FTC starts process to consider rule on oil market manipulation
Using authority it received in energy legislation late last year, the US FTC on May 1 took the first step to determine whether it should develop a formal rule defining and prohibiting oil market manipulation.
WASHINGTON, DC, May 2 -- Using authority it received in energy legislation late last year, the US Federal Trade Commission on May 1 took the first step to determine whether it should develop a formal rule defining and prohibiting oil market manipulation.
The commission announced that it has approved an advanced notice of proposed rulemaking (ANPR) to seek public comments on the appropriate way to interpret and enforce provisions in the 2007 Energy Independence and Security Act (EISA 2007) aimed at preventing market manipulation in the oil industry.
"We understand that consumers are being hurt by high [gasoline] prices," said FTC Chairman William E. Kovacic. "The commission remains vigilant in using its full authority to prevent unlawful behavior that affects gas prices. Today's request for public comments is an important part of our efforts to assess, quickly and thoughtfully, how the commission's new market manipulation authority may be used to protect the American people."
US House Speaker Nancy Pelosi (D-Calif.), who complained a week earlier with several of her colleagues that the FTC was dragging its feet in exercising its new authority, said May 1 that the action was long overdue. "I thank the FTC for heeding our call to protect consumers by using this new authority to probe oil and gasoline prices and punish those who manipulate prices at the pump," she said.
In a letter to Pelosi that she released, Kovacic said the commission's staff "has worked hard to move as speedily as possible." The letter continued: "To date, an FTC task force has examined the development and use of antimanipulation authority by other federal agencies, as well as by the states; met with other government officials (including the Commodity Futures Trading Commission, the Federal Energy Regulatory Commission, and the Securities and Exchange Commission), and undertaken other tasks, both substantive and administrative, in connection with this legislation."
Comments on Section 811
Two sections of EISA 2007 gave the FTC this new authority. The agency is seeking public comment on Section 811, which deals with petroleum market manipulation. But FTC said it already is able to seek relief through federal courts for violations of Section 812, which prohibits the reporting of false price information to a federal agency, because it received this authority when EISA 2007 became law.
Following the advance notice's 30-day comment period, Kovacic told Pelosi that the commission "expects to expeditiously analyze the comments received, draft a proposed rule and issue a notice of proposed rulemaking (NPR) with a 30-day comment period."
The learning during this process will be crucial, Kovacic said. "The commission has not previously sought to develop a legal definition of the term 'manipulation' or prosecuted a case alleging manipulation. Moreover, there are challenges involved in appropriately applying this broad concept to markets that, unlike electricity or natural gas, are not subject to comprehensive regulatory, disclosure or reporting regimes," he said.
"The pursuit of a case alleging manipulation in wholesale markets for crude oil, gasoline, or distillates may encounter other complexities arising from the differences between such products and the other markets in which manipulation cases have been brought, but we hope to overcome these challenges as we avail ourselves of the methods and opportunities contemplated by the ANPR/NPR procedures, Kovacic said, adding, "Specifically, we believe that there is no better way to generate meaningful comments that will assist in our development of a workable rule for the benefit of the American public."
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