Legislation introduced in the 116th US Congress would give the federal government authority to prosecute members of the Organization of Petroleum Exporting Countries for violating US antitrust laws, speakers at an Apr. 10 Washington event generally agreed. But they were less certain about whether it would actually take place.
Both H.R. 948, which Rep. Steve Chabot (R-Ohio) introduced on Feb. 4 with seven cosponsors, and S. 370, which Sen. Charles E. Grassley (R-Iowa) introduced on Feb. 7 with three cosponsors, would give the US government’s executive branch legal authority to move against OPEC and its members for alleged collusion and market manipulation.
“It would not make the oil cartel simply OPEC, but any group which conspires to fix prices,” said Harry First, Charles H. Denison professor at New York University’s School of Law during a discussion on such so-called “NOPEC” laws at Securing America’s Future Energy (SAFE).
“It could become a coherent part of the administration’s strategy to support US interests,” added a second panelist, Retired US Navy Adm. Dennis Blair who formerly led the US Pacific Command. “We have to have penalties in our pockets to respond to other countries’ unfair actions.”
First said, “These bills are very targeted. The only enforcer would be the US Department of Justice, which makes the executive branch the key player. Putting the decision there is important.”
Seth Bloom, president of Bloom Strategies, who helped draft the first NOPEC bill 19 years ago when he was on the staff of then-US Sen. Herbert H. Kohl (D-Wis.), said, “Price fixing conspiracies among competitors are illegal in this country. But foreign nations are protected by sovereign immunity and the Act of State Doctrine.”
Diplomatic implications
Asked why that and subsequent versions did not become law despite winning unanimous approval in both the House and Senate Judiciary Committees, he said that an official in George W. Bush’s administration said in 2007 that it would be vetoed for diplomatic reasons. Bloom took this to mean that it posed a possible threat to US relations with Saudi Arabia.
“But I think this bill’s time may have come,” Bloom said. “OPEC’s influence continues to grow, particularly with the addition of Russia. I’m not sure it would even be necessary to file a lawsuit if it was enacted. The mere threat could keep OPEC members in line.”
First said, “Unless Congress gives a specific exemption, antitrust laws apply to every industry.” He noted, however, that Congress included an exception for commercial entities when it passed the Foreign Sovereign Immunity Act in 1976. The current NOPEC bills say this clearly applies in global crude oil and petroleum product markets, he said.
First added, “Antitrust cases involving foreign entities generally have been brought against state-owned enterprises. That said, there’s been a recent uptick in actions.”
Andrew Morriss, dean of the School of Innovation and vice-president for entrepreneurship and economic development at Texas A&M University, noted, “Let’s not forget that monopolies always have bad consequences. Stopping bad actors is about more than prices. It would help encourage innovation.”
Former Indianapolis Mayor Greg Ballard observed, “There’s new technology coming in transportation although it’s not very dramatic yet. If electric vehicles grow from cars and trucks to planes and ships, it would be significant. It’s getting a lot cheaper, and I’d like to see more local and state government involved.”
China in the lead
Blair said that China is the country working hardest on converting vehicles from petroleum products. “More electric vehicles are sold there than anywhere else. If the US doesn’t follow its own interests while it still can, China will dominate nonoil vehicle technology,” he warned.
Morriss suggested, “Natural gas is starting to make inroads. We nearly regulated the gas market to death in the 1970s, but it’s starting to make inroads in the trucking industry. Fleet vehicles are easy to switch to gas because they’re relatively easy to refuel.”
SAFE Founder and Pres. Robbie Diamond, who moderated the discussion, said, “We have an infrastructure that’s worth trillions of dollars that uses petroleum products. To say the free market is going to solve this isn’t true because there’s no free market here. The argument for NOPEC is simple: The Justice Department should be allowed to treat OPEC in the same way it treats other cartels.”
SAFE also released independent research it commissioned by First and Darren Bush, the Leonard B. Rosenburg Professor of Law at the University of Houston Law Center, which concluded that while the current NOPEC bills would not solve all the problems, their relatively moderate approach would remove “substantial roadblocks” the cartel has used to evade US antitrust law.
If enacted, the legislation would amend the Sherman Antitrust Act to remove the sovereign immunity and Act of State doctrine OPEC and its members have used in the past to evade US antitrust litigation, according to SAFE. First and Bush’s research also suggests that concerns about retaliatory risks are misplaced, it said. “While asymmetric retaliation against the competition law system is certainly possible, there is no history of such retaliation against US antitrust enforcement,” First and Bush said in their white paper.
“NOPEC’s real power is that it would not always be necessary to go to court for enforcement. Settlements could be negotiated,” Bloom said.
Contact Nick Snow at [email protected].
