Three oil companies agree to pay a record $5.6 million settlement following allegations of illegal coordination by the Federal Trade Commission.
At a Glance
- XCL Resources, Verdun Oil, and EP Energy fined $5.6 million for antitrust violations
- Companies accused of illegal pre-merger coordination, known as “gun jumping”
- Violation of Hart-Scott-Rodino Act led to crude oil supply shortage
- Largest penalty ever for a gun-jumping violation in U.S. history
- FTC increases scrutiny on oil and gas industry amid price inflation concerns
Record-Breaking Settlement for Antitrust Violations
In a landmark case, the Federal Trade Commission (FTC) has imposed a hefty $5.6 million fine on three oil companies for violating antitrust laws. XCL Resources Holdings, Verdun Oil Company II, and EP Energy LLC have agreed to settle charges of illegal pre-merger coordination, a practice known as “gun jumping.” This settlement marks the largest penalty ever imposed for such a violation in United States history.
The companies were found to have breached the Hart-Scott-Rodino Act (HSR Act), which requires large transactions to be reported to the FTC and Department of Justice for investigation before closing. Specifically, Verdun had agreed to acquire EP in a $1.4 billion transaction subject to the HSR Act. However, the companies prematurely transferred significant operational control of EP to XCL and Verdun during a mandatory waiting period.
The FTC’s investigation revealed that the unlawful activities included halting EP’s well-drilling operations, managing customer contracts, and coordinating prices. These actions reportedly led to a crude oil supply shortage at a time when the United States was already grappling with significant supply issues and high crude oil prices.
The illegal conduct persisted for 94 days, only ending when an amendment was made to allow EP to operate independently. This case highlights the FTC’s ongoing efforts to maintain competitive market conduct and protect consumers, especially during challenging economic and geopolitical scenarios.
FTC’s Increased Scrutiny on Oil Industry
This settlement comes amid increased scrutiny of the oil and gas industry by the FTC. The commission has been investigating potential collusion and proposed mergers in the sector, particularly in light of accusations of price gouging during 2021 and 2022. These allegations arose due to various economic factors and geopolitical events, although the industry has consistently denied such claims.
The FTC’s settlement was accepted with a 4-0-1 vote, and the Department of Justice filed the complaint in the U.S. District Court for the District of Columbia. A 60-day public comment period is now open for the proposed settlement, after which the court may approve it if deemed in the public interest.
