For Illegal Pre-Merger Conduct.
By Bracewell
On January, 7, 2025, the Federal Trade Commission (FTC) announced that crude oil producers XCL Resources Holdings, LLC (XCL), Verdun Oil Company II LLC (Verdun) and EP Energy LLC (EP) collectively will pay a $5.68 million civil penalty to resolve allegations they engaged in illegal pre-merger coordination, also known as “gun jumping,†in violation of the Hart-Scott-Rodino Act (HSR Act). This is the largest fine ever imposed for a gun jumping violation in US history.Â
The HSR Act requires merging parties to report transactions over certain size thresholds to the FTC and Department of Justice so that those agencies can conduct an antitrust review before closing. The agencies typically have 30 days after a transaction has been reported, which is known as the HSR waiting period, to conduct their initial assessment. The investigating agency can extend that waiting period by issuing a “second request†demand for additional information should they deem the transaction needs more in-depth review. During the HSR waiting period, the acquiror is prohibited from taking ownership or control over the target business. Such gun jumping is punishable by a civil penalty of up to $51,744 per day (the maximum penalty is adjusted annually).
On July 26, 2021, Verdun and XCL entered into a $1.45 billion agreement to acquire EP that triggered the HSR Act’s notification and waiting period requirements. During the initial 30-day HSR review period, the FTC’s investigation identified significant competitive concerns about the transaction, including that it would have eliminated head-to-head competition between two of only four significant energy producers in Utah’s Uinta Basin and would have harmed competition for the sale of Uinta Basin waxy crude oil to Salt Lake City refiners. To resolve those concerns, on March 25, 2022, the FTC entered into a consent agreement with XCL, Verdun and EP that required the divestiture of EP’s entire business and assets in Utah.
