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21 May 2007
After three months of the new congressional session, several new bills concerning competition in the energy industry are now being processed, ranging from 'price gouging' legislation to proposals that may affect petroleum mergers. Although similar bills were introduced in the last session but never passed, this year may prove different.
Some form of federal price gouging bill was predicated to pass last year despite the opposition of the Federal Trade Commission (FTC), in light of considerable support from both parties. Numerous versions of the price gouging bill were proposed following Hurricanes Katrina and Rita. One of these passed the House of Representatives but went no further. In this session two new bills have been proposed. In January 2007 the Gasoline Consumer Anti-price Gouging Protection Act(1) was introduced in the Senate, an act that would give the FTC authority to issue rules on increasing gasoline prices in areas under an emergency proclamation or order. More recently, over 70 house sponsors introduced the Federal Price Gouging Prevention Act(2) on February 28 2007, which is far more expansive than any prior proposals.
The Federal Price Gouging Prevention Act would apply particularly to natural gas and gasoline. Specifically, it applies to "crude oil, gasoline, natural gas or petroleum distillates", which would include home heating oil and propane. The proposal makes it unlawful to charge 'unconscionably excessive' prices or for the seller to take "unfair advantage of unusual market conditions (whether real or perceived) or the circumstances of an emergency to increase prices unreasonably".
As explained in the bill, one factor to consider in determining a violation is whether a 'gross disparity' exists between the price and that charged in the preceding 30 days, or as compared to the price readily obtainable by other purchasers in the same area.
Another new addition is a 'market manipulation' section which makes it unlawful to employ any manipulative or deceptive device or contrivance in the purchase or sale of crude oil, gasoline, natural gas or petroleum distillates at wholesale. This provision is similar to the anti-market manipulation rules of the Federal Energy Regulatory Commission (FERC), which borrowed the test for manipulation from securities fraud laws.
As to enforcement, the Federal Price Gouging Prevention Act gives the FTC authority to impose civil penalties on any person of up to $3 million or three times the profit value, and the new statute would have criminal penalties. Corporations would face fines of up to $150 million. Individuals could face jail sentences of up to 10 years and $2 million fines. Although there is no private enforcement provision in the act, the state attorneys general would also be given authority to enforce the law. Finally, the act includes a novel provision to promote market transparency for crude oil, gasoline and petroleum distillates. This provision would allow the FTC to establish an electronic information system for the public if the FTC believed the price information was not adequately available.
The Oil Industry Merger
Antitrust Enforcement Act was introduced on March 14 2007 to prevent anti-competitive mergers
and acquisitions in the oil industry.(3) The key provision in this act addresses the amendment of Section 7 of the Clayton Act
to shift the burden of proof to the advocates of an energy merger to prove that
it would not substantially lessen competition. In Spring 2006 a similar bill was
The Gasoline Price Stabilization Act of 2007(4) was introduced on March 13. The bill covers a variety of topics, but of most interest is a proposed prohibition of mergers in the petroleum industry unless the acquisition is likely to result in a net benefit to consumers by maintaining or increasing competition. In other words, this is a burden-shifting provision like the Oil Industry Merger Antitrust Enforcement Act. In addition, there is an automatic moratorium on large mergers for one year unless waived by the attorney general under extraordinary circumstances.
The No Oil Producing and Exporting Cartels Act of 2007(5) was introduced on March 14 to amend the Sherman Act to make oil-producing and exporting cartels illegal. A similar proposal was also introduced last spring. This bill would amend the Foreign Sovereign Immunities Act to make it easier to sue a foreign state or any instrument of the state for price fixing. However, under this bill only the Department of Justice is identified as authorized to bring an enforcement action. Private causes of action are not mentioned.
For further information on this topic please contact Layne E Kruse or Darryl W Anderson at Fulbright & Jaworski LLP's Houston office by telephone (+1 713 651 5151) or by fax (+1 713 651 5246) or by email (email@example.com or firstname.lastname@example.org). Alternatively, contact David M Foster at Fulbright & Jaworski LLP's Washington office by telephone (+1 202 662 4517) or by fax (+1 202 662 4643) or by email (email@example.com).
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