitrust enforcement during the Trump Administration.  State AGs also filed a petition for certiorari with the Supreme Court in the U.S. v. American Express case despite the Department of Justice’s decision not to seek review of the appellate decision overturning its trial victory.[5]  Other state AG antitrust actions have also been reported in the generic pharmaceuticals[6] and oil and gas[7] sectors.  These more recent examples illustrate that at this time State AGs are also willing and able to bring their own antitrust investigations and lawsuits even in the absence of action from their federal counterparts.  Clearance from federal antitrust agencies may not be the last word over the next several years.

   [1]   Shylah Alfonso, David Chiappetta, Cori Gordon Moore, Takeaways From the ABA Antitrust Spring Meeting: Part 1 (April 3, 2017)

   [2]   Order re Motion for Preliminary Injunction, State of California v. Valero Energy Corp., No. C 17-03786 WHA, at 5 (N.D. Cal. August 23, 2017).

   [3]   Id. at 6.

   [4]   Mattias Gafni, After lawsuit, Valero backs out of planned East Bay oil terminal purchase, The Mercury News, Sept. 18, 2017,

   [5]   Iowa, et al. v. American Express Co., et al, case number 16A923 (U.S. June 2, 2017).

   [6]   Connecticut et al. v. Aurobindo Pharma USA Inc. et al., case number 3:16-cv-02056 (Conn. D.C. Dec. 16, 2016); see also Transfer Order, In re: Generic Pharmaceuticals Pricing Antitrust Litigation, MDL No. 2724, case number 3:16-cv-02056-VLB.  Twenty additional states joined the complaint later on. 

   [7]   Ivan Penn, California attorney general subpoenas oil refiners in gas-price probe, (June 30, 2016)

The following Gibson Dunn lawyers assisted in the preparation of this client update: Daniel Swanson, Joshua Soven, Eric Stock, Sean Royall, Joseph Vardner and Abiel Garcia.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have about these developments. To learn more about these issues, please contact the Gibson Dunn lawyer with whom you usually work, or any of the following lawyers in the firm’s Antitrust and Competition practice group:

Daniel G. Swanson – Los Angeles (+1 213-229-7430, [email protected])
M. Sean Royall – Dallas (+1 214-698-3256, [email protected])
Eric J. Stock – New York (+1 212-351-2301, [email protected])
Joshua H. Soven – Washington, D.C. (+1 202-955-8503, [email protected])
Mylan L. Denerstein – New York (+1 212-351-3850, [email protected])

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