WASHINGTON, D.C. — The Federal Trade Commission (FTC) has imposed a landmark $5.6 million civil penalty on XCL Resources Holdings, LLC (XCL), Verdun Oil Company II LLC (Verdun), and EP Energy LLC (EP) for illegally coordinating business activities before their merger was finalized. This penalty is the largest of its kind in U.S. history for a violation of the Hart-Scott-Rodino Act (HSR Act).
According to the FTC, the companies engaged in unlawful “gun jumping,” taking control of key operational decisions at EP before the merger received regulatory approval. The HSR Act, which mandates pre-merger notification and a waiting period for federal review, was breached when Verdun, under common management with XCL, began coordinating with EP on well-drilling, customer contracts, and pricing strategies.
The illegal activities disrupted the crude oil market at a time of extreme supply shortages and high fuel costs, directly affecting consumers. EP reportedly halted its planned drilling and development activities under direction from XCL and Verdun, causing supply gaps in the Uinta Basin in Utah and the Eagle Ford region in Texas. The FTC alleged these actions led to higher oil prices in the U.S. market.
The FTC’s investigation revealed further concerns over the merger, initially valued at $1.4 billion. The proposed deal would have reduced competition among energy producers in the Uinta Basin of Utah, where only four major producers, including EP, operated. To address these antitrust concerns, the FTC required the divestiture of EP’s assets in Utah as part of a consent agreement reached in March 2022.
The HSR Act violations occurred over a 94-day period, beginning on July 26, 2021, when the purchase agreement was signed, and extending until October 27, 2021, when the companies amended the agreement to reinstate EP’s operational independence. The waiting period officially expired on March 25, 2022, following the FTC’s resolution of its antitrust concerns.
Throughout the investigation, the FTC emphasized the importance of maintaining the integrity of the HSR Act’s review process. Federal regulators need the mandated waiting period to ensure that mergers and acquisitions do not harm competition or drive up costs for consumers. By enforcing the penalty, the FTC sends a strong message against any efforts to undermine this critical regulatory safeguard.
The settlement aims to ensure that EP and its parent company, CP, fully comply with the HSR Act going forward. Moreover, the penalty serves as a reminder to other companies that violating the HSR Act may result in significant financial consequences. It is crucial for businesses involved in mergers or acquisitions to carefully navigate the HSR review process and adhere to all regulatory requirements. Failure to
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