On Jan. 7, FTC fined oil companies $5.6mn for unlawful gun-jumping.
FTC, DoJ reported on lawsuit against crude oil producers XCL Resources Holdings LLC, Verdun Oil, and EP Energy LLC for violating pre-transaction notification requirements.
Companies also violated waiting period requirements of Hart-Scott-Rodino act (HSR act) (15 USC 18a), following Verdun’s $1.4bn purchase agreement for EP in 2021.
The civil penalty settlement reached with XCL Resources, Verdun Oil, and EP provides for the largest dollar penalty ever imposed for a gun-jumping violation in US history.
Alleged Conduct
Verdun, which was under common management with XCL at time of the transaction, agreed to acquire EP in a $1.4 billion transaction that was subject to the HSR act.
EP, however, allowed XCL and Verdun to assume operational and decision-making control over significant aspects of EP’s day-to-day business operations prior to closing.
Violated HSR act’s waiting period requirements, where merging parties must submit form to federal antitrust agencies, observe waiting period before completing deal.
Unlawful gun-jumping activities during HSR waiting period included XCL and Verdun ordering stoppage to EP’s planned well-drilling and development activities.
XCL and EP coordinating to manage EP’s customer contracts, relationships, and deliveries in Uinta Basin region of Utah; coordinated prices for EP’s customers in Texas.
Led to crude oil supply shortage for EP when the US market was facing significant supply shortages and multi-year highs in oil prices, resulting in skyrocketing prices.
Enforcement
Request for decree that parties violated HSR act; pay $5.6mn civil penalty; that parties enjoined from any activity for 10 years with same effect as alleged violations.
