The Federal Trade Commission (FTC) announced that XCL Resources Holdings, LLC (XCL), Verdun Oil Company II LLC (Verdun), and EP Energy LLC (EP) have agreed to pay a $5.6 million civil penalty. This settlement addresses allegations of illegal pre-merger coordination, known as gun jumping, in violation of the Hart-Scott-Rodino Act (HSR Act).
According to the FTC's complaint, Verdun agreed to acquire EP in a $1.4 billion transaction subject to the HSR Act. The act requires parties involved in mergers to submit an HSR form and observe a waiting period before completing any transaction. However, it was alleged that EP allowed XCL and Verdun to assume control over significant aspects of its operations prior to the closing of the transaction.
The companies allegedly engaged in activities such as ordering stoppages on well-drilling projects, coordinating customer contracts and relationships, and setting prices for customers in certain regions. These actions reportedly contributed to crude oil supply shortages during a period when U.S. oil prices were high.
The settlement reached with these companies represents the largest penalty ever imposed for gun-jumping violations under U.S. law.
The FTC noted that this violation began on July 26, 2021, when XCL, Verdun, and EP executed their purchase agreement. The investigation found that eliminating competition between two major energy producers would harm market competition for crude oil sales in Utah.
To address competitive concerns, a consent agreement was reached requiring divestiture of EP’s business assets in Utah. The illegal conduct continued until October 27, 2021, when an amendment allowed EP to operate independently again.
On March 25, 2022, the HSR waiting period expired following acceptance of a consent agreement by the FTC after being violated for 94 days by these companies.
The FTC voted unanimously to accept this settlement except for Commissioner Holyoak who recused themselves from voting. The Department of Justice filed both complaint and proposed order on behalf of the FTC with submission made within U.S District Court located at District Columbia
Per Tunney Act requirements: proposed settlements alongside competitive impact statements will be published via Federal Register inviting public commentary over sixty-day duration directed towards Maribeth Petrizzi Special Attorney representing United States through provided contact information
