Record $5.6 Million Penalty for Oil Companies in Gun-Jumping Antitrust Case

In a historic move, the Federal Trade Commission (FTC) has hit three major oil companies—XCL Resources Holdings, LLC (XCL), Verdun Oil Company II LLC (Verdun), and EP Energy LLC (EP)—with a $5.6 million fine. The fine settles allegations that the companies violated antitrust laws through illegal coordination before a merger, a practice known as “gun jumping.” This marks the largest penalty ever imposed for such a violation in U.S. history.

In a deal valued at $1.4 billion, Verdun, which shared common management with XCL at the time, was set to acquire EP Energy. However, the companies took some premature steps before they had the green light from the FTC and Department of Justice (DOJ), breaching the waiting period required under the Hart-Scott-Rodino Act (HSR Act).

The HSR Act mandates that companies report large mergers and acquisitions to the FTC and DOJ, who are then given time to investigate the deal before it can proceed. During this investigatory period, companies are prohibited from coordinating their operations in ways that could harm competition. Unfortunately, XCL, Verdun, and EP didn’t wait.

Instead, they took actions that allowed them to begin controlling parts of EP’s day-to-day business before the deal was officially approved. This included halting EP’s planned drilling activities, coordinating customer contracts in Utah’s Uinta Basin, and adjusting prices for customers in Texas’s Eagle Ford region. These moves, according to the FTC, led to a significant supply shortage of crude oil just as the U.S. market was already facing rising prices and growing supply concerns.

A Sharp Rise in Prices & a Longer Look

The illegal coordination had serious consequences. As oil supply dwindled, American consumers paid the price at the pump, contributing to an already tense market. The situation highlighted how pre-merger actions can quickly spiral into consumer harm—something the FTC has made clear it’s prepared to tackle.

Following the FTC’s investigation, it was determined that the merger, as initially planned, would have eliminated competition between two key players in the industry, specifically for the sale of waxy crude oil to Salt Lake City refineries. The FTC required the companies to divest EP’s assets in Utah to resolve competitive concerns, a solution finalized in March 2022.

Though the companies took action to amend their coordination by October 2021, it wasn’t until March 2022—nearly 94 days later—that the HSR waiting period ended and the transaction could move forward. This period of gun jumping is what led to the unprecedented fine.

The Penalty & Its Impact

The $5.6 million penalty is a clear message to other companies in high-stakes mergers to not jump the gun. The FTC is actively enforcing rules that protect both competition and consumers from the potentially harmful effects of premature coordination. The settlement was approved by a 4-0-1 FTC vote and filed by the DOJ in the U.S. District Court for the District of Columbia.

As part of the legal process, the FTC’s proposed settlement, including a competitive impact statement, will be published in the Federal Register. Public comments on the settlement can be submitted for the next 60 days, and at the end of that period, the U.S. District Court will decide whether to approve the settlement.

This case isn’t just about a financial penalty; it’s yet another reminder of how important it is for companies to follow the rules and for regulators to stay vigilant. The FTC’s record fine makes it clear that the agency will continue to scrutinize pre-merger activities to ensure the competitive landscape remains fair and that consumers aren’t left to foot the bill for anti-competitive behavior.

For now, XCL, Verdun, and EP are settling their differences with regulators, but this case could set a lasting precedent for how mergers in the energy sector—and beyond—are managed in the future.

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