United States of America v. XCL Resources Holdings, LLC, Verdun Oil Company II, LLC, and EP Energy LLC; Proposed Final Judgment and Competitive Impact Statement, 7159-7171 [2025-01252]
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an Initial Determination on Violation of
Section 337. The ALJ also issued a
Recommended Determination on
remedy and bonding should a violation
be found in the above-captioned
investigation. The Commission is
soliciting submissions on public interest
issues raised by the recommended relief
should the Commission find a violation.
This notice is soliciting comments from
the public and interested government
agencies only.
FOR FURTHER INFORMATION CONTACT:
Lynde Herzbach, Esq., Office of the
General Counsel, U.S. International
Trade Commission, 500 E Street SW,
Washington, DC 20436, telephone (202)
205–3228. Copies of non-confidential
documents filed in connection with this
investigation may be viewed on the
Commission’s electronic docket (EDIS)
at https://edis.usitc.gov. For help
accessing EDIS, please email
EDIS3Help@usitc.gov. General
information concerning the Commission
may also be obtained by accessing its
internet server at https://www.usitc.gov.
Hearing-impaired persons are advised
that information on this matter can be
obtained by contacting the
Commission’s TDD terminal on (202)
205–1810.
SUPPLEMENTARY INFORMATION: Section
337 of the Tariff Act of 1930 provides
that, if the Commission finds a
violation, it shall exclude the articles
concerned from the United States
unless, after considering the effect of
such exclusion upon the public health
and welfare, competitive conditions in
the United States economy, the
production of like or directly
competitive articles in the United
States, and United States consumers, it
finds that such articles should not be
excluded from entry. (19 U.S.C.
1337(d)(1)).
The Commission is soliciting
submissions on public interest issues
raised by the recommended relief
should the Commission find a violation,
specifically, a general exclusion order
directed to certain passive optical
network equipment imported, sold for
importation, and/or sold after
importation that infringe claims 1 and
12–14 of U.S. Patent No. 7,333,511 or
claims 1 and 3 of U.S. Patent No.
7,558,260. Parties are to file public
interest submissions pursuant to 19 CFR
210.50(a)(4).
The Commission is interested in
further development of the record on
the public interest in this investigation.
Accordingly, members of the public and
interested government agencies are
invited to file submissions of no more
than five (5) pages, inclusive of
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attachments, concerning the public
interest in light of the ALJ’s
Recommended Determination on
Remedy and Bonding issued in this
investigation on December 19, 2024.
Comments should address whether
issuance of the recommended remedial
orders in this investigation, should the
Commission find a violation, would
affect the public health and welfare in
the United States, competitive
conditions in the United States
economy, the production of like or
directly competitive articles in the
United States, or United States
consumers.
In particular, the Commission is
interested in comments that:
(i) explain how the articles potentially
subject to the recommended remedial
orders are used in the United States;
(ii) identify any public health, safety,
or welfare concerns in the United States
relating to the recommended orders;
(iii) identify like or directly
competitive articles that complainant,
its licensees, or third parties make in the
United States which could replace the
subject articles if they were to be
excluded;
(iv) indicate whether complainant,
complainant’s licensees, and/or thirdparty suppliers have the capacity to
replace the volume of articles
potentially subject to the recommended
orders within a commercially
reasonable time; and
(v) explain how the recommended
orders would impact consumers in the
United States.
Written submissions must be filed no
later than by close of business on
February 11, 2025.
Persons filing written submissions
must file the original document
electronically on or before the deadlines
stated above. The Commission’s paper
filing requirements in 19 CFR 210.4(f)
are currently waived. 85 FR 15798 (Mar.
19, 2020). Submissions should refer to
the investigation number (‘‘Inv. No.
337–TA–1384’’) in a prominent place on
the cover page and/or the first page. (See
Handbook for Electronic Filing
Procedures, https://www.usitc.gov/
secretary/fed_reg_notices/rules/
handbook_on_electronic_filing.pdf).
Persons with questions regarding filing
should contact the Secretary (202–205–
2000).
Any person desiring to submit a
document to the Commission in
confidence must request confidential
treatment by marking each document
with a header indicating that the
document contains confidential
information. This marking will be
deemed to satisfy the request procedure
set forth in Rules 201.6(b) and
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7159
210.5(e)(2) (19 CFR 201.6(b) &
210.5(e)(2)). Documents for which
confidential treatment by the
Commission is properly sought will be
treated accordingly. Any non-party
wishing to submit comments containing
confidential information must serve
those comments on the parties to the
investigation pursuant to the applicable
Administrative Protective Order. A
redacted non-confidential version of the
document must also be filed
simultaneously with any confidential
filing and must be served in accordance
with Commission Rule 210.4(f)(7)(ii)(A)
(19 CFR 210.4(f)(7)(ii)(A)). All
information, including confidential
business information and documents for
which confidential treatment is properly
sought, submitted to the Commission for
purposes of this investigation may be
disclosed to and used: (i) by the
Commission, its employees and Offices,
and contract personnel (a) for
developing or maintaining the records
of this or a related proceeding, or (b) in
internal investigations, audits, reviews,
and evaluations relating to the
programs, personnel, and operations of
the Commission including under 5
U.S.C. appendix 3; or (ii) by U.S.
Government employees and contract
personnel, solely for cybersecurity
purposes. All contract personnel will
sign appropriate nondisclosure
agreements. All nonconfidential written
submissions will be available for public
inspection on EDIS.
This action is taken under the
authority of section 337 of the Tariff Act
of 1930, as amended (19 U.S.C. 1337),
and in part 210 of the Commission’s
Rules of Practice and Procedure (19 CFR
part 210).
By order of the Commission.
Issued: January 14, 2025.
Lisa Barton,
Secretary to the Commission.
[FR Doc. 2025–01307 Filed 1–17–25; 8:45 am]
BILLING CODE 7020–02–P
DEPARTMENT OF JUSTICE
Antitrust Division
United States of America v. XCL
Resources Holdings, LLC, Verdun Oil
Company II, LLC, and EP Energy LLC;
Proposed Final Judgment and
Competitive Impact Statement
Notice is hereby given pursuant to the
Antitrust Procedures and Penalties Act,
15 U.S.C. 16(b)–(h), that a proposed
Final Judgment, Stipulation, and
Competitive Impact Statement have
been filed with the United States
District Court for the District of
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Columbia in United States of America v.
XCL Resources Holdings, LLC, Verdun
Oil Company II, LLC, and EP Energy
LLC, Civil Action No. 1:25-cv-00041. On
January 7, 2025, the United States filed
a Complaint alleging that XCL
Resources Holdings, LLC (‘‘XCL’’),
Verdun Oil Company II, LLC
(‘‘Verdun’’), and EP Energy LLC (‘‘EP
Energy’’) (together ‘‘Defendants’’)
violated the notice and waiting period
requirements of section 7A of the
Clayton Act, 15 U.S.C. 18a, commonly
known as the Hart-Scott-Rodino
Antitrust Improvements Act of 1976
(‘‘HSR Act’’ or ‘‘Act’’) by transferring
beneficial ownership of EP Energy to
XCL and Verdun during the waiting
period, which constitutes gun jumping.
The Proposed Final Judgment, filed at
the same time as the Complaint,
requires: (i) XCL and Verdun jointly and
severally to pay a civil penalty in the
amount of $2,842,188.50, and EP Energy
to pay a civil penalty in the amount of
$2,842,188.50 within 30 days of entry of
the Final Judgment; (ii) Defendants to
refrain from certain conduct as laid out
in the Final Judgment; and (iii)
Defendants to design, maintain, and
operate a compliance program to ensure
compliance with the Final Judgment
and the Antitrust Laws, and certify
observance of these compliance
provisions to the United States within
60 days of entry of the Final Judgment.
Copies of the Complaint, proposed
Final Judgment, and Competitive Impact
Statement are available for inspection
on the Antitrust Division’s website at
https://www.justice.gov/atr and at the
Office of the Clerk of the United States
District Court for the District of
Columbia. Copies of these materials may
be obtained from the Antitrust Division
upon request and payment of the
copying fee set by Department of Justice
regulations.
Public comment is invited within 60
days of the date of this notice. Such
comments, including the name of the
submitter, and responses thereto, will be
posted on the Antitrust Division’s
website, filed with the Court, and, under
certain circumstances, published in the
Federal Register. Comments in English
should be directed to Maribeth Petrizzi,
Special Attorney, United States, c/o
Federal Trade Commission, 600
Pennsylvania Avenue NW, CC–8416,
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Washington, DC 20580 or by email to
bccompliance@ftc.gov.
Suzanne Morris,
Deputy Director of Civil Enforcement
Operations.
United States District Court for the
District of Columbia
United States of America, c/o Department
of Justice, Washington, DC 20530 Plaintiff, v.
XCL RESOURCES HOLDINGS, LLC, 600 N.
Shepherd Drive, Suite 390, Houston, TX
77007; VERDUN OIL COMPANY II LLC, 945
Bunker Hill Road, Suite 1300, Houston, TX
77024 and EP ENERGY LLC, 945 Bunker Hill
Road, Suite 100, Houston, TX 77024
Defendants. Civil Action No. 1:25-cv-00041.
Complaint for Civil Penalties and
Equitable Relief for Violations of the
Hart–Scott–Rodino Act
The United States of America, acting
under the direction of the Attorney
General of the United States, brings this
civil antitrust action for equitable and
monetary relief in the form of civil
penalties against the Defendants XCL
Resources Holdings, LLC
(‘‘XCL’’),Verdun Oil Company II, LLC
(‘‘Verdun’’), and EP Energy LLC (‘‘EP’’),
and alleges:
Nature of the Action
1. This case involves violations of
federal antitrust obligations under
Section 7A of the Clayton Act, 15 U.S.C.
18A, commonly known as the HartScott-Rodino Antitrust Improvements
Act of 1976 (‘‘HSR Act’’). Under the
HSR Act, both parties must make a premerger notification filing to the federal
antitrust agencies and observe the
corresponding waiting-period
obligations before transferring any
ownership or control of the to-beacquired business to the acquirer. This
waiting period ensures that the parties
to a proposed transaction remain as
separate, independent entities during
the pendency of the antitrust review.
This suspensory waiting period allows
the enforcement agencies the
opportunity to investigate the
transaction and, where applicable,
pursue an enforcement action, before
consolidation of the businesses and
assets occurs.
2. In this matter, Verdun and EP
entered a proposed transaction that was
subject to the HSR Act’s notification and
waiting-period requirements, and each
Defendant made the required pre-merger
notification filing with the antitrust
agencies. The Defendants failed,
however, to satisfy their waiting-period
obligations. Instead, upon executing the
transaction agreement, EP allowed
Verdun and its sister company, XCL, to
assume operational and decision-
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making control over significant aspects
of EP’s day-to-day business operations.
This was no mere technical violation;
the Defendants’ conduct effectively
allowed one competitor to acquire
beneficial ownership, including control
over key competitive decisions of the
other, before the transaction closed,
which is precisely what the HSR Act
prohibits.
3. Pursuant to a Membership Interest
Purchase Agreement dated July 26, 2021
(‘‘Purchase Agreement’’), Verdun agreed
to acquire EP, a company engaged in
crude oil production in the Uinta Basin
area of Utah and in the Eagle Ford area
of Texas. Verdun is under common
management with XCL, and both
companies are engaged in crude oil
production: Verdun in the Eagle Ford
area and XCL in the Uinta Basin. The
purchase price for the proposed
transaction was approximately $1.4
billion. As part of the transaction, EP’s
operations in the Uinta Basin were to be
transferred to XCL, and XCL would pay
the portion of the purchase price
attributed to the Uinta Basin assets.
4. The proposed transaction triggered
a filing obligation under the HSR Act.
As such, the Defendants were required
to make premerger notification filings
with the Federal Trade Commission
(‘‘FTC’’) and Department of Justice and
to observe the prescribed waiting
periods before transferring ownership of
EP to XCL and Verdun. The Defendants’
parent entities made premerger
notification filings for the Defendants’
proposed transaction as required by the
HSR Act. After receiving the premerger
notification filings, the FTC investigated
the proposed transaction and ultimately
obtained a consent agreement
addressing the FTC’s concerns about the
impact of the transaction on
competition in the market for the
development, production, and sale of
waxy crude oil in the Uinta Basin area
of Utah. The consent agreement was
entered on March 25, 2022, and
required the Defendants to divest all of
EP’s Utah operations to a qualified
third-party operator, Crescent Energy, to
remedy the potential lessening of
competition in the alleged crude oil
market.
5. The HSR Act’s waiting-period
obligation for this transaction went into
effect on July 26, 2021, the date the
Defendants executed the Purchase
Agreement, and continued through
March 25, 2022, the date the FTC
accepted the consent agreement and
granted termination of the waiting
period.
6. For a portion of this waiting period,
however, the Defendants disregarded
their obligations under the HSR Act and
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transferred significant operational
control over EP’s ordinary-course
business to XCL and Verdun. This
conduct violates the HSR Act and is
often referred to as ‘‘gun jumping’’ or a
‘‘gun-jumping violation.’’
7. Specifically, the Purchase
Agreement provided for the immediate
transfer of control over key aspects of
EP’s business to XCL and Verdun,
including granting XCL and Verdun
approval rights over EP’s ongoing and
planned crude oil development and
production activities and many of EP’s
ordinary-course expenditures. Once the
Purchase Agreement was signed, by
virtue of these approval rights, XCL and
Verdun quickly began gun jumping by
exercising operating control over
significant aspects of EP’s business.
Indeed, XCL put an immediate halt to
EP’s new well-drilling activities, so that
XCL—not EP—could control the
development and production plans for
EP’s drilling assets moving forward.
XCL halted EP’s new oil-drilling
activities for several weeks, from
approximately July 26, 2021, to
approximately August 16, 2021. On
approximately August 17, 2021, after
the Defendants realized that the FTC
would investigate the transaction, XCL
and Verdun allowed EP to resume its
own well-drilling and planning
activities.
8. The Defendants’ unlawful gun
jumping allowed competitors to
coordinate their activities. Among other
things, XCL’s temporary halting of EP’s
development activities contributed to
EP having crude oil supply shortages in
September and October 2021 at a time
when the United States was
experiencing significant supply
shortages and spiking crude oil prices
due to sudden demand increases as
COVID–19 restrictions eased. The
Defendants anticipated EP’s potential
supply shortages while negotiating the
Purchase Agreement, which specifically
provided that XCL and Verdun—not
EP—would bear all costs associated
with EP’s supply shortages. XCL and
EP—direct competitors in the
marketplace—then worked in concert to
supply EP’s customers in satisfaction of
EP’s customer supply commitments.
During this period, EP employees
effectively reported to their XCL
counterparts and provided XCL
employees with details on customer
contracts, supply volumes, and pricing
terms. XCL employees also coordinated
directly with EP’s customers to discuss
EP’s supply shortage and to arrange for
alternative delivery to the customer,
which XCL made either from its own
supplies or from purchases it made on
the spot market, to fulfill EP’s
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contractual commitments to the
customers. EP’s customers began
contacting XCL directly—sometimes
excluding EP altogether—to discuss EP’s
supply and delivery commitments to
each customer under the relevant EP
supply contract.
9. The Purchase Agreement also
required EP to submit all expenditures
above $250,000 for XCL’s or Verdun’s
review and approval. These approval
requirements applied to many of EP’s
ordinary-course expenditures, and
effectively transferred control over a
significant portion of EP’s day-to-day
operations to XCL and Verdun. Further,
XCL and Verdun received and approved
expenditure requests from EP falling
well below the $250,000 threshold
outlined in the Purchase Agreement.
10. XCL also required changes to
certain of EP’s ordinary-course business
operations, such as EP’s well-drilling
designs and its leasing and renewal
activities. EP also gave XCL almostunfettered access to EP’s competitively
sensitive business information—
including EP’s site design plans,
customer contract and pricing
information, and daily supply and
production reports—in the months after
the parties signed the Purchase
Agreement.
11. Verdun also coordinated with EP
on EP’s contract negotiations with
certain customers in the Eagle Ford
production area. Specifically, Verdun
observed that certain EP contracts
included below-market prices and
directed EP to raise them in the next
contracting period. EP complied.
12. The illegal conduct detailed above
lasted through October 27, 2021, when
the Defendants executed an amendment
to the Purchase Agreement, which
allowed EP to operate independently
once again and in the ordinary course of
business, without XCL’s or Verdun’s
control over its day-to-day operations.
Around this time, XCL and Verdun and
EP also stopped coordinating on
customer supply and pricing and ceased
exchanging competitively sensitive
information.
13. The Defendants’ transfer of
operational control over key aspects of
EP’s business to XCL and Verdun during
the HSR waiting period was a transfer
of beneficial ownership that constitutes
a gun-jumping violation of the HSR Act.
The Defendants were in violation of the
HSR Act from when the Purchase
Agreement was signed, on July 26, 2021,
until the Purchase Agreement was
amended, on October 27, 2021, a period
of 94 days.
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Jurisdiction, Venue, and Interstate
Commerce
14. The United States brings this
action under Section 7A of the Clayton
Act, 15 U.S.C. 18a, to recover civil
penalties for the violation of the HSR
Act.
15. This Court has jurisdiction over
the subject matter of this action under
Section 7A(g) of the Clayton Act, 15
U.S.C. 18a(g), and under 28 U.S.C. 1331,
1337(a), 1345, and 1355.
16. The Defendants are engaged in—
and their activities described herein
substantially affected—interstate
commerce.
17. The Defendants have consented to
the personal jurisdiction and venue in
the District of Columbia for purposes of
this action.
The Defendants
18. Defendant XCL Resources
Holdings, LLC is a limited liability
company organized, existing, and doing
business under, and by virtue of, the
laws of the State of Delaware, with its
office and principal place of business at
600 N. Shephard Drive, Suite 390 in
Houston, Texas.
19. Defendant Verdun Oil Company
II, LLC is a limited liability company
organized, existing, and doing business
under, and by virtue of, the laws of the
State of Texas, with its office and
principal place of business at 945
Bunker Hill Road, Suite 1300 in
Houston, Texas.
20. Defendant EP Energy LLC is a
limited liability company organized,
existing, and doing business under, and
by virtue of, the laws of the State of
Delaware, with its office and principal
place of business at 945 Bunker Hill
Road, Suite 100 in Houston, Texas.
21. All Defendants are engaged,
among other things, in the development,
production, and sale of crude oil in the
United States.
The HSR Act and Rules
22. The HSR Act requires certain
acquiring persons, and certain persons
whose voting securities or assets are
acquired, to file notifications with the
Department of Justice and the FTC
(collectively, the ‘‘federal antitrust
agencies’’) and to observe a waiting
period before consummating certain
acquisitions of voting securities or
assets. 15 U.S.C. 18a(a) and (b). Of
relevance here, the notice and waiting
requirements apply if, as a result of the
acquisition, the acquiring person will
‘‘hold’’ assets or voting securities above
the HSR Act’s size of transaction
threshold (which was $368.0 million at
all times relevant to this complaint).
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23. Under the HSR Act, the FTC
promulgated rules defining relevant
terms and specifying what information
must be included in the required
notification. 16 CFR 801–803. The rules
define ‘‘hold’’ to mean ‘‘beneficial
ownership, whether direct, or indirect
through fiduciaries, agents, controlled
entities or other means.’’ 16 CFR
801.1(c). While the existence of
beneficial ownership will depend on the
facts in a particular case, practical
indicia include controlling ordinarycourse business decisions, assuming or
rejecting contractual obligations,
obtaining competitively sensitive
information, and partaking in financial
gains and losses.
24. Through the HSR Act, Congress
intended to provide the federal antitrust
agencies prior notice of, and
information about, proposed
transactions. The HSR Act created a
process for premerger notification and
investigation that does not require
assessing beforehand whether the
proposed transaction is anticompetitive
or illegal under the antitrust laws.
Congress created a suspensory waiting
period to provide the federal antitrust
agencies with the opportunity to
investigate a proposed transaction and
to determine whether to seek an
injunction to prevent its consummation
if the investigation shows that the
proposed transaction may violate the
antitrust laws. Gun-jumping violations
deprive the enforcement agencies of this
opportunity to investigate a transaction
and seek an injunction before a
transaction is completed, after which it
may be difficult to completely restore
competition and the acquired company
to their pre-transaction states.
The Purchase Agreement
25. Pursuant to the Purchase
Agreement, XCL and Verdun agreed to
acquire EP for $1.445 billion, with
possible adjustments for specified
conditions. XCL and Verdun each
contributed more than $368 million of
the purchase price, triggering notice and
waiting requirements under the HSR
Act for both companies.
26. XCL and Verdun’s bid to acquire
EP’s business was contingent on XCL
and Verdun securing immediate
approval rights over EP’s ordinarycourse development activities; the
Defendants memorialized these rights in
the Purchase Agreement they signed. As
XCL executives noted during the
Purchase Agreement negotiations,
‘‘[XCL’s parent] is providing a deposit
that more than offsets potential damages
from 60 days of delayed production and
initial operation planning, we moved
materially on price and included this
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term in our initial offer sheet, we are
unable to move off this point.’’
(emphasis in original).
27. The Purchase Agreement
restricted EP’s discretion to conduct its
ordinary-course business activities
during the period between the signing of
the Purchase Agreement and the closing
of the transaction, a period that
included the full duration of the HSR
Act’s applicable waiting period.
28. For example, EP committed ‘‘not
to propose, agree to, or commence any
individual operation on the Assets
anticipated to cost in excess of Two
Hundred Fifty Thousand ($250,000),’’
unless XCL or Verdun first expressly
approved the activity, without any
exception for ordinary-course
transactions.
29. Further, for the numerous crude
oil wells EP was developing, EP would
‘‘not conduct any operation in
connection with’’ those plans ‘‘unless
such operations are expressly permitted
pursuant to’’ the Purchase Agreement
‘‘or are otherwise approved by
Purchaser.’’
30. The Purchase Agreement thus
prevented EP from continuing with its
crude oil well-development activities
without XCL’s or Verdun’s approval,
giving XCL and Verdun control to stop
or delay EP from moving forward with
its production plans in the normal
course of its business.
31. XCL or Verdun had ‘‘sole
discretion’’ whether to approve any
actions that were otherwise prohibited
by the Purchase Agreement, and the
Purchase Agreement set forth
procedures for granting XCL’s or
Verdun’s approval.
32. In short, these contractual
provisions allowed one competitor to
control the other’s ordinary-course
business activities relating to crude oil
production before the transaction
closed—a paradigmatic case of gun
jumping through transfer of beneficial
ownership. All this occurred during a
time when the U.S. market as a whole
was facing significant supply shortages
and multi-year highs in oil prices,
resulting in Americans paying
skyrocketing prices at the pump.
33. The parties also agreed to shift to
XCL and Verdun the financial risk for
certain EP business activity, which
constitutes further evidence of gun
jumping. The Defendants anticipated
that the Purchase Agreement restrictions
on EP’s activities would result in crude
supply shortages for EP and its
customers in the ensuing months and
could cause EP to breach existing
obligations. The Purchase Agreement
therefore required XCL and Verdun to
bear all financial risk and liabilities
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associated with these provisions and
shifted to XCL and Verdun the financial
ramifications of these changes and
delays to EP’s development activities.
The Purchase Agreement provided that
‘‘failure of Purchaser to approve such
matters shall obligate Purchaser to bear
all risk and liability for any breach or
non-compliance under the Assets as a
result of Purchaser’s acts or omissions
with respect to such failure to approve.’’
34. The Purchase Agreement was
eventually amended on October 27,
2021. Among other things, the
amendment effectively allowed EP to
resume its well-development activities
in the ordinary course of business
without requiring XCL’s or Verdun’s
consent.
The Defendants’ Unlawful Conduct
Following the Merger Agreement
35. This matter presents a
straightforward example of unlawful
gun jumping where two companies
agree to coordinate their activities
before a transaction is permitted to close
under the HSR Act. The Purchase
Agreement created the contractual
obligation for EP to transfer operating
control over key portions of its crude oil
production business to XCL and
Verdun, and the Defendants’ actions in
the weeks and months after they
executed the Purchase Agreement
demonstrated that such a transfer of
control from EP to XCL and Verdun did
indeed take place. XCL and Verdun thus
gained beneficial ownership of EP’s
assets in direct violation of the HSR
Act’s waiting period requirements.
XCL Required Ep To Suspend its WellCompletion Activities
36. The Defendants’ actions abruptly
halted EP’s crude oil development
activities. Indeed, upon signing the
Purchase Agreement, XCL immediately
stopped EP’s ordinary-course welldrilling design and planning activities
in Utah. XCL did this so that it—not
EP—could take over the management of
EP’s development plans and designs
moving forward.
37. An email sent the afternoon the
Purchase Agreement was signed on July
26, 2021, from an EP executive to his
counterparts at XCL, illustrates the
Defendants’ intentions to transfer
operational control of EP to XCL and
Verdun: ‘‘Congratulations on getting the
Purchase Agreement signed and deposit
sent! Now we can move forward with
your requested changes. Please confirm
that you approve the following: Shut
down all currently planned fracs until
after the close. Per the attached
spreadsheet, by shutting down these
fracs we have sold more oil than we will
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be able to deliver and XCL accepts the
contractual and reputational
ramifications of not delivering these
barrels.’’
38. XCL responded in the affirmative.
‘‘XCL Confirmations of EP Operational
Changes . . . . We confirm the request
to suspend any operations related to
completions between sign to close.’’
(emphasis in original).
39. In the days after the Defendants
signed the Purchase Agreement, XCL
employees began actively supervising
EP’s well-design and planning activities,
including by requiring changes to EP’s
site design plans and vendor-selection
process. XCL employed a ‘‘boots on the
ground’’ approach to taking over EP’s
operations and design planning, with EP
employees effectively reporting to their
XCL counterparts.
40. For instance, in an August 2, 2021,
email from an XCL Vice-President to
EP’s Chief Operating Officer, the XCL
executive states: ‘‘Thanks for taking my
call today, and working through
operational planning with us. As
discussed, we would like to complete
the Moose Hollow and Bluebell wells as
a combined team, where XCL leads on
frac design and vendor selection, and EP
teams with XCL to execute the
operations.’’
41. The Defendants understood that
XCL’s halting of EP’s ordinary-course
well-development projects would lead
to, or contribute to, production
shortfalls for EP and its customers in
following months, given the delay in
EP’s ability to drill the new wells. In
exchange, XCL agreed to assume the
contractual and reputational
ramifications of these shortfalls.
42. The stoppages to EP’s ordinarycourse well-drilling activities lasted for
several weeks—until approximately
August 17, 2021—and ended only after
the Defendants realized that the FTC
would conduct a full investigation into
the competitive effects of their
transaction. At that point, XCL allowed
EP to resume its well-drilling
activities—though EP would continue to
seek XCL’s review and approval for its
plans and related expenditures, as
required by the Purchase Agreement.
XCL Coordinated With EP on EP’s
Customer Contracts, Customer
Relationships, and Customer Deliveries
43. The Defendants’ unlawful gun
jumping delayed introduction of
increased supply in the market. EP
faced supply shortages in the Uinta
Basin in the months of September and
October 2021 due to XCL halting EP’s
well-completion activities in the weeks
following the Purchase Agreement
signing. XCL and EP discussed the
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shortages and XCL’s resulting financial
obligation during the subsequent
months. For instance, in an October
2021, email exchange between EP and
XCL, an EP employee wrote, ‘‘However,
as XCL has been directing EP Energy’s
completions and has agreed to fulfill EP
Energy’s contractual commitments
between sign and close any shortfall [in
EP’s ability to fulfil its supply
commitments] would be due to XCL’s
decisions.’’
44. To this end, XCL began conferring
and coordinating with EP about EP’s
production volumes, customer
contracts, and supply obligations.
45. XCL requested and received from
EP detailed information about EP’s
actual and projected production
volumes, delivery capabilities, and
customer supply obligations—including
details about the customers’ contracted
volumes and pricing terms.
46. XCL then proceeded to coordinate
with EP to manage and direct EP’s
fulfillment of its contractual obligations
to its customers, with XCL covering the
volume shortages under EP’s customer
agreements.
47. XCL also engaged directly with
EP’s customers about EP’s supply and
delivery obligations, providing EP’s
customers with detailed information
about EP’s volume projections, supply
shortages, and ability to meet its supply
obligations in current and future
periods.
48. XCL held itself out to EP’s
customers, in words or substance, as
coordinating EP’s supply and deliveries
in the Uinta Basin, and EP’s customers
began contacting XCL directly about
their EP contracts, EP’s volume
projections, and the delivery schedules
pursuant to the contracts.
49. For example, in an email exchange
between an EP customer and XCL from
September 2021, the EP customer asks
XCL to confirm EP’s supply forecast: ‘‘It
was good catching up with you this
week. Below is the forecast from EP
Energy. Let me know if you think they’ll
actually have these contracted volumes
for October or if we’ll need to do
another spot deal similar to September.’’
The XCL employee responded, ‘‘I do not
have an updated EP forecast for October
yet but am told it will come in the next
day or two. Once that’s in hand we’ll be
able to build a plan for October.’’
50. Another example, from August
2021, shows an exchange between XCL
and a different EP customer, where the
EP customer asks XCL to provide EP’s
volume forecast for the following
month: ‘‘Just wondering if you have a
feel yet for what Sept will look like (EP
volume)? Also, just to confirm, we’re
good with the contract volumes for Q4,
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correct?’’ The XCL employee responds,
‘‘I do have a feel for sept, we have a
planning meeting in the AM to finalize,
but directionally looking better than
planned. Potentially no cuts, probably
more likely in the 500bpd range, but
will definitely get you a communication
on that tomorrow once I get
confirmation. As for Q4, that too is still
a little up in the air as we finalize the
development plan and I’ll share more as
soon as I can. We are planning on
moving things forward to fill
commitments in full, just again needing
to confirm all of that.’’
51. XCL coordinated with EP and EP’s
customers regarding EP’s supply and
delivery volumes from approximately
August 2021 through approximately
October 2021. This coordination ended
by November 2021, when XCL began
informing EP’s customers that XCL and
EP needed to operate as independent
companies for the remainder of the premerger period and that, as a result, XCL
would no longer be covering EP’s
volume shortfalls.
XCL’s and Verdun’s Approvals Were
Required for EP To Conduct OrdinaryCourse Business Activities and To Make
Ordinary-Course Expenditures; XCL and
Verdun Required EP To Make Changes
to its Operations
52. In addition to exercising their
approval rights over EP’s well-drilling
activities, XCL and Verdun exercised
their rights under the Purchase
Agreement to review and approve other
of EP’s ordinary-course expenditures
and business activities.
53. Under the Purchase Agreement,
EP needed to secure XCL’s or Verdun’s
approval before making expenditures
above $250,000, which is a relatively
low threshold in the crude development
and production business. As a result,
XCL or Verdun approval was required
before EP could perform a range of
ordinary-course activities needed to
conduct its business, including, e.g.,
purchasing supplies for its drilling
operations and entering or extending
contracts for drilling rigs.
54. In practice, EP sought and
received approval for ordinary-course
expenditures below the low levels
established through the Purchase
Agreement. These included approvals to
purchase gauges and other pre-drilling
expenses.
55. On top of submitting its
expenditures for approval, under the
Purchase Agreement, EP also needed to
secure XCL’s or Verdun’s approval for
other basic activities, such as hiring
field-level employees and contractors
necessary to conduct its drilling and
production operations in the ordinary
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course of business. Pursuant to these
requirements, EP submitted its ordinarycourse hiring proposals to XCL and
Verdun for approval.
56. XCL and Verdun also required EP
to make changes to aspects of its
business plans and day-to-day
operations. These included changes to
EP’s well-drilling and site design plans,
modifications to the areas in Utah and
Texas where EP could pursue leasing
and renewal activities, changes
regarding EP’s selection of vendors, and
instructions not to pursue development
opportunities that EP had been
exploring in the ordinary course of
business.
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Verdun and EP Coordinated Regarding
Prices for EP’s Customers in the Eagle
Ford Region of Texas
57. The Defendants’ gun-jumping
activity also included coordination of
prices. In the Eagle Ford region of
Texas, employees from Verdun and EP
coordinated on pricing terms that EP
would offer to its customers. EP shared
its competitively sensitive information
on customer pricing and supply
volumes with Verdun, and then sought
Verdun’s approval of the prices it
negotiated with the customers.
58. On July 28, 2021, shortly after the
Purchase Agreement was signed, a
Verdun employee with responsibility
for sales and marketing contacted his EP
counterpart to discuss EP’s customer
pricing and contract terms. The Verdun
employee used information he had
obtained from the virtual data room set
up by EP as part of the sale process to
suggest changes to EP’s customer
pricing. An EP employee responded and
continued to consult with the Verdun
employee as she was negotiating with
the customers. Ultimately, the EP
employee sought and obtained the
approval of the Verdun employee for the
new contracts with EP’s customers.
EP Exchanged Competitively Sensitive
Information With XCL and Verdun
Without Adequate Safeguards To Limit
Access Or Prevent Misuse
59. The Defendants’ gun jumping also
facilitated the exchange of confidential
and granular business information far
beyond anything necessary for
transaction due diligence. Upon signing
the Purchase Agreement, XCL and
Verdun asked for, and received,
competitively sensitive information
about EP’s business operations and
customers in Utah and Texas. This
information included details on EP’s
customer contracts, customer pricing,
production volumes, customer
dispatches, business plans, site designs,
vendor relationships and contracts,
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permitting and surveying information,
and other competitively sensitive,
nonpublic information. EP provided
some of this information to XCL and
Verdun on a daily or weekly basis.
60. EP took no meaningful steps to
resist these requests from XCL and
Verdun. Instead, EP agreed to provide
XCL and Verdun employees with access
to its competitively sensitive
information in the pre-merger period,
even though EP competed directly with
both XCL and Verdun and the
information exchange lacked any
legitimate business purposes. Further,
EP made no effort—and XCL and
Verdun offered no protections on its
own—to limit the access to, or use of,
EP’s competitively sensitive information
by XCL’s and Verdun’s employees.
61. In the days following execution of
the Purchase Agreement, XCL and
Verdun requested and received access to
EP daily operating reports, including
reports on EP’s crude production,
dispatches by customers, and oil sales
and loads by counterparty. These
materials were provided to several XCL
and Verdun businesspeople responsible
for sales, marketing, and operations.
62. These daily reports provided the
employees of XCL and Verdun with
virtually real-time information about
EP’s operations, output, and sales. To
illustrate, in an August 4, 2021, email
from EP’s Chief Operating Officer to a
number of XCL and Verdun
employees—including the CEO and
head of operations for both XCL and
Verdun—the EP executive writes, ‘‘You
will start receiving the attached
Operations Report daily. This report
covers drilling, completions, workovers
and production.’’
63. XCL also requested and received
weekly updates on EP’s permits and
sundries, spacing orders, and ongoing
regulatory work, as well as access to
EP’s site survey logs, geologic reports,
geosteering reports, software
communication systems, and various
other datasets.
64. Beyond regular reports and
updates, XCL and Verdun employees
requested and received information on
an ad hoc basis on EP’s development
plans, contracts, customers, projections,
deliveries, and seemingly any other
aspect of EP’s business or operations of
interest to XCL and Verdun business
employees.
65. The Defendants had no legitimate
business purposes for exchanging and
disseminating EP’s competitively
sensitive business information in the
pre-merger period and failed to place
limits as to who at XCL and Verdun
could access the information or how
that information could be used.
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66. Even information provided by EP
to XCL and Verdun through the virtual
data room—ostensibly for the legitimate
purpose of conducting due diligence on
the proposed transaction—lacked
appropriate safeguards on access and
use.
67. Some of EP’s confidential
information from the due diligence data
room was used by Verdun’s operations
and sales employees to inform pricing
and contract terms in the pre-merger
period when Verdun and EP were still
competitors in the marketplace. As
noted in Paragraph 58 of this complaint,
a Verdun employee used information
from the virtual data room to discuss
with his counterpart at EP prices for
EP’s customers.
68. The information flow from EP to
XCL and Verdun continued in full force
through approximately October 2021.
Cause of Action Violation of Section 7A
of the Clayton Act
69. Plaintiff alleges and incorporates
paragraphs 1 through 68 as if set forth
fully herein.
70. XCL and Verdun’s acquisition of
EP was subject to Section 7A premerger
notification and waiting-period
requirements.
71. XCL and Verdun substituted their
business interests and judgment for
those of EP and exercised operational
control over key aspects of EP’s business
before expiration of the waiting period
in violation of Section 7A.
72. By controlling EP’s business
operations after having agreed to acquire
EP, XCL and Verdun acquired beneficial
ownership of EP’s assets and thus
acquired and held those assets within
the meaning of Section 7A.
73. The Defendants were
continuously in violation of the
requirements of the HSR Act each day
beginning on July 26, 2021, until XCL
and Verdun ceased exercising
operational control over relevant aspects
of EP’s business and the Purchase
Agreement was amended on October 27,
2021.
Request for Relief
Wherefore, the United States requests:
(a) that the Court adjudge and decree
that each Defendant violated the HSR
Act and was in violation during the
period beginning on July 26, 2021, and
ending on October 27, 2021, a total of
94 days;
(b) that the Court order the
Defendants pay to the United States an
appropriate civil penalty as provided
under Section 7A(g)(1) of the Clayton
Act, 15 U.S.C. 18a(g)(1), and 16 CFR
1.98(a);
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(c) that the Defendants, their officers,
directors, agents, employees,
subsidiaries, and successors, and all
other persons acting or claiming to act
on their behalf, be enjoined, restrained,
and prohibited for a period of ten years
from, in any manner, directly or
indirectly, engaging in any other
agreement, combination, or conspiracy
that has the same effect as the alleged
violation;
(d) that the Court order such other
and further relief as it may deem just
and proper; and
(e) that the Court award the United
States its costs of this suit.
Date:
2025
FOR THE PLAINTIFF UNITED STATES OF
AMERICA:
Doha Mekki,
Acting Assistant Attorney General,
Department of Justice, Antitrust Division,
Washington, DC 20530
lllllllllllllllllllll
Maribeth Petrizzi, DC Bar No. 435204,
Special Attorney
lllllllllllllllllllll
Jamie R. Towey, DC Bar No. 475969, Special
Attorney
lllllllllllllllllllll
Kenneth A. Libby, Special Attorney
lllllllllllllllllllll
Paul Frangie, Special Attorney, Federal Trade
Commission, Washington, DC 20580, (202)
326–2564
United States District Court for the
District of Columbia
United States of America, Plaintiff, v. XCL
RESOURCES HOLDINGS, LLC, VERDUN OIL
COMPANY II LLC, and EP ENERGY LLC,
Defendants.
Civil Action No. 1:25–cv–00041.
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[Proposed] Final Judgment
WHEREAS the United States of
America filed its Complaint on January
7, 2025, alleging that Defendants XCL
Resources Holdings, LLC, Verdun Oil
Company II LLC, and EP Energy LLC
violated Section 7A of the Clayton Act,
15 U.S.C. 18a, commonly known as the
Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the ‘‘HartScott-Rodino Act’’), and the United
States and Defendants XCL Resources
Holdings, LLC, Verdun Oil Company II
LLC, and EP Energy LLC, by their
respective attorneys, have consented to
the entry of this Final Judgment without
trial or adjudication of any issue of fact
or law, and without this Final Judgment
constituting any evidence against or an
admission by any party regarding any
issue of fact or law;
And Whereas Defendants agree to be
bound by the provisions of this Final
Judgment pending its approval by the
Court;
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Now, Therefore, before any testimony
is taken, without trial or adjudication of
any issue of fact or law, and upon the
consent of the parties hereto, it is
Ordered, Adjudged, And Decreed:
I. Jurisdiction
The Court has jurisdiction over the
subject matter of this action. The
Defendants consent solely for the
purpose of this action and the entry of
this Final Judgment that this Court has
jurisdiction over each of the parties to
this action. The Complaint states a
claim upon which relief may be granted
against the Defendants under Section
7A of the Clayton Act, 15 U.S.C. 18a.
II. Definitions
A. ‘‘XCL’’ means XCL Resources
Holdings, LLC, a limited liability
company organized, existing, and doing
business under the laws of the state of
Delaware, with its executive offices and
principal place of business located at
600 N. Shepherd Drive, Suite 390,
Houston, Texas 77007, including its
successors and assigns, and its
subsidiaries and divisions.
B. ‘‘Verdun’’ means Verdun Oil
Company II LLC, a limited liability
company organized, existing, and doing
business under the laws of the state of
Texas, with its executive offices and
principal place of business located at
945 Bunker Hill Road, Suite 1300,
Houston, Texas 77024, including its
successors and assigns, and its
subsidiaries and divisions.
C. ‘‘EP Energy’’ means EP Energy LLC,
a limited liability company organized,
existing, and doing business under the
laws of the state of Delaware, with its
executive offices and principal place of
business located at 945 Bunker Hill
Road, Suite 100, Houston, Texas 77024,
including its successors and assigns,
and its subsidiaries and divisions.
D. ‘‘Agreement’’ means any
agreement, contract, or mutual
understanding, whether formal or
informal, written, or unwritten.
E. ‘‘Antitrust Laws’’ means the
Federal Trade Commission Act, as
amended, 15 U.S.C. 41 et seq., the
Sherman Act, 15 U.S.C. 1 et seq., the
Clayton Act, 15 U.S.C. 12 et seq., and
the Hart-Scott-Rodino Act, 15 U.S.C.
18a.
F. ‘‘Competing Product’’ means any
product, service, or technology included
in a Reportable Transaction that is
offered for sale, license, or distribution
to customers in the same state, or
produced in the same state or geological
basin, by a Defendant and any other
party to the Reportable Transaction.
G. ‘‘Farm-in agreement’’ or ‘‘Farm-out
agreement’’ means an agreement in
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which the owner or lessee of mineral
rights assigns an interest in such
mineral rights to another party, in
exchange for such other party providing
specified exploration and/or
development activities, funding for such
exploration and/or development
activities, or contributing or swapping
mineral acreage, regardless of whether
the owner or lessee retains working
interests, overriding royalty interests, or
other types of economic interests. The
agreement is termed a ‘‘Farm-in
agreement’’ from the viewpoint of the
party acquiring such interest, and a
‘‘Farm-out agreement’’ from the
viewpoint of the owner or lessee of the
mineral rights assigning such interest.
H. ‘‘Non-Public Information’’ means
any information related to the assets and
businesses included in a Reportable
Transaction known by the Defendant or
another party to the Reportable
Transaction, excluding any information
that was or becomes available to the
public through means other than
disclosure by the receiving party.
I. ‘‘Pre-consummation Period’’ means
the period between the signing of an
agreement or letter of intent for a
Reportable Transaction, and the earlier
of the expiration or termination of the
applicable waiting period, and the
abandonment of the Reportable
Transaction.
J. ‘‘Regulations’’ means any rule,
regulation, statement, or interpretation
relating to the Hart-Scott-Rodino Act
that has binding legal effect with respect
to the implementation or application of
the Hart-Scott-Rodino Act or any section
or subsection within 16 CFR 801–803.
K. ‘‘Reportable Transaction’’ means a
transaction to which a Defendant is a
party that is reportable under Section
7A the Clayton Act, 15 U.S.C. 18a,
including the rules, regulations and
formal interpretations implementing the
section.
III. Applicability
This Final Judgment applies to XCL,
Verdun, and EP Energy, as defined
above, and all other persons in active
concert or participation with any of
them who receive actual notice of this
Final Judgment by personal service or
otherwise.
IV. Civil Penalty
A. Judgment is hereby entered in this
matter in favor of Plaintiff and against
Defendants, and, pursuant to Section
7A(g)(1) of the Clayton Act, 15 U.S.C.
18a(g)(1), the Debt Collection
Improvement Act of 1996, Public Law
104134 § 31001(s) (amending the
Federal Civil Penalties Inflation
Adjustment Act of 1990, 28 U.S.C.
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2461), the Federal Civil Penalties
Inflation Adjustment Act Improvements
Act of 2015, Public Law 114–74 § 701
(further amending the Federal Civil
Penalties Inflation Adjustment Act of
1990), and Federal Trade Commission
Rule 1.98, 16 CFR 1.98, 89 FR 9764
(February 12, 2024), XCL and Verdun
jointly and severally are hereby ordered
to pay a civil penalty in the amount of
$2,842,188.50, and EP Energy is hereby
ordered to pay a civil penalty in the
amount of $2,842,188.50, for a total
among all Defendants of $5,684,377.00.
Payment of the civil penalty ordered
hereby shall be made by wire transfer of
funds or cashier’s check. If the payment
is to be made by wire transfer, prior to
making the transfer, Defendant will
contact the Budget and Fiscal Section of
the Antitrust Division’s Executive Office
at ATR.EXO-Fiscal-Inquiries@usdoj.gov
for instructions. If the payment is made
by cashier’s check, the check must be
made payable to the United States
Department of Justice—Antitrust
Division and delivered to: Chief, Budget
& Fiscal Section, Executive Office,
Antitrust Division, United States
Department of Justice, Liberty Square
Building, 450 5th Street NW, Room
3016, Washington, DC 20530.
B. Defendants shall pay the full
amount of the civil penalty within thirty
(30) days of entry of this Final
Judgment. In the event of a default or
delay in payment, interest at the rate of
eighteen (18) percent per annum shall
accrue thereon from the date of the
default or delay to the date of payment.
V. Prohibited Conduct
A. During the Pre-consummation
Period for any Reportable Transaction,
the Defendant shall not enter into any
Agreement with any other party to the
transaction to:
1. combine, merge, or transfer (in
whole or in part) any operational or
decision-making control over any aspect
of the business, assets, or interests that
are part of the Reportable Transaction
including (a) the production, marketing,
or distribution of any to-be-acquired
product; or (b) any sales, service, or
procurement terms for such products;
2. require one party to the Reportable
Transaction to obtain approval from
another party to the Reportable
Transaction for any ordinary-course
business activities or expenses,
including planned capital expenditures;
3. delay or suspend ordinary-course
sales or development efforts; or
4. disclose or seek the disclosure of
the following information for any
Competing Product:
a. current or future prices or contract
offers; or
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b. Non-Public Information relating to
customers, current or future drilling and
completions, production, sales, or
shipments to customers.
Provided, however, that nothing in
this Final Judgment prohibits
Defendants from disclosing or seeking
information relating to a Competing
Product (i) that is publicly available at
the time disclosure occurs, or (ii) that is
necessary to conduct reasonable and
customary due diligence of or
integration planning for the proposed
transaction, provided such activity by
Defendants are supervised by antitrust
counsel and occurs pursuant to a nondisclosure agreement that (a) limits use
of the information to conducting due
diligence or integration planning
(including limiting dissemination of the
information to individuals involved in
or supervising due diligence or
integration planning), (b) prohibits
disclosure of the information to any
employee of the receiving entity who is
directly responsible for the marketing,
pricing, or sales of a Competing Product,
and (c) requires the recipient to delete
or destroy the information if the
Reportable Transaction does not close.
VI. Permitted Conduct
Nothing in this Final Judgment
prohibits Defendants from:
A. Agreeing that a party to a
transaction shall continue to operate in
the ordinary course of business during
the Pre-consummation Period;
B. Agreeing that a party to a
transaction forgo conduct that would
cause a material adverse change in the
value of to-be-acquired assets during the
Pre-consummation Period;
C. Negotiating, agreeing to, or
participating in joint operating, joint
development, Farm-in, or Farm-out
agreements,
Provided, however, that the joint
operating, joint development, Farm-in,
or Farm-out agreements do not relate to
assets included as part of any
Reportable Transaction during the Preconsummation Period; or
D. Disclosing Non-public Information
related to Competing Products in the
context of litigation or settlement
discussions if the disclosure is subject
to a protective order.
VII. Compliance
A. Defendants shall design, maintain,
and operate an antitrust compliance
program to ensure compliance with this
Final Judgment and the Antitrust Laws,
and as part of such program shall:
1. within 30 days of entry of this Final
Judgment, appoint or retain a qualified
antitrust compliance officer (‘‘Antitrust
Compliance Officer’’) to supervise the
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design, maintenance, and operation of
the program, and shall authorize the
Antitrust Compliance Officer to perform
all tasks necessary to fulfill these
obligations. Defendants may replace the
Antitrust Compliance Officer with
another qualified person at any time;
2. within 45 days of entry of this Final
Judgment, distribute a copy of this Final
Judgment to each current officer and
director, and each employee, agent, or
other person who has responsibility or
authority over sales, marketing, strategic
planning, exploration and development,
or mergers and acquisitions;
3. distribute a copy of this Final
Judgment to any person who takes a
position described in Paragraph
VII(A)(2) within 30 days of the date the
person takes such position;
4. provide in-person or online training
concerning Defendants’ obligations
under this Final Judgment and the
Antitrust Laws as they apply to
Defendants’ activities, to each person
designated in Paragraphs VII(A)(2) or
(3):
a. no later than 45 days after this Final
Judgment is entered;
b. no later than 30 days after a person
first takes a position described in
Paragraph VII(A)(2); and
c. at least annually.
Provided, however, that as to any
person on extended leave (e.g., parental,
family, or disability leave), the training
for such person under the above
schedule shall be completed within 30
days of the date the person returns to
work;
5. obtain within 60 days from the
entry of this Final Judgment, and
annually thereafter, and retain for the
duration of this Final Judgment, a
written certification from each person
designated in Paragraphs VII(A)(2) & (3)
that the person: (a) has received, read,
understands, and agrees to abide by the
terms of this Final Judgment; (b)
understands that failure to comply with
this Final Judgment may result in
conviction for criminal contempt of
court; and (c) is not aware of any
violation of the Final Judgment; and
6. provide a copy of this Final
Judgment (or a hyperlink to a copy of
this Final Judgment) to each party to a
Reportable Transaction no later than
signing of the definitive agreement.
B. Within 60 days of entry of this
Final Judgment, Defendants shall certify
to Plaintiff that they have (1) designed,
established, and are maintaining an
antitrust compliance program; (2)
designated an Antitrust Compliance
Officer, specifying their name, business
address, and telephone number; (3)
distributed this Final Judgment as
required in Paragraph VII(A)(2); and (4)
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provided training as required in
Paragraph VII(A)(4).
C. For the term of this Final Judgment,
on or before its anniversary date,
Defendants shall file with Plaintiff an
annual statement verifying that they are
complying with the requirements of this
Final Judgment and describing in detail
the manner of their compliance with the
provisions of Sections V and VII.
D. If any of Defendants’ directors or
officers, or the Antitrust Compliance
Officer, learns of any violation of this
Final Judgment, Defendants shall within
three (3) business days take appropriate
action to assure continued compliance
with this Final Judgment, and shall
notify the Plaintiff in writing of the
violation within 10 business days of
learning of the violation.
VIII. Compliance Inspection
A. For the purposes of determining or
securing compliance with this Final
Judgment, or of determining whether
the Final Judgment should be modified
or vacated, and subject to any legallyrecognized privilege, from time to time
authorized representatives of the United
States, including agents and consultants
retained by the United States, shall,
upon written request of an authorized
representative of the Assistant Attorney
General in charge of the Antitrust
Division, and on reasonable notice to
Defendants, be permitted:
(1) access during Defendants’ office
hours to inspect and copy, or at the
option of the United States, to require
Defendants to provide electronic copies
of all books, ledgers, accounts, records,
data, and documents in the possession,
custody, or control of Defendants,
relating to any matters contained in this
Final Judgment; and
(2) to interview, either informally or
on the record, Defendants’ officers,
employees, or agents, who may have
their individual counsel present,
regarding such matters. The interviews
shall be subject to the reasonable
convenience of the interviewee and
without restraint or interference by
Defendants.
B. Upon the written request of an
authorized representative of the
Assistant Attorney General in charge of
the Antitrust Division, Defendants shall
submit written reports or response to
written interrogatories, under oath if
requested, relating to any of the matters
contained in this Final Judgment as may
be requested.
C. No information or documents
obtained pursuant to any provision of
this Final Judgment may be divulged by
the United States to any person other
than an authorized representative of the
executive branch of the United States,
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except in the course of legal proceedings
to which the United States is a party,
including grand jury proceedings, for
the purpose of securing compliance
with this Final Judgment, or as
otherwise required by law.
D. In the event of a request by a third
party, pursuant to the Freedom of
Information Act, 5 U.S.C. 552, for
disclosure of information obtained
pursuant to any provision of this Final
Judgment, the Antitrust Division will
act in accordance with that statute, and
the Department of Justice regulations at
28 CFR part 16, including the provision
on confidential commercial information,
at 28 CFR 16.7. Designations of
confidentiality expire 10 years after
submission, ‘‘unless the submitter
requests and provides justification for a
longer designation period.’’ See 28 CFR
16.7(b).
E. If at the time that Defendants
furnish information or documents to the
United States pursuant to any provision
of this Final Judgment, Defendants
represent and identify in writing
information or documents for which a
claim of protection may be asserted
under Rule 26(c)(1)(G) of the Federal
Rules of Civil Procedure, and
Defendants mark each pertinent page of
such material, ‘‘Subject to claim of
protection under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure,’’ the
United States must give Defendants 10
calendar days’ notice before divulging
the material in any legal proceeding
(other than a grand jury proceeding).
IX. Retention of Jurisdiction
This Court retains jurisdiction to
enable any of the parties to this Final
Judgment to apply to this Court at any
time for further orders and directions as
may be necessary or appropriate to carry
out or construe this Final Judgment, to
modify or terminate any of its
provisions, to enforce compliance, and
to punish violations of its provisions.
X. Enforcement of Final Judgment
A. The United States retains and
reserves all rights to enforce the
provisions of this Final Judgment,
including the right to seek an order of
contempt from the Court. Defendants
agree that in any civil contempt action,
any motion to show cause, or any
similar action brought by the United
States regarding an alleged violation of
this Final Judgment, the United States
may establish a violation of this Final
Judgment and the appropriateness of
any remedy therefor by a preponderance
of the evidence, and Defendants waive
any argument that a different standard
of proof should apply.
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B. The Final Judgment should be
interpreted to give full effect to the
procompetitive purposes of the antitrust
laws, including Section 7A of the
Clayton Act and Regulations
promulgated thereunder. Defendants
agree that they may be held in contempt
of, and that the Court may enforce, any
provision of this Final Judgment that, as
interpreted by the Court in light of these
procompetitive principles and applying
ordinary tools of interpretation, is stated
specifically and in reasonable detail,
whether or not it is clear and
unambiguous on its face. In any such
interpretation, the terms of this Final
Judgment should not be construed
against either party as the drafter.
C. In any enforcement proceeding in
which the Court finds that a Defendant
has violated this Final Judgment, the
United States may apply to the Court for
a one-time extension of this Final
Judgment for that Defendant, together
with such other relief as may be
appropriate. In connection with any
successful effort by the United States to
enforce this Final Judgment against a
Defendant, whether litigated or resolved
prior to litigation, each Defendant agrees
to reimburse the United States for the
fees and expenses of its attorneys, as
well as any other costs including
experts’ fees, incurred in connection
with that enforcement effort, including
in the investigation of the potential
violation.
D. For a period of four (4) years after
the expiration of this Final Judgment
pursuant to Section XI, if the United
States has evidence that a Defendant
violated this Final Judgment before it
expired, the United States may file an
action against that Defendant in this
Court requesting that the Court order (1)
Defendant to comply with the terms of
this Final Judgment for an additional
term of at least four years following the
filing of the enforcement action under
this Section, (2) any appropriate
contempt remedies, (3) any additional
relief needed to ensure the Defendant
complies with the terms of the Final
Judgment, and (4) fees or expenses as
called for in Paragraph X(C).
XI. Expiration of Final Judgment
Unless this Court grants an extension,
this Final Judgment shall expire ten (10)
years from the date of its entry if each
Defendant has paid the civil penalty in
full.
XII. Costs
Each party shall bear its own costs of
this action.
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and competition from potentially
anticompetitive transactions by
providing the agencies an opportunity
to conduct an antitrust review of
proposed transactions before they are
consummated.
At the same time the Complaint was
filed, the United States also filed a
Stipulation and proposed Final
Judgment. Under the proposed Final
Judgment, which is explained more
fully below, Defendants are prohibited
from engaging in specified conduct
during the term of the order and are
required to pay a civil penalty to the
United States in the amount of
$5,684,377. The proposed Final
Dated:
llllllllllllllllllll Judgment is designed to deter HSR Act
lllllllllllllllllllll violations by XCL, Verdun, and
similarly situated acquirers.
United States District Judge
The United States and Defendants
United States District Court for the
have stipulated that the proposed Final
District of Columbia
Judgment may be entered after
compliance with the APPA. Entry of the
United States of America, Plaintiff, v. XCL
RESOURCES HOLDINGS, LLC, VERDUN OIL proposed Final Judgment will terminate
COMPANY II LLC, and EP ENERGY LLC
this action, except that the Court will
Defendants. Civil Action No. 1:25-cv-00041.
retain jurisdiction to construe, modify,
or enforce the provisions of the
Competitive Impact Statement
proposed Final Judgment and punish
In accordance with the Antitrust
violations thereof.
Procedures and Penalties Act, 15 U.S.C.
II. Description of the Events
16(b)–(h) (the ‘‘APPA’’ or ‘‘Tunney
Act’’), the United States of America files A. XCL and Verdun’s acquisition of EP
this Competitive Impact Statement
On July 26, 2021, XCL and Verdun
related to the proposed Final Judgment
agreed to acquire EP for approximately
filed in this civil antitrust proceeding.
$1.4 billion. Defendants are engaged,
I. Nature and Purpose of Proceedings
among other things, in the development,
On January 7, 2025, the United States production, and sale of crude oil in the
United States. XCL operates in the Uinta
filed a Complaint against Defendants
Basin of Utah. Verdun operates in the
XCL Resources Holdings, LLC (‘‘XCL’’),
Eagle Ford area of Texas. EP operates in
Verdun Oil Company II LLC
both the Uinta Basis and the Eagle Ford
(‘‘Verdun’’), and EP Energy LLC (‘‘EP’’)
(together, ‘‘Defendants’’), related to XCL area. Shortly thereafter, Defendants’
parent entities filed the pre-acquisition
and Verdun’s acquisition of EP. The
Notification and Report forms required
Complaint alleges that Defendants
by Section 7A of the Clayton Act. After
violated Section 7A of the Clayton Act,
reviewing the parties’ filings, the
15 U.S.C. 18a, commonly known as the
Federal Trade Commission (‘‘FTC’’)
Hart-Scott-Rodino Antitrust
opened an investigation into the
Improvements Act of 1976 (the ‘‘HSR
competitive effects of the proposed
Act’’).
transaction. XCL and EP were two of
The Complaint alleges that XCL and
four significant oil and gas development
Verdun acquired EP, through a
and production companies in northeast
transaction in excess of the thenapplicable statutory thresholds, without Utah’s Uinta Basin. The FTC alleged in
observing the required HSR Act waiting its complaint that, after the acquisition
of EP, if XCL reduced the volume of
period. The HSR Act provides that ‘‘no
crude oil that it supplied to Salt Lake
person shall acquire, directly or
City, Salt Lake City area refiners would
indirectly, any voting securities of any
be forced to pay more for Uinta Basin
person’’ exceeding certain thresholds
waxy crude oil. Ultimately, the FTC
until that person has filed preacquisition notification and report forms obtained a consent agreement resolving
its concerns about the impact of the
with the Department of Justice and the
Federal Trade Commission (collectively, transaction on competition in the
market for the development, production,
the ‘‘federal antitrust agencies’’ or
and sale of waxy crude oil in the Uinta
‘‘agencies’’) and the post-filing waiting
Basin area of Utah. The consent
period has expired. 15 U.S.C. 18a(a). A
agreement required Defendants to divest
key purpose of the notification and
all of EP’s Utah operations to a qualified
waiting period is to protect consumers
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XIII. Public Interest Determination
Entry of this Final Judgment is in the
public interest. The parties have
complied with the requirements of the
Antitrust Procedures and Penalties Act,
15 U.S.C. 16, including making copies
available to the public of this Final
Judgment, the Competitive Impact
Statement, and any comments thereon
and the United States’ responses to
comments. Based upon the record
before the Court, which includes the
Competitive Impact Statement and any
comments and responses to comments
filed with the Court, entry of this Final
Judgment is in the public interest.
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third-party operator, Crescent Energy.
Entry of the consent agreement
terminated the HSR Act waiting period
on March 25, 2022. XCL and Verdun
consummated the transaction on March
30, 2022, and EP is now a wholly owned
subsidiary of Verdun.
B. Defendants’ alleged violation of
Section 7A
The HSR Act requirements apply to a
transaction if, as a result of the
transaction, the acquirer will ‘‘hold’’
assets or voting securities valued above
the thresholds. Under HSR Rule
801.1(c), to ‘‘hold’’ assets or voting
securities means ‘‘beneficial ownership,
whether direct, or indirect through
fiduciaries, agents, controlled entities or
other means.’’ 16 CFR 801.1(c). Thus,
under the Act, parties must make an
HSR Act filing and observe a waiting
period before transferring beneficial
ownership of the assets or voting
securities to be acquired. The Statement
of Basis and Purpose accompanying the
Rules explains that beneficial
ownership is determined on a case-bycase basis, based on the indicia of
beneficial ownership which include,
among others, the right to obtain the
benefit of any increase in value or
dividends and the risk of loss of value.
43 FR 33,449 (July 31, 1978). A firm
may also gain beneficial ownership by
obtaining ‘‘operational control’’ of an
asset.
The combination of XCL and
Verdun’s agreement to purchase EP and
their assumption of key ordinary-course
functions transferred beneficial
ownership of EP’s business to XCL and
Verdun before they had fulfilled their
obligations under the HSR Act.
Specifically, the July 26, 2021 Purchase
Agreement provided for the immediate
transfer of control over key aspects of
EP’s business to XCL and Verdun,
including granting XCL and Verdun
approval rights over EP’s ongoing and
planned crude oil development and
production activities and many of EP’s
ordinary-course expenditures. XCL put
an immediate halt to EP’s new welldrilling activities, so that XCL—not
EP—could control the development and
production plans for EP’s drilling assets
moving forward. Even though XCL and
Verdun allowed EP to resume its own
well-drilling and planning activities
after Defendants realized that the FTC
would investigate the transaction, the
temporary halts resulted in EP having
crude oil supply shortages in the
following months. Defendants predicted
these shortages and specifically
provided in the Purchase Agreement
that XCL and Verdun—not EP—would
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bear all costs associated with EP’s
supply shortages.
XCL and Verdun also exercised
operational control over EP by, inter
alia, working directly with EP’s
customers on EP’s behalf; requiring EP
to provide competitively sensitive
information to XCL and Verdun
businesspeople; requiring approval of
ordinary-course expenditures; and
coordinating with EP on EP’s contract
negotiations with certain customers in
the Eagle Ford production area. The
illegal conduct lasted through October
27, 2021, when the Defendants executed
an amendment to the Purchase
Agreement which allowed EP to operate
independently once again and in the
ordinary course of business, without
XCL’s or Verdun’s control over its dayto-day operations. The Defendants were
in violation of the HSR Act for a period
of 94 days, from when the Purchase
Agreement was signed, on July 26, 2021,
until the Purchase Agreement was
amended, on October 27, 2021. Among
other things, XCL’s temporary halting of
EP’s development activities contributed
to EP having crude oil supply shortages
in September and October 2021 at a
time when the United States was
experiencing significant supply
shortages and spiking crude oil prices
due to sudden demand increases as
COVID–19 restrictions eased. XCL and
EP—direct competitors in the
marketplace—then worked in concert to
supply EP’s customers to satisfy EP’s
customer supply commitments. Verdun
also coordinated with EP on EP’s
contract negotiations with certain
customers in the Eagle Ford production
area. Specifically, Verdun observed that
certain EP contracts included belowmarket prices and directed EP to raise
them in the next contracting period. EP
complied.
Agreements that transfer some indicia
of beneficial ownership, even if
common in an industry, may violate
Section 7A if entered into while the
buyer intends to acquire the asset.
Entering into such agreements before
the HSR Act waiting period expires
defeats the purpose of the HSR Act by
enabling the acquiring person to direct
the acquired person’s business to bring
about the effects of an acquisition prior
to completion of the agencies’ antitrust
review.
III. Explanation of the Proposed Final
Judgment
The relief required by the proposed
Final Judgment will prevent future
violations of Section 7A of the Clayton
Act of the type Defendants committed
and secures a monetary civil penalty for
XCL’s, Verdun’s, and EP’s violation of
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Section 7A. The proposed Final
Judgment sets forth prohibited and
permitted conduct, a compliance
program the Defendants must follow,
and procedures available to the United
States to determine and ensure
compliance with the Final Judgment.
Section XI provides that these
conditions will expire ten years after the
entry of the Final Judgment.
A. Prohibited Conduct
Section V of the proposed Final
Judgment is designed to prevent future
HSR Act violations of the sort alleged in
the Complaint. During the ‘‘preconsummation period’’ of any future
HSR-reportable transaction—after
executing an agreement or letter of
intent for a transaction subject to the
reporting requirements of the HSR Act
and until the expiration of the statutory
waiting period or abandonment of the
transaction—the Defendants are
prohibited from entering into any
agreement with the other contracting
party or parties to combine, merge, or
transfer, in whole or in part, any
operational or decision-making control
over businesses, assets, or interests to be
acquired. This injunction applies to all
transactions subject to the reporting
requirements of the HSR Act, regardless
of the particular products involved or
whether any other party to the
transaction competes with the
Defendants. The injunction also
prevents an acquirer from obtaining
approval rights or authority over
ordinary-course decisions of the to-beacquired entity or unrestricted access to
certain categories of non-public
information. To be clear, the injunction
is not intended to cover all means of
transferring beneficial ownership—
which is assessed on a case-by-case
basis depending on a variety of factors—
but to broadly cover the Defendants’
conduct in this matter and prevent
recurrence.
B. Permitted Conduct
Section VI of the proposed Final
Judgment identifies certain agreements
and conduct that are permitted by the
Judgment. Paragraphs VI(A) and VI(B)
ensure that the decree will not be
interpreted to forbid specified ‘‘conduct
of business’’ covenants that are typically
found in merger agreements. These are
customary provisions found in most
merger agreements and are intended to
protect the value of the transaction and
prevent a to-be-acquired person from
wasting assets. Paragraph VI(C) ensures
that the decree does not prevent certain
ordinary-course agreements in the oil
and gas industry. Paragraph VI(D)
recognizes narrow exceptions to the
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restrictions on access to non-public
information in Paragraph V(A)(4) for
certain activities, such as participating
in litigation.
C. Compliance
Sections VII and VIII of the proposed
Final Judgment set forth various
compliance procedures. Section VII sets
up an affirmative compliance program
directed toward ensuring compliance
with the limitations imposed by the
proposed Final Judgment and with the
federal antitrust laws. The compliance
program includes the designation of a
qualified antitrust compliance officer
who is required to ensure that the
relevant Defendant distributes a copy of
the Final Judgment to each current and
succeeding director, office, employee,
agent, or other person with the
responsibility over sales, marketing,
strategic planning, exploration and
development, or mergers and
acquisitions; briefs each such person
regarding compliance with the Final
Judgment and the antitrust laws as they
apply to Defendants’ activities; and
obtains certification annually from each
such person that he or she understands
his or her obligations under the Final
Judgment and agrees to abide by its
terms. In addition, Defendants must
provide a copy of the Final Judgment to
certain parties entering a merger or
acquisition with a Defendant prior to
signing the definitive agreement.
Section VII of the proposed Final
Judgment further requires the
compliance officer to certify to the
United States that Defendant is in
compliance and to report any violations
of the Final Judgment.
To facilitate monitoring of
Defendants’ compliance with the Final
Judgment, Section VIII grants DOJ
access, upon reasonable notice, to
Defendants’ records and documents
relating to matters contained in the
Final Judgment. Defendants must also
make its personnel available for
interviews or depositions regarding
such matters. In addition, Defendants
must, upon request, prepare written
reports relating to matter contained in
the Final Judgment.
D. Civil Penalties
The proposed Final Judgment
imposes a $5,684,377 civil penalty for
Defendants’ violation of the HSR Act.
The United States adjusted the penalty
downward from the maximum
permitted under the HSR Act in part
because the Defendants were willing to
resolve the matter by consent decree
and avoid a prolonged investigation and
litigation. The relief will have a
beneficial effect on competition because
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it will deter future instances in which
parties seek to immediately acquire
control of an independent competitive
presence before filing the required preacquisition notifications with the
agencies and observing the required
waiting period. At the same time, the
penalty will not have any adverse effect
on competition.
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IV. Remedies Available to Potential
Private Litigants
There is no private antitrust action for
HSR Act violations; therefore, entry of
the proposed Final Judgment will
neither impair nor assist the bringing of
any private antitrust action.
V. Procedures Available for
Modification of the Proposed Final
Judgment
The United States and the Defendants
have stipulated that the proposed Final
Judgment may be entered by this Court
after compliance with the provisions of
the APPA, provided that the United
States has not withdrawn its consent.
The APPA conditions entry of the
decree upon this Court’s determination
that the proposed Final Judgment is in
the public interest.
The APPA provides a period of at
least sixty (60) days preceding the
effective date of the proposed Final
Judgment within which any person may
submit to the United States written
comments regarding the proposed Final
Judgment. Any person who wishes to
comment should do so within sixty (60)
days of the date of publication of this
Competitive Impact Statement in the
Federal Register, or within sixty (60)
days of the first date of publication in
a newspaper of the summary of this
Competitive Impact Statement,
whichever is later. All comments
received during this period will be
considered by the United States
Department of Justice, which remains
free to withdraw its consent to the
proposed Final Judgment at any time
prior to the Court’s entry of judgment.
The comments and the response of the
United States will be filed with this
Court. In addition, comments will be
posted on the U.S. Department of
Justice, Antitrust Division’s internet
website and, under certain
circumstances, published in the Federal
Register. Written comments should be
submitted to: Maribeth Petrizzi, Special
Attorney, United States, c/o Federal
Trade Commission, 600 Pennsylvania
Avenue NW, CC–8416, Washington, DC
20580, Email: bccompliance@ftc.gov.
The proposed Final Judgment
provides that this Court retains
jurisdiction over this action, and the
parties may apply to this Court for any
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order necessary or appropriate for the
modification, interpretation, or
enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final
Judgment
As an alternative to the proposed
Final Judgment, the United States
considered a full trial on the merits
against the Defendants. The United
States is satisfied, however, that the
relief required by the proposed Final
Judgment will remedy the violation
alleged in the Complaint and deter
violations by similarly situated entities
in the future. Thus, the proposed Final
Judgment achieves all or substantially
all of the relief the United States would
have obtained through litigation but
avoids the time, expense, and
uncertainty of a full trial on the merits.
VII. Standard of Review Under the Appa
for the Proposed Final Judgment
Under the Clayton Act and APPA,
proposed Final Judgments, or ‘‘consent
decrees,’’ in antitrust cases brought by
the United States are subject to a sixty
(60) day comment period, after which
the court shall determine whether entry
of the proposed Final Judgment is ‘‘in
the public interest.’’ 15 U.S.C. 16(e)(1).
In making that determination, the court,
in accordance with the statute as
amended in 2004, is required to
consider:
(A) the competitive impact of such
judgment, including termination of alleged
violations, provisions for enforcement and
modification, duration of relief sought,
anticipated effects of alternative remedies
actually considered, whether its terms are
ambiguous, and any other competitive
considerations bearing upon the adequacy of
such judgment that the court deems
necessary to a determination of whether the
consent judgment is in the public interest;
and
(B) the impact of entry of such judgment
upon competition in the relevant market or
markets, upon the public generally and
individuals alleging specific injury from the
violations set forth in the complaint
including consideration of the public benefit,
if any, to be derived from a determination of
the issues at trial.
Id. § 16(e)(1)(A) & (B). In considering
these statutory factors, the court’s
inquiry is necessarily a limited one, as
the government is entitled to ‘‘broad
discretion to settle with the defendant
within the reaches of the public
interest.’’ United States v. Microsoft
Corp., 56 F.3d 1448, 1461 (D.C. Cir.
1995); United States v, U.S. Airways
Group, Inc., 38 F. Supp. 3d 69, 75
(D.D.C. 2014) (noting the government
has broad discretion of the adequacy of
the relief at issue); United States v.
InBev N.V./S.A., No. 08–1965 (JR),
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2009–2 Trade Cas. (CCH) ¶ 76,736, 2009
U.S. Dist. LEXIS 84787, at *3, (D.D.C.
Aug. 11, 2009) (noting that the court’s
review of a consent judgment is limited
and only inquires ‘‘into whether the
government’s determination that the
proposed remedies will cure the
antitrust violations alleged in the
complaint was reasonable, and whether
the mechanism to enforce the final
judgment are clear and manageable.’’).
As the United States Court of Appeals
for the District of Columbia Circuit has
held, under the APPA a court considers,
among other things, the relationship
between the remedy secured and the
specific allegations in the government’s
Complaint, whether the proposed Final
Judgment is sufficiently clear, whether
its enforcement mechanisms are
sufficient, and whether it may positively
harm third parties. See Microsoft, 56
F.3d at 1458–62. With respect to the
adequacy of the relief secured by the
proposed Final Judgment, a court may
not ‘‘make de novo determination of
facts and issues.’’ United States v. W.
Elec. Co., 993 F.2d 1572, 1577 (D.C. Cir.
1993) (quotation marks omitted);; see
also Microsoft, 56 F.3d at 1460–62;
United States v. Alcoa, Inc., 152 F.
Supp. 2d 37, 40 (D.D.C. 2001); United
States v. Enova Corp., 107 F. Supp. 2d
10, 16 (D.D.C. 2000); InBev, 2009 U.S.
Dist. LEXIS 84787, at *3.
Instead, ‘‘[t]he balancing of competing
social and political interests affected by
a proposed antitrust decree must be left,
in the first instance, to the discretion of
the Attorney General.’’ W. Elec. Co., 993
F.2d at 1577 (quotation marks omitted).
‘‘The court should also bear in mind the
flexibility of the public interest inquiry:
the court’s function is not to determine
whether the resulting array of rights and
liabilities is the one that will best serve
society, but only to confirm that the
resulting settlement is within the
reaches of the public interest.’’
Microsoft, 56 F.3d at 1460 (quotation
marks omitted); see also United States v.
Deutsche Telekom AG, No. 19–2232
(TJK), 2020 WL 1873555, at *7 (D.D.C.
Apr. 14, 2020). More demanding
requirements would ‘‘have enormous
practical consequences for the
government’s ability to negotiate future
settlements,’’ contrary to congressional
intent. Microsoft, 56 F.3d at 1456. ‘‘The
Tunney Act was not intended to create
a disincentive to the use of the consent
decree.’’ Id.
The United States’ predictions about
the efficacy of the remedy are to be
afforded deference by the Court. See,
e.g., Microsoft, 56 F.3d at 1461
(recognizing courts should give ‘‘due
respect to the Justice Department’s . . .
view of the nature of its case’’); United
E:\FR\FM\21JAN1.SGM
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ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 90, No. 12 / Tuesday, January 21, 2025 / Notices
States v. Iron Mountain, Inc., 217 F.
Supp. 3d 146, 152–53 (D.D.C. 2016) (‘‘In
evaluating objections to settlement
agreements under the Tunney Act, a
court must be mindful that [t]he
government need not prove that the
settlements will perfectly remedy the
alleged antitrust harms[;] it need only
provide a factual basis for concluding
that the settlements are reasonably
adequate remedies for the alleged
harms.’’ (internal citations omitted));
United States v. Republic Servs., Inc.,
723 F. Supp. 2d 157, 160 (D.D.C. 2010)
(noting ‘‘the deferential review to which
the government’s proposed remedy is
accorded’’); United States v. ArcherDaniels-Midland Co., 272 F. Supp. 2d 1,
6 (D.D.C. 2003) (‘‘A district court must
accord due respect to the government’s
prediction as to the effect of proposed
remedies, its perception of the market
structure, and its view of the nature of
the case.’’). The ultimate question is
whether ‘‘the remedies [obtained by the
Final Judgment are] so inconsonant with
the allegations charged as to fall outside
of the ‘reaches of the public interest.’’’
Microsoft, 56 F.3d at 1461 (quoting W.
Elec. Co., 900 F.2d at 309).
Moreover, the court’s role under the
APPA is limited to reviewing the
remedy in relationship to the violations
that the United States has alleged in its
Complaint and does not authorize the
court to ‘‘construct [its] own
hypothetical case and then evaluate the
decree against that case.’’ Microsoft, 56
F.3d at 1459; see also U.S. Airways, 38
F. Supp. 3d at 75 (noting that the court
must simply determine whether there is
a factual foundation for the
government’s decisions such that its
conclusions regarding the proposed
settlements are reasonable); InBev, 2009
U.S. Dist. LEXIS 84787, at *20
(concluding that ‘‘the ‘public interest’ is
not to be measured by comparing the
violations alleged in the complaint
against those the court believes could
have, or even should have, been
alleged’’). Because the ‘‘court’s authority
to review the decree depends entirely
on the government’s exercising its
prosecutorial discretion by bringing a
case in the first place,’’ it follows that
‘‘the court is only authorized to review
the decree itself,’’ and not to ‘‘effectively
redraft the complaint’’ to inquire into
other matters that the United States did
not pursue. Microsoft, 56 F.3d at 1459–
60. As this Court confirmed in SBC
Communications, courts ‘‘cannot look
beyond the complaint in making the
public interest determination unless the
complaint is drafted so narrowly as to
make a mockery of judicial power.’’ 489
F. Supp. 2d at 15.
VerDate Sep<11>2014
19:56 Jan 18, 2025
Jkt 265001
In its 2004 amendments to the APPA,
Congress made clear its intent to
preserve the practical benefits of using
judgments proposed by the United
States in antitrust enforcement, adding
the unambiguous instruction that
‘‘[n]othing in this section shall be
construed to require the court to
conduct an evidentiary hearing or to
require the court to permit anyone to
intervene.’’ 15 U.S.C. 16(e)(2); see also
U.S. Airways, 38 F. Supp. 3d at 76
(indicating that a court is not required
to hold an evidentiary hearing or to
permit intervenors as part of its review
under the Tunney Act). This language
explicitly wrote into the statute what
Congress intended when it enacted the
Tunney Act in 1974. As Senator Tunney
explained: ‘‘The court is nowhere
compelled to go to trial or to engage in
extended proceedings which might have
the effect of vitiating the benefits of
prompt and less costly settlement
through the consent decree process.’’
119 Cong. Rec. 24,598 (1973) (statement
of Sen. Tunney). ‘‘A court can make its
public interest determination based on
the competitive impact statement and
response to public comments alone.’’
U.S. Airways, 38 F. Supp. 3d at 76
(citing Enova Corp., 107 F. Supp. 2d at
17).
7171
with the Attorney General and the
Federal Trade Commission disclosing
changes in its membership. On February
3, 2015, the RTC officially changed its
name to NAMC. The notifications were
filed for the purpose of extending the
Act’s provisions limiting the recovery of
antitrust plaintiffs to actual damages
under specified circumstances.
Specifically, Abaco Systems Inc.,
Huntsville, AL; ACP Technologies, LLC,
St. Clair Shores, MI; Acutronic USA,
Inc, Pittsburgh, PA; AEF-Performance,
LLC, Picayune, MS; AIVOT Robotics,
Inc., Seattle, WA; All Foam Products Co,
Middlefield, OH; Amazon Web Services,
Seattle, WA; American Lithium Energy
Corporation, Carlsbad, CA; American
Tooling Center, Inc., Lansing, MI;
Amphenol Borisch Technologies, Grand
Rapids, MI; Ascent AeroSystems,
Wilmington, MA; ATA Engineering, Inc,
San Diego, CA; ATI, Arlington, VA; AVL
Mobility Technologies, Inc., Plymouth,
MI; Banks Technologies, Azusa, CA;
Beast Code, LLC., Fort Walton Beach,
FL; Belding Tool and Machine, Belding,
MI; Bevilacqua Research Corporation,
Huntsville, AL; BlueSky Mast, Inc.,
Largo, FL; Bosch Rexroth Corporation,
Bethlehem, PA; Buffalo Armory Group,
LLC, Buffalo, NY; Cambium
Biomaterials, Mojave, CA; Canis
Automotive Labs Inc, Highlands Ranch,
VIII. Determinative Documents
CO; Canoo Technologies Inc., Torrance,
There are no determinative materials
CA; Clear Align, Eagleville, PA;
or documents within the meaning of the Compound Eye Inc., Redwood City, CA;
APPA that were considered by the
Computer Access Technologies, LLC,
United States in formulating the
Colorado Springs, CO; CoVar, McLean,
proposed Final Judgment.
VA; Cryptic Vector, Liberty Township,
Date: January 7, 2025
OH; CTC Enterprise Ventures
Respectfully Submitted,
Corporation, Johnstown, PA; Cubic
lllllllllllllllllllll Defense Applications Inc., San Diego,
Kenneth A. Libby, Special Attorney, U.S.
Ca; Cummings Aerospace, Inc.,
Department of Justice, Antitrust Division, c/
Huntsville, AL; Curtiss Wright 901D,
o Federal Trade Commission, 600
Monsey, NY; Curtiss-Wright
Pennsylvania Avenue NW, Washington, DC
(Teletronics Technology Corp),
20580, Phone: (202) 326–2694, Email:
Newtown, PA; CVX Instruments, LLC,
klibby@ftc.gov.
Charlevoix, MI; D–2 Incorporated,
[FR Doc. 2025–01252 Filed 1–17–25; 8:45 am]
Bourne, MA; D’Angelo Technologies,
BILLING CODE 4410–11–P
LLC, Dayton, OH; Detroit Manufacturing
Systems, LLC., Detroit, MI; Diversified
DEPARTMENT OF JUSTICE
Technologies, Inc., Bedford, MA;
Doodle Labs, LLC, Marina Del Rey, CA;
Antitrust Division
DTCUBED, LLC, Sewell, NJ; Duality
Robotics, Inc., San Mateo, CA; Dynetics,
Notice Pursuant to the National
Inc., Huntsville, AL; Easy Aerial,
Cooperative Research and Production
Brooklyn, NY; ELC Industries, d.b.a.
Act of 1993—The National Advanced
Aurora Defense Group, Aurora, IL;
Mobility Consortium, Inc.
Emelody Worldwide Inc., Peachtree
Corners, GA; esc Aerospace US, Inc.,
Notice is hereby given that, on
Orlando, FL; Florida Institute for
October 10, 2024, pursuant to section
Human & Machine Cognition,
6(a) of the National Cooperative
Pensacola, FL; FN America, LLC,
Research and Production Act of 1993,
MCLEAN, VA; Galley Power Inc,
15 U.S.C. 4301 et seq. (‘‘the Act’’), The
Hudson, MA; GE Aviation Systems,
National Advanced Mobility
LLC, Grand Rapids, MI; General
Consortium, Inc. (‘‘NAMC’’) has filed
Technical Services, LLC, Wall
written notifications simultaneously
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
E:\FR\FM\21JAN1.SGM
21JAN1
Agencies
[Federal Register Volume 90, Number 12 (Tuesday, January 21, 2025)]
[Notices]
[Pages 7159-7171]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-01252]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States of America v. XCL Resources Holdings, LLC, Verdun
Oil Company II, LLC, and EP Energy LLC; Proposed Final Judgment and
Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the District of
[[Page 7160]]
Columbia in United States of America v. XCL Resources Holdings, LLC,
Verdun Oil Company II, LLC, and EP Energy LLC, Civil Action No. 1:25-
cv-00041. On January 7, 2025, the United States filed a Complaint
alleging that XCL Resources Holdings, LLC (``XCL''), Verdun Oil Company
II, LLC (``Verdun''), and EP Energy LLC (``EP Energy'') (together
``Defendants'') violated the notice and waiting period requirements of
section 7A of the Clayton Act, 15 U.S.C. 18a, commonly known as the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (``HSR Act'' or
``Act'') by transferring beneficial ownership of EP Energy to XCL and
Verdun during the waiting period, which constitutes gun jumping.
The Proposed Final Judgment, filed at the same time as the
Complaint, requires: (i) XCL and Verdun jointly and severally to pay a
civil penalty in the amount of $2,842,188.50, and EP Energy to pay a
civil penalty in the amount of $2,842,188.50 within 30 days of entry of
the Final Judgment; (ii) Defendants to refrain from certain conduct as
laid out in the Final Judgment; and (iii) Defendants to design,
maintain, and operate a compliance program to ensure compliance with
the Final Judgment and the Antitrust Laws, and certify observance of
these compliance provisions to the United States within 60 days of
entry of the Final Judgment.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's website at https://www.justice.gov/atr and at the Office of
the Clerk of the United States District Court for the District of
Columbia. Copies of these materials may be obtained from the Antitrust
Division upon request and payment of the copying fee set by Department
of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments in English should be directed to
Maribeth Petrizzi, Special Attorney, United States, c/o Federal Trade
Commission, 600 Pennsylvania Avenue NW, CC-8416, Washington, DC 20580
or by email to [email protected].
Suzanne Morris,
Deputy Director of Civil Enforcement Operations.
United States District Court for the District of Columbia
United States of America, c/o Department of Justice, Washington,
DC 20530 Plaintiff, v. XCL RESOURCES HOLDINGS, LLC, 600 N. Shepherd
Drive, Suite 390, Houston, TX 77007; VERDUN OIL COMPANY II LLC, 945
Bunker Hill Road, Suite 1300, Houston, TX 77024 and EP ENERGY LLC,
945 Bunker Hill Road, Suite 100, Houston, TX 77024 Defendants. Civil
Action No. 1:25-cv-00041.
Complaint for Civil Penalties and Equitable Relief for Violations of
the Hart-Scott-Rodino Act
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil antitrust
action for equitable and monetary relief in the form of civil penalties
against the Defendants XCL Resources Holdings, LLC (``XCL''),Verdun Oil
Company II, LLC (``Verdun''), and EP Energy LLC (``EP''), and alleges:
Nature of the Action
1. This case involves violations of federal antitrust obligations
under Section 7A of the Clayton Act, 15 U.S.C. 18A, commonly known as
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (``HSR Act'').
Under the HSR Act, both parties must make a pre-merger notification
filing to the federal antitrust agencies and observe the corresponding
waiting-period obligations before transferring any ownership or control
of the to-be-acquired business to the acquirer. This waiting period
ensures that the parties to a proposed transaction remain as separate,
independent entities during the pendency of the antitrust review. This
suspensory waiting period allows the enforcement agencies the
opportunity to investigate the transaction and, where applicable,
pursue an enforcement action, before consolidation of the businesses
and assets occurs.
2. In this matter, Verdun and EP entered a proposed transaction
that was subject to the HSR Act's notification and waiting-period
requirements, and each Defendant made the required pre-merger
notification filing with the antitrust agencies. The Defendants failed,
however, to satisfy their waiting-period obligations. Instead, upon
executing the transaction agreement, EP allowed Verdun and its sister
company, XCL, to assume operational and decision-making control over
significant aspects of EP's day-to-day business operations. This was no
mere technical violation; the Defendants' conduct effectively allowed
one competitor to acquire beneficial ownership, including control over
key competitive decisions of the other, before the transaction closed,
which is precisely what the HSR Act prohibits.
3. Pursuant to a Membership Interest Purchase Agreement dated July
26, 2021 (``Purchase Agreement''), Verdun agreed to acquire EP, a
company engaged in crude oil production in the Uinta Basin area of Utah
and in the Eagle Ford area of Texas. Verdun is under common management
with XCL, and both companies are engaged in crude oil production:
Verdun in the Eagle Ford area and XCL in the Uinta Basin. The purchase
price for the proposed transaction was approximately $1.4 billion. As
part of the transaction, EP's operations in the Uinta Basin were to be
transferred to XCL, and XCL would pay the portion of the purchase price
attributed to the Uinta Basin assets.
4. The proposed transaction triggered a filing obligation under the
HSR Act. As such, the Defendants were required to make premerger
notification filings with the Federal Trade Commission (``FTC'') and
Department of Justice and to observe the prescribed waiting periods
before transferring ownership of EP to XCL and Verdun. The Defendants'
parent entities made premerger notification filings for the Defendants'
proposed transaction as required by the HSR Act. After receiving the
premerger notification filings, the FTC investigated the proposed
transaction and ultimately obtained a consent agreement addressing the
FTC's concerns about the impact of the transaction on competition in
the market for the development, production, and sale of waxy crude oil
in the Uinta Basin area of Utah. The consent agreement was entered on
March 25, 2022, and required the Defendants to divest all of EP's Utah
operations to a qualified third-party operator, Crescent Energy, to
remedy the potential lessening of competition in the alleged crude oil
market.
5. The HSR Act's waiting-period obligation for this transaction
went into effect on July 26, 2021, the date the Defendants executed the
Purchase Agreement, and continued through March 25, 2022, the date the
FTC accepted the consent agreement and granted termination of the
waiting period.
6. For a portion of this waiting period, however, the Defendants
disregarded their obligations under the HSR Act and
[[Page 7161]]
transferred significant operational control over EP's ordinary-course
business to XCL and Verdun. This conduct violates the HSR Act and is
often referred to as ``gun jumping'' or a ``gun-jumping violation.''
7. Specifically, the Purchase Agreement provided for the immediate
transfer of control over key aspects of EP's business to XCL and
Verdun, including granting XCL and Verdun approval rights over EP's
ongoing and planned crude oil development and production activities and
many of EP's ordinary-course expenditures. Once the Purchase Agreement
was signed, by virtue of these approval rights, XCL and Verdun quickly
began gun jumping by exercising operating control over significant
aspects of EP's business. Indeed, XCL put an immediate halt to EP's new
well-drilling activities, so that XCL--not EP--could control the
development and production plans for EP's drilling assets moving
forward. XCL halted EP's new oil-drilling activities for several weeks,
from approximately July 26, 2021, to approximately August 16, 2021. On
approximately August 17, 2021, after the Defendants realized that the
FTC would investigate the transaction, XCL and Verdun allowed EP to
resume its own well-drilling and planning activities.
8. The Defendants' unlawful gun jumping allowed competitors to
coordinate their activities. Among other things, XCL's temporary
halting of EP's development activities contributed to EP having crude
oil supply shortages in September and October 2021 at a time when the
United States was experiencing significant supply shortages and spiking
crude oil prices due to sudden demand increases as COVID-19
restrictions eased. The Defendants anticipated EP's potential supply
shortages while negotiating the Purchase Agreement, which specifically
provided that XCL and Verdun--not EP--would bear all costs associated
with EP's supply shortages. XCL and EP--direct competitors in the
marketplace--then worked in concert to supply EP's customers in
satisfaction of EP's customer supply commitments. During this period,
EP employees effectively reported to their XCL counterparts and
provided XCL employees with details on customer contracts, supply
volumes, and pricing terms. XCL employees also coordinated directly
with EP's customers to discuss EP's supply shortage and to arrange for
alternative delivery to the customer, which XCL made either from its
own supplies or from purchases it made on the spot market, to fulfill
EP's contractual commitments to the customers. EP's customers began
contacting XCL directly--sometimes excluding EP altogether--to discuss
EP's supply and delivery commitments to each customer under the
relevant EP supply contract.
9. The Purchase Agreement also required EP to submit all
expenditures above $250,000 for XCL's or Verdun's review and approval.
These approval requirements applied to many of EP's ordinary-course
expenditures, and effectively transferred control over a significant
portion of EP's day-to-day operations to XCL and Verdun. Further, XCL
and Verdun received and approved expenditure requests from EP falling
well below the $250,000 threshold outlined in the Purchase Agreement.
10. XCL also required changes to certain of EP's ordinary-course
business operations, such as EP's well-drilling designs and its leasing
and renewal activities. EP also gave XCL almost-unfettered access to
EP's competitively sensitive business information--including EP's site
design plans, customer contract and pricing information, and daily
supply and production reports--in the months after the parties signed
the Purchase Agreement.
11. Verdun also coordinated with EP on EP's contract negotiations
with certain customers in the Eagle Ford production area. Specifically,
Verdun observed that certain EP contracts included below-market prices
and directed EP to raise them in the next contracting period. EP
complied.
12. The illegal conduct detailed above lasted through October 27,
2021, when the Defendants executed an amendment to the Purchase
Agreement, which allowed EP to operate independently once again and in
the ordinary course of business, without XCL's or Verdun's control over
its day-to-day operations. Around this time, XCL and Verdun and EP also
stopped coordinating on customer supply and pricing and ceased
exchanging competitively sensitive information.
13. The Defendants' transfer of operational control over key
aspects of EP's business to XCL and Verdun during the HSR waiting
period was a transfer of beneficial ownership that constitutes a gun-
jumping violation of the HSR Act. The Defendants were in violation of
the HSR Act from when the Purchase Agreement was signed, on July 26,
2021, until the Purchase Agreement was amended, on October 27, 2021, a
period of 94 days.
Jurisdiction, Venue, and Interstate Commerce
14. The United States brings this action under Section 7A of the
Clayton Act, 15 U.S.C. 18a, to recover civil penalties for the
violation of the HSR Act.
15. This Court has jurisdiction over the subject matter of this
action under Section 7A(g) of the Clayton Act, 15 U.S.C. 18a(g), and
under 28 U.S.C. 1331, 1337(a), 1345, and 1355.
16. The Defendants are engaged in--and their activities described
herein substantially affected--interstate commerce.
17. The Defendants have consented to the personal jurisdiction and
venue in the District of Columbia for purposes of this action.
The Defendants
18. Defendant XCL Resources Holdings, LLC is a limited liability
company organized, existing, and doing business under, and by virtue
of, the laws of the State of Delaware, with its office and principal
place of business at 600 N. Shephard Drive, Suite 390 in Houston,
Texas.
19. Defendant Verdun Oil Company II, LLC is a limited liability
company organized, existing, and doing business under, and by virtue
of, the laws of the State of Texas, with its office and principal place
of business at 945 Bunker Hill Road, Suite 1300 in Houston, Texas.
20. Defendant EP Energy LLC is a limited liability company
organized, existing, and doing business under, and by virtue of, the
laws of the State of Delaware, with its office and principal place of
business at 945 Bunker Hill Road, Suite 100 in Houston, Texas.
21. All Defendants are engaged, among other things, in the
development, production, and sale of crude oil in the United States.
The HSR Act and Rules
22. The HSR Act requires certain acquiring persons, and certain
persons whose voting securities or assets are acquired, to file
notifications with the Department of Justice and the FTC (collectively,
the ``federal antitrust agencies'') and to observe a waiting period
before consummating certain acquisitions of voting securities or
assets. 15 U.S.C. 18a(a) and (b). Of relevance here, the notice and
waiting requirements apply if, as a result of the acquisition, the
acquiring person will ``hold'' assets or voting securities above the
HSR Act's size of transaction threshold (which was $368.0 million at
all times relevant to this complaint).
[[Page 7162]]
23. Under the HSR Act, the FTC promulgated rules defining relevant
terms and specifying what information must be included in the required
notification. 16 CFR 801-803. The rules define ``hold'' to mean
``beneficial ownership, whether direct, or indirect through
fiduciaries, agents, controlled entities or other means.'' 16 CFR
801.1(c). While the existence of beneficial ownership will depend on
the facts in a particular case, practical indicia include controlling
ordinary-course business decisions, assuming or rejecting contractual
obligations, obtaining competitively sensitive information, and
partaking in financial gains and losses.
24. Through the HSR Act, Congress intended to provide the federal
antitrust agencies prior notice of, and information about, proposed
transactions. The HSR Act created a process for premerger notification
and investigation that does not require assessing beforehand whether
the proposed transaction is anticompetitive or illegal under the
antitrust laws. Congress created a suspensory waiting period to provide
the federal antitrust agencies with the opportunity to investigate a
proposed transaction and to determine whether to seek an injunction to
prevent its consummation if the investigation shows that the proposed
transaction may violate the antitrust laws. Gun-jumping violations
deprive the enforcement agencies of this opportunity to investigate a
transaction and seek an injunction before a transaction is completed,
after which it may be difficult to completely restore competition and
the acquired company to their pre-transaction states.
The Purchase Agreement
25. Pursuant to the Purchase Agreement, XCL and Verdun agreed to
acquire EP for $1.445 billion, with possible adjustments for specified
conditions. XCL and Verdun each contributed more than $368 million of
the purchase price, triggering notice and waiting requirements under
the HSR Act for both companies.
26. XCL and Verdun's bid to acquire EP's business was contingent on
XCL and Verdun securing immediate approval rights over EP's ordinary-
course development activities; the Defendants memorialized these rights
in the Purchase Agreement they signed. As XCL executives noted during
the Purchase Agreement negotiations, ``[XCL's parent] is providing a
deposit that more than offsets potential damages from 60 days of
delayed production and initial operation planning, we moved materially
on price and included this term in our initial offer sheet, we are
unable to move off this point.'' (emphasis in original).
27. The Purchase Agreement restricted EP's discretion to conduct
its ordinary-course business activities during the period between the
signing of the Purchase Agreement and the closing of the transaction, a
period that included the full duration of the HSR Act's applicable
waiting period.
28. For example, EP committed ``not to propose, agree to, or
commence any individual operation on the Assets anticipated to cost in
excess of Two Hundred Fifty Thousand ($250,000),'' unless XCL or Verdun
first expressly approved the activity, without any exception for
ordinary-course transactions.
29. Further, for the numerous crude oil wells EP was developing, EP
would ``not conduct any operation in connection with'' those plans
``unless such operations are expressly permitted pursuant to'' the
Purchase Agreement ``or are otherwise approved by Purchaser.''
30. The Purchase Agreement thus prevented EP from continuing with
its crude oil well-development activities without XCL's or Verdun's
approval, giving XCL and Verdun control to stop or delay EP from moving
forward with its production plans in the normal course of its business.
31. XCL or Verdun had ``sole discretion'' whether to approve any
actions that were otherwise prohibited by the Purchase Agreement, and
the Purchase Agreement set forth procedures for granting XCL's or
Verdun's approval.
32. In short, these contractual provisions allowed one competitor
to control the other's ordinary-course business activities relating to
crude oil production before the transaction closed--a paradigmatic case
of gun jumping through transfer of beneficial ownership. All this
occurred during a time when the U.S. market as a whole was facing
significant supply shortages and multi-year highs in oil prices,
resulting in Americans paying skyrocketing prices at the pump.
33. The parties also agreed to shift to XCL and Verdun the
financial risk for certain EP business activity, which constitutes
further evidence of gun jumping. The Defendants anticipated that the
Purchase Agreement restrictions on EP's activities would result in
crude supply shortages for EP and its customers in the ensuing months
and could cause EP to breach existing obligations. The Purchase
Agreement therefore required XCL and Verdun to bear all financial risk
and liabilities associated with these provisions and shifted to XCL and
Verdun the financial ramifications of these changes and delays to EP's
development activities. The Purchase Agreement provided that ``failure
of Purchaser to approve such matters shall obligate Purchaser to bear
all risk and liability for any breach or non-compliance under the
Assets as a result of Purchaser's acts or omissions with respect to
such failure to approve.''
34. The Purchase Agreement was eventually amended on October 27,
2021. Among other things, the amendment effectively allowed EP to
resume its well-development activities in the ordinary course of
business without requiring XCL's or Verdun's consent.
The Defendants' Unlawful Conduct Following the Merger Agreement
35. This matter presents a straightforward example of unlawful gun
jumping where two companies agree to coordinate their activities before
a transaction is permitted to close under the HSR Act. The Purchase
Agreement created the contractual obligation for EP to transfer
operating control over key portions of its crude oil production
business to XCL and Verdun, and the Defendants' actions in the weeks
and months after they executed the Purchase Agreement demonstrated that
such a transfer of control from EP to XCL and Verdun did indeed take
place. XCL and Verdun thus gained beneficial ownership of EP's assets
in direct violation of the HSR Act's waiting period requirements.
XCL Required Ep To Suspend its Well-Completion Activities
36. The Defendants' actions abruptly halted EP's crude oil
development activities. Indeed, upon signing the Purchase Agreement,
XCL immediately stopped EP's ordinary-course well-drilling design and
planning activities in Utah. XCL did this so that it--not EP--could
take over the management of EP's development plans and designs moving
forward.
37. An email sent the afternoon the Purchase Agreement was signed
on July 26, 2021, from an EP executive to his counterparts at XCL,
illustrates the Defendants' intentions to transfer operational control
of EP to XCL and Verdun: ``Congratulations on getting the Purchase
Agreement signed and deposit sent! Now we can move forward with your
requested changes. Please confirm that you approve the following: Shut
down all currently planned fracs until after the close. Per the
attached spreadsheet, by shutting down these fracs we have sold more
oil than we will
[[Page 7163]]
be able to deliver and XCL accepts the contractual and reputational
ramifications of not delivering these barrels.''
38. XCL responded in the affirmative. ``XCL Confirmations of EP
Operational Changes . . . . We confirm the request to suspend any
operations related to completions between sign to close.'' (emphasis in
original).
39. In the days after the Defendants signed the Purchase Agreement,
XCL employees began actively supervising EP's well-design and planning
activities, including by requiring changes to EP's site design plans
and vendor-selection process. XCL employed a ``boots on the ground''
approach to taking over EP's operations and design planning, with EP
employees effectively reporting to their XCL counterparts.
40. For instance, in an August 2, 2021, email from an XCL Vice-
President to EP's Chief Operating Officer, the XCL executive states:
``Thanks for taking my call today, and working through operational
planning with us. As discussed, we would like to complete the Moose
Hollow and Bluebell wells as a combined team, where XCL leads on frac
design and vendor selection, and EP teams with XCL to execute the
operations.''
41. The Defendants understood that XCL's halting of EP's ordinary-
course well-development projects would lead to, or contribute to,
production shortfalls for EP and its customers in following months,
given the delay in EP's ability to drill the new wells. In exchange,
XCL agreed to assume the contractual and reputational ramifications of
these shortfalls.
42. The stoppages to EP's ordinary-course well-drilling activities
lasted for several weeks--until approximately August 17, 2021--and
ended only after the Defendants realized that the FTC would conduct a
full investigation into the competitive effects of their transaction.
At that point, XCL allowed EP to resume its well-drilling activities--
though EP would continue to seek XCL's review and approval for its
plans and related expenditures, as required by the Purchase Agreement.
XCL Coordinated With EP on EP's Customer Contracts, Customer
Relationships, and Customer Deliveries
43. The Defendants' unlawful gun jumping delayed introduction of
increased supply in the market. EP faced supply shortages in the Uinta
Basin in the months of September and October 2021 due to XCL halting
EP's well-completion activities in the weeks following the Purchase
Agreement signing. XCL and EP discussed the shortages and XCL's
resulting financial obligation during the subsequent months. For
instance, in an October 2021, email exchange between EP and XCL, an EP
employee wrote, ``However, as XCL has been directing EP Energy's
completions and has agreed to fulfill EP Energy's contractual
commitments between sign and close any shortfall [in EP's ability to
fulfil its supply commitments] would be due to XCL's decisions.''
44. To this end, XCL began conferring and coordinating with EP
about EP's production volumes, customer contracts, and supply
obligations.
45. XCL requested and received from EP detailed information about
EP's actual and projected production volumes, delivery capabilities,
and customer supply obligations--including details about the customers'
contracted volumes and pricing terms.
46. XCL then proceeded to coordinate with EP to manage and direct
EP's fulfillment of its contractual obligations to its customers, with
XCL covering the volume shortages under EP's customer agreements.
47. XCL also engaged directly with EP's customers about EP's supply
and delivery obligations, providing EP's customers with detailed
information about EP's volume projections, supply shortages, and
ability to meet its supply obligations in current and future periods.
48. XCL held itself out to EP's customers, in words or substance,
as coordinating EP's supply and deliveries in the Uinta Basin, and EP's
customers began contacting XCL directly about their EP contracts, EP's
volume projections, and the delivery schedules pursuant to the
contracts.
49. For example, in an email exchange between an EP customer and
XCL from September 2021, the EP customer asks XCL to confirm EP's
supply forecast: ``It was good catching up with you this week. Below is
the forecast from EP Energy. Let me know if you think they'll actually
have these contracted volumes for October or if we'll need to do
another spot deal similar to September.'' The XCL employee responded,
``I do not have an updated EP forecast for October yet but am told it
will come in the next day or two. Once that's in hand we'll be able to
build a plan for October.''
50. Another example, from August 2021, shows an exchange between
XCL and a different EP customer, where the EP customer asks XCL to
provide EP's volume forecast for the following month: ``Just wondering
if you have a feel yet for what Sept will look like (EP volume)? Also,
just to confirm, we're good with the contract volumes for Q4,
correct?'' The XCL employee responds, ``I do have a feel for sept, we
have a planning meeting in the AM to finalize, but directionally
looking better than planned. Potentially no cuts, probably more likely
in the 500bpd range, but will definitely get you a communication on
that tomorrow once I get confirmation. As for Q4, that too is still a
little up in the air as we finalize the development plan and I'll share
more as soon as I can. We are planning on moving things forward to fill
commitments in full, just again needing to confirm all of that.''
51. XCL coordinated with EP and EP's customers regarding EP's
supply and delivery volumes from approximately August 2021 through
approximately October 2021. This coordination ended by November 2021,
when XCL began informing EP's customers that XCL and EP needed to
operate as independent companies for the remainder of the pre-merger
period and that, as a result, XCL would no longer be covering EP's
volume shortfalls.
XCL's and Verdun's Approvals Were Required for EP To Conduct Ordinary-
Course Business Activities and To Make Ordinary-Course Expenditures;
XCL and Verdun Required EP To Make Changes to its Operations
52. In addition to exercising their approval rights over EP's well-
drilling activities, XCL and Verdun exercised their rights under the
Purchase Agreement to review and approve other of EP's ordinary-course
expenditures and business activities.
53. Under the Purchase Agreement, EP needed to secure XCL's or
Verdun's approval before making expenditures above $250,000, which is a
relatively low threshold in the crude development and production
business. As a result, XCL or Verdun approval was required before EP
could perform a range of ordinary-course activities needed to conduct
its business, including, e.g., purchasing supplies for its drilling
operations and entering or extending contracts for drilling rigs.
54. In practice, EP sought and received approval for ordinary-
course expenditures below the low levels established through the
Purchase Agreement. These included approvals to purchase gauges and
other pre-drilling expenses.
55. On top of submitting its expenditures for approval, under the
Purchase Agreement, EP also needed to secure XCL's or Verdun's approval
for other basic activities, such as hiring field-level employees and
contractors necessary to conduct its drilling and production operations
in the ordinary
[[Page 7164]]
course of business. Pursuant to these requirements, EP submitted its
ordinary-course hiring proposals to XCL and Verdun for approval.
56. XCL and Verdun also required EP to make changes to aspects of
its business plans and day-to-day operations. These included changes to
EP's well-drilling and site design plans, modifications to the areas in
Utah and Texas where EP could pursue leasing and renewal activities,
changes regarding EP's selection of vendors, and instructions not to
pursue development opportunities that EP had been exploring in the
ordinary course of business.
Verdun and EP Coordinated Regarding Prices for EP's Customers in the
Eagle Ford Region of Texas
57. The Defendants' gun-jumping activity also included coordination
of prices. In the Eagle Ford region of Texas, employees from Verdun and
EP coordinated on pricing terms that EP would offer to its customers.
EP shared its competitively sensitive information on customer pricing
and supply volumes with Verdun, and then sought Verdun's approval of
the prices it negotiated with the customers.
58. On July 28, 2021, shortly after the Purchase Agreement was
signed, a Verdun employee with responsibility for sales and marketing
contacted his EP counterpart to discuss EP's customer pricing and
contract terms. The Verdun employee used information he had obtained
from the virtual data room set up by EP as part of the sale process to
suggest changes to EP's customer pricing. An EP employee responded and
continued to consult with the Verdun employee as she was negotiating
with the customers. Ultimately, the EP employee sought and obtained the
approval of the Verdun employee for the new contracts with EP's
customers.
EP Exchanged Competitively Sensitive Information With XCL and Verdun
Without Adequate Safeguards To Limit Access Or Prevent Misuse
59. The Defendants' gun jumping also facilitated the exchange of
confidential and granular business information far beyond anything
necessary for transaction due diligence. Upon signing the Purchase
Agreement, XCL and Verdun asked for, and received, competitively
sensitive information about EP's business operations and customers in
Utah and Texas. This information included details on EP's customer
contracts, customer pricing, production volumes, customer dispatches,
business plans, site designs, vendor relationships and contracts,
permitting and surveying information, and other competitively
sensitive, nonpublic information. EP provided some of this information
to XCL and Verdun on a daily or weekly basis.
60. EP took no meaningful steps to resist these requests from XCL
and Verdun. Instead, EP agreed to provide XCL and Verdun employees with
access to its competitively sensitive information in the pre-merger
period, even though EP competed directly with both XCL and Verdun and
the information exchange lacked any legitimate business purposes.
Further, EP made no effort--and XCL and Verdun offered no protections
on its own--to limit the access to, or use of, EP's competitively
sensitive information by XCL's and Verdun's employees.
61. In the days following execution of the Purchase Agreement, XCL
and Verdun requested and received access to EP daily operating reports,
including reports on EP's crude production, dispatches by customers,
and oil sales and loads by counterparty. These materials were provided
to several XCL and Verdun businesspeople responsible for sales,
marketing, and operations.
62. These daily reports provided the employees of XCL and Verdun
with virtually real-time information about EP's operations, output, and
sales. To illustrate, in an August 4, 2021, email from EP's Chief
Operating Officer to a number of XCL and Verdun employees--including
the CEO and head of operations for both XCL and Verdun--the EP
executive writes, ``You will start receiving the attached Operations
Report daily. This report covers drilling, completions, workovers and
production.''
63. XCL also requested and received weekly updates on EP's permits
and sundries, spacing orders, and ongoing regulatory work, as well as
access to EP's site survey logs, geologic reports, geosteering reports,
software communication systems, and various other datasets.
64. Beyond regular reports and updates, XCL and Verdun employees
requested and received information on an ad hoc basis on EP's
development plans, contracts, customers, projections, deliveries, and
seemingly any other aspect of EP's business or operations of interest
to XCL and Verdun business employees.
65. The Defendants had no legitimate business purposes for
exchanging and disseminating EP's competitively sensitive business
information in the pre-merger period and failed to place limits as to
who at XCL and Verdun could access the information or how that
information could be used.
66. Even information provided by EP to XCL and Verdun through the
virtual data room--ostensibly for the legitimate purpose of conducting
due diligence on the proposed transaction--lacked appropriate
safeguards on access and use.
67. Some of EP's confidential information from the due diligence
data room was used by Verdun's operations and sales employees to inform
pricing and contract terms in the pre-merger period when Verdun and EP
were still competitors in the marketplace. As noted in Paragraph 58 of
this complaint, a Verdun employee used information from the virtual
data room to discuss with his counterpart at EP prices for EP's
customers.
68. The information flow from EP to XCL and Verdun continued in
full force through approximately October 2021.
Cause of Action Violation of Section 7A of the Clayton Act
69. Plaintiff alleges and incorporates paragraphs 1 through 68 as
if set forth fully herein.
70. XCL and Verdun's acquisition of EP was subject to Section 7A
premerger notification and waiting-period requirements.
71. XCL and Verdun substituted their business interests and
judgment for those of EP and exercised operational control over key
aspects of EP's business before expiration of the waiting period in
violation of Section 7A.
72. By controlling EP's business operations after having agreed to
acquire EP, XCL and Verdun acquired beneficial ownership of EP's assets
and thus acquired and held those assets within the meaning of Section
7A.
73. The Defendants were continuously in violation of the
requirements of the HSR Act each day beginning on July 26, 2021, until
XCL and Verdun ceased exercising operational control over relevant
aspects of EP's business and the Purchase Agreement was amended on
October 27, 2021.
Request for Relief
Wherefore, the United States requests:
(a) that the Court adjudge and decree that each Defendant violated
the HSR Act and was in violation during the period beginning on July
26, 2021, and ending on October 27, 2021, a total of 94 days;
(b) that the Court order the Defendants pay to the United States an
appropriate civil penalty as provided under Section 7A(g)(1) of the
Clayton Act, 15 U.S.C. 18a(g)(1), and 16 CFR 1.98(a);
[[Page 7165]]
(c) that the Defendants, their officers, directors, agents,
employees, subsidiaries, and successors, and all other persons acting
or claiming to act on their behalf, be enjoined, restrained, and
prohibited for a period of ten years from, in any manner, directly or
indirectly, engaging in any other agreement, combination, or conspiracy
that has the same effect as the alleged violation;
(d) that the Court order such other and further relief as it may
deem just and proper; and
(e) that the Court award the United States its costs of this suit.
Date: 2025
FOR THE PLAINTIFF UNITED STATES OF AMERICA:
Doha Mekki,
Acting Assistant Attorney General, Department of Justice, Antitrust
Division, Washington, DC 20530
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Maribeth Petrizzi, DC Bar No. 435204, Special Attorney
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Jamie R. Towey, DC Bar No. 475969, Special Attorney
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Kenneth A. Libby, Special Attorney
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Paul Frangie, Special Attorney, Federal Trade Commission,
Washington, DC 20580, (202) 326-2564
United States District Court for the District of Columbia
United States of America, Plaintiff, v. XCL RESOURCES HOLDINGS,
LLC, VERDUN OIL COMPANY II LLC, and EP ENERGY LLC, Defendants.
Civil Action No. 1:25-cv-00041.
[Proposed] Final Judgment
WHEREAS the United States of America filed its Complaint on January
7, 2025, alleging that Defendants XCL Resources Holdings, LLC, Verdun
Oil Company II LLC, and EP Energy LLC violated Section 7A of the
Clayton Act, 15 U.S.C. 18a, commonly known as the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the ``Hart-Scott-Rodino Act''), and
the United States and Defendants XCL Resources Holdings, LLC, Verdun
Oil Company II LLC, and EP Energy LLC, by their respective attorneys,
have consented to the entry of this Final Judgment without trial or
adjudication of any issue of fact or law, and without this Final
Judgment constituting any evidence against or an admission by any party
regarding any issue of fact or law;
And Whereas Defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the Court;
Now, Therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon the consent of the
parties hereto, it is Ordered, Adjudged, And Decreed:
I. Jurisdiction
The Court has jurisdiction over the subject matter of this action.
The Defendants consent solely for the purpose of this action and the
entry of this Final Judgment that this Court has jurisdiction over each
of the parties to this action. The Complaint states a claim upon which
relief may be granted against the Defendants under Section 7A of the
Clayton Act, 15 U.S.C. 18a.
II. Definitions
A. ``XCL'' means XCL Resources Holdings, LLC, a limited liability
company organized, existing, and doing business under the laws of the
state of Delaware, with its executive offices and principal place of
business located at 600 N. Shepherd Drive, Suite 390, Houston, Texas
77007, including its successors and assigns, and its subsidiaries and
divisions.
B. ``Verdun'' means Verdun Oil Company II LLC, a limited liability
company organized, existing, and doing business under the laws of the
state of Texas, with its executive offices and principal place of
business located at 945 Bunker Hill Road, Suite 1300, Houston, Texas
77024, including its successors and assigns, and its subsidiaries and
divisions.
C. ``EP Energy'' means EP Energy LLC, a limited liability company
organized, existing, and doing business under the laws of the state of
Delaware, with its executive offices and principal place of business
located at 945 Bunker Hill Road, Suite 100, Houston, Texas 77024,
including its successors and assigns, and its subsidiaries and
divisions.
D. ``Agreement'' means any agreement, contract, or mutual
understanding, whether formal or informal, written, or unwritten.
E. ``Antitrust Laws'' means the Federal Trade Commission Act, as
amended, 15 U.S.C. 41 et seq., the Sherman Act, 15 U.S.C. 1 et seq.,
the Clayton Act, 15 U.S.C. 12 et seq., and the Hart-Scott-Rodino Act,
15 U.S.C. 18a.
F. ``Competing Product'' means any product, service, or technology
included in a Reportable Transaction that is offered for sale, license,
or distribution to customers in the same state, or produced in the same
state or geological basin, by a Defendant and any other party to the
Reportable Transaction.
G. ``Farm-in agreement'' or ``Farm-out agreement'' means an
agreement in which the owner or lessee of mineral rights assigns an
interest in such mineral rights to another party, in exchange for such
other party providing specified exploration and/or development
activities, funding for such exploration and/or development activities,
or contributing or swapping mineral acreage, regardless of whether the
owner or lessee retains working interests, overriding royalty
interests, or other types of economic interests. The agreement is
termed a ``Farm-in agreement'' from the viewpoint of the party
acquiring such interest, and a ``Farm-out agreement'' from the
viewpoint of the owner or lessee of the mineral rights assigning such
interest.
H. ``Non-Public Information'' means any information related to the
assets and businesses included in a Reportable Transaction known by the
Defendant or another party to the Reportable Transaction, excluding any
information that was or becomes available to the public through means
other than disclosure by the receiving party.
I. ``Pre-consummation Period'' means the period between the signing
of an agreement or letter of intent for a Reportable Transaction, and
the earlier of the expiration or termination of the applicable waiting
period, and the abandonment of the Reportable Transaction.
J. ``Regulations'' means any rule, regulation, statement, or
interpretation relating to the Hart-Scott-Rodino Act that has binding
legal effect with respect to the implementation or application of the
Hart-Scott-Rodino Act or any section or subsection within 16 CFR 801-
803.
K. ``Reportable Transaction'' means a transaction to which a
Defendant is a party that is reportable under Section 7A the Clayton
Act, 15 U.S.C. 18a, including the rules, regulations and formal
interpretations implementing the section.
III. Applicability
This Final Judgment applies to XCL, Verdun, and EP Energy, as
defined above, and all other persons in active concert or participation
with any of them who receive actual notice of this Final Judgment by
personal service or otherwise.
IV. Civil Penalty
A. Judgment is hereby entered in this matter in favor of Plaintiff
and against Defendants, and, pursuant to Section 7A(g)(1) of the
Clayton Act, 15 U.S.C. 18a(g)(1), the Debt Collection Improvement Act
of 1996, Public Law 104134 Sec. 31001(s) (amending the Federal Civil
Penalties Inflation Adjustment Act of 1990, 28 U.S.C.
[[Page 7166]]
2461), the Federal Civil Penalties Inflation Adjustment Act
Improvements Act of 2015, Public Law 114-74 Sec. 701 (further amending
the Federal Civil Penalties Inflation Adjustment Act of 1990), and
Federal Trade Commission Rule 1.98, 16 CFR 1.98, 89 FR 9764 (February
12, 2024), XCL and Verdun jointly and severally are hereby ordered to
pay a civil penalty in the amount of $2,842,188.50, and EP Energy is
hereby ordered to pay a civil penalty in the amount of $2,842,188.50,
for a total among all Defendants of $5,684,377.00. Payment of the civil
penalty ordered hereby shall be made by wire transfer of funds or
cashier's check. If the payment is to be made by wire transfer, prior
to making the transfer, Defendant will contact the Budget and Fiscal
Section of the Antitrust Division's Executive Office at [email protected] for instructions. If the payment is made by
cashier's check, the check must be made payable to the United States
Department of Justice--Antitrust Division and delivered to: Chief,
Budget & Fiscal Section, Executive Office, Antitrust Division, United
States Department of Justice, Liberty Square Building, 450 5th Street
NW, Room 3016, Washington, DC 20530.
B. Defendants shall pay the full amount of the civil penalty within
thirty (30) days of entry of this Final Judgment. In the event of a
default or delay in payment, interest at the rate of eighteen (18)
percent per annum shall accrue thereon from the date of the default or
delay to the date of payment.
V. Prohibited Conduct
A. During the Pre-consummation Period for any Reportable
Transaction, the Defendant shall not enter into any Agreement with any
other party to the transaction to:
1. combine, merge, or transfer (in whole or in part) any
operational or decision-making control over any aspect of the business,
assets, or interests that are part of the Reportable Transaction
including (a) the production, marketing, or distribution of any to-be-
acquired product; or (b) any sales, service, or procurement terms for
such products;
2. require one party to the Reportable Transaction to obtain
approval from another party to the Reportable Transaction for any
ordinary-course business activities or expenses, including planned
capital expenditures;
3. delay or suspend ordinary-course sales or development efforts;
or
4. disclose or seek the disclosure of the following information for
any Competing Product:
a. current or future prices or contract offers; or
b. Non-Public Information relating to customers, current or future
drilling and completions, production, sales, or shipments to customers.
Provided, however, that nothing in this Final Judgment prohibits
Defendants from disclosing or seeking information relating to a
Competing Product (i) that is publicly available at the time disclosure
occurs, or (ii) that is necessary to conduct reasonable and customary
due diligence of or integration planning for the proposed transaction,
provided such activity by Defendants are supervised by antitrust
counsel and occurs pursuant to a non-disclosure agreement that (a)
limits use of the information to conducting due diligence or
integration planning (including limiting dissemination of the
information to individuals involved in or supervising due diligence or
integration planning), (b) prohibits disclosure of the information to
any employee of the receiving entity who is directly responsible for
the marketing, pricing, or sales of a Competing Product, and (c)
requires the recipient to delete or destroy the information if the
Reportable Transaction does not close.
VI. Permitted Conduct
Nothing in this Final Judgment prohibits Defendants from:
A. Agreeing that a party to a transaction shall continue to operate
in the ordinary course of business during the Pre-consummation Period;
B. Agreeing that a party to a transaction forgo conduct that would
cause a material adverse change in the value of to-be-acquired assets
during the Pre-consummation Period;
C. Negotiating, agreeing to, or participating in joint operating,
joint development, Farm-in, or Farm-out agreements,
Provided, however, that the joint operating, joint development,
Farm-in, or Farm-out agreements do not relate to assets included as
part of any Reportable Transaction during the Pre-consummation Period;
or
D. Disclosing Non-public Information related to Competing Products
in the context of litigation or settlement discussions if the
disclosure is subject to a protective order.
VII. Compliance
A. Defendants shall design, maintain, and operate an antitrust
compliance program to ensure compliance with this Final Judgment and
the Antitrust Laws, and as part of such program shall:
1. within 30 days of entry of this Final Judgment, appoint or
retain a qualified antitrust compliance officer (``Antitrust Compliance
Officer'') to supervise the design, maintenance, and operation of the
program, and shall authorize the Antitrust Compliance Officer to
perform all tasks necessary to fulfill these obligations. Defendants
may replace the Antitrust Compliance Officer with another qualified
person at any time;
2. within 45 days of entry of this Final Judgment, distribute a
copy of this Final Judgment to each current officer and director, and
each employee, agent, or other person who has responsibility or
authority over sales, marketing, strategic planning, exploration and
development, or mergers and acquisitions;
3. distribute a copy of this Final Judgment to any person who takes
a position described in Paragraph VII(A)(2) within 30 days of the date
the person takes such position;
4. provide in-person or online training concerning Defendants'
obligations under this Final Judgment and the Antitrust Laws as they
apply to Defendants' activities, to each person designated in
Paragraphs VII(A)(2) or (3):
a. no later than 45 days after this Final Judgment is entered;
b. no later than 30 days after a person first takes a position
described in Paragraph VII(A)(2); and
c. at least annually.
Provided, however, that as to any person on extended leave (e.g.,
parental, family, or disability leave), the training for such person
under the above schedule shall be completed within 30 days of the date
the person returns to work;
5. obtain within 60 days from the entry of this Final Judgment, and
annually thereafter, and retain for the duration of this Final
Judgment, a written certification from each person designated in
Paragraphs VII(A)(2) & (3) that the person: (a) has received, read,
understands, and agrees to abide by the terms of this Final Judgment;
(b) understands that failure to comply with this Final Judgment may
result in conviction for criminal contempt of court; and (c) is not
aware of any violation of the Final Judgment; and
6. provide a copy of this Final Judgment (or a hyperlink to a copy
of this Final Judgment) to each party to a Reportable Transaction no
later than signing of the definitive agreement.
B. Within 60 days of entry of this Final Judgment, Defendants shall
certify to Plaintiff that they have (1) designed, established, and are
maintaining an antitrust compliance program; (2) designated an
Antitrust Compliance Officer, specifying their name, business address,
and telephone number; (3) distributed this Final Judgment as required
in Paragraph VII(A)(2); and (4)
[[Page 7167]]
provided training as required in Paragraph VII(A)(4).
C. For the term of this Final Judgment, on or before its
anniversary date, Defendants shall file with Plaintiff an annual
statement verifying that they are complying with the requirements of
this Final Judgment and describing in detail the manner of their
compliance with the provisions of Sections V and VII.
D. If any of Defendants' directors or officers, or the Antitrust
Compliance Officer, learns of any violation of this Final Judgment,
Defendants shall within three (3) business days take appropriate action
to assure continued compliance with this Final Judgment, and shall
notify the Plaintiff in writing of the violation within 10 business
days of learning of the violation.
VIII. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally-recognized privilege,
from time to time authorized representatives of the United States,
including agents and consultants retained by the United States, shall,
upon written request of an authorized representative of the Assistant
Attorney General in charge of the Antitrust Division, and on reasonable
notice to Defendants, be permitted:
(1) access during Defendants' office hours to inspect and copy, or
at the option of the United States, to require Defendants to provide
electronic copies of all books, ledgers, accounts, records, data, and
documents in the possession, custody, or control of Defendants,
relating to any matters contained in this Final Judgment; and
(2) to interview, either informally or on the record, Defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee and without restraint or
interference by Defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
Defendants shall submit written reports or response to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained pursuant to any provision
of this Final Judgment may be divulged by the United States to any
person other than an authorized representative of the executive branch
of the United States, except in the course of legal proceedings to
which the United States is a party, including grand jury proceedings,
for the purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. In the event of a request by a third party, pursuant to the
Freedom of Information Act, 5 U.S.C. 552, for disclosure of information
obtained pursuant to any provision of this Final Judgment, the
Antitrust Division will act in accordance with that statute, and the
Department of Justice regulations at 28 CFR part 16, including the
provision on confidential commercial information, at 28 CFR 16.7.
Designations of confidentiality expire 10 years after submission,
``unless the submitter requests and provides justification for a longer
designation period.'' See 28 CFR 16.7(b).
E. If at the time that Defendants furnish information or documents
to the United States pursuant to any provision of this Final Judgment,
Defendants represent and identify in writing information or documents
for which a claim of protection may be asserted under Rule 26(c)(1)(G)
of the Federal Rules of Civil Procedure, and Defendants mark each
pertinent page of such material, ``Subject to claim of protection under
Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,'' the United
States must give Defendants 10 calendar days' notice before divulging
the material in any legal proceeding (other than a grand jury
proceeding).
IX. Retention of Jurisdiction
This Court retains jurisdiction to enable any of the parties to
this Final Judgment to apply to this Court at any time for further
orders and directions as may be necessary or appropriate to carry out
or construe this Final Judgment, to modify or terminate any of its
provisions, to enforce compliance, and to punish violations of its
provisions.
X. Enforcement of Final Judgment
A. The United States retains and reserves all rights to enforce the
provisions of this Final Judgment, including the right to seek an order
of contempt from the Court. Defendants agree that in any civil contempt
action, any motion to show cause, or any similar action brought by the
United States regarding an alleged violation of this Final Judgment,
the United States may establish a violation of this Final Judgment and
the appropriateness of any remedy therefor by a preponderance of the
evidence, and Defendants waive any argument that a different standard
of proof should apply.
B. The Final Judgment should be interpreted to give full effect to
the procompetitive purposes of the antitrust laws, including Section 7A
of the Clayton Act and Regulations promulgated thereunder. Defendants
agree that they may be held in contempt of, and that the Court may
enforce, any provision of this Final Judgment that, as interpreted by
the Court in light of these procompetitive principles and applying
ordinary tools of interpretation, is stated specifically and in
reasonable detail, whether or not it is clear and unambiguous on its
face. In any such interpretation, the terms of this Final Judgment
should not be construed against either party as the drafter.
C. In any enforcement proceeding in which the Court finds that a
Defendant has violated this Final Judgment, the United States may apply
to the Court for a one-time extension of this Final Judgment for that
Defendant, together with such other relief as may be appropriate. In
connection with any successful effort by the United States to enforce
this Final Judgment against a Defendant, whether litigated or resolved
prior to litigation, each Defendant agrees to reimburse the United
States for the fees and expenses of its attorneys, as well as any other
costs including experts' fees, incurred in connection with that
enforcement effort, including in the investigation of the potential
violation.
D. For a period of four (4) years after the expiration of this
Final Judgment pursuant to Section XI, if the United States has
evidence that a Defendant violated this Final Judgment before it
expired, the United States may file an action against that Defendant in
this Court requesting that the Court order (1) Defendant to comply with
the terms of this Final Judgment for an additional term of at least
four years following the filing of the enforcement action under this
Section, (2) any appropriate contempt remedies, (3) any additional
relief needed to ensure the Defendant complies with the terms of the
Final Judgment, and (4) fees or expenses as called for in Paragraph
X(C).
XI. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry if each Defendant has
paid the civil penalty in full.
XII. Costs
Each party shall bear its own costs of this action.
[[Page 7168]]
XIII. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States' responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and responses to comments filed with
the Court, entry of this Final Judgment is in the public interest.
Dated:
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United States District Judge
United States District Court for the District of Columbia
United States of America, Plaintiff, v. XCL RESOURCES HOLDINGS,
LLC, VERDUN OIL COMPANY II LLC, and EP ENERGY LLC Defendants. Civil
Action No. 1:25-cv-00041.
Competitive Impact Statement
In accordance with the Antitrust Procedures and Penalties Act, 15
U.S.C. 16(b)-(h) (the ``APPA'' or ``Tunney Act''), the United States of
America files this Competitive Impact Statement related to the proposed
Final Judgment filed in this civil antitrust proceeding.
I. Nature and Purpose of Proceedings
On January 7, 2025, the United States filed a Complaint against
Defendants XCL Resources Holdings, LLC (``XCL''), Verdun Oil Company II
LLC (``Verdun''), and EP Energy LLC (``EP'') (together,
``Defendants''), related to XCL and Verdun's acquisition of EP. The
Complaint alleges that Defendants violated Section 7A of the Clayton
Act, 15 U.S.C. 18a, commonly known as the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the ``HSR Act'').
The Complaint alleges that XCL and Verdun acquired EP, through a
transaction in excess of the then-applicable statutory thresholds,
without observing the required HSR Act waiting period. The HSR Act
provides that ``no person shall acquire, directly or indirectly, any
voting securities of any person'' exceeding certain thresholds until
that person has filed pre-acquisition notification and report forms
with the Department of Justice and the Federal Trade Commission
(collectively, the ``federal antitrust agencies'' or ``agencies'') and
the post-filing waiting period has expired. 15 U.S.C. 18a(a). A key
purpose of the notification and waiting period is to protect consumers
and competition from potentially anticompetitive transactions by
providing the agencies an opportunity to conduct an antitrust review of
proposed transactions before they are consummated.
At the same time the Complaint was filed, the United States also
filed a Stipulation and proposed Final Judgment. Under the proposed
Final Judgment, which is explained more fully below, Defendants are
prohibited from engaging in specified conduct during the term of the
order and are required to pay a civil penalty to the United States in
the amount of $5,684,377. The proposed Final Judgment is designed to
deter HSR Act violations by XCL, Verdun, and similarly situated
acquirers.
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment will terminate this action, except that the
Court will retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and punish violations
thereof.
II. Description of the Events
A. XCL and Verdun's acquisition of EP
On July 26, 2021, XCL and Verdun agreed to acquire EP for
approximately $1.4 billion. Defendants are engaged, among other things,
in the development, production, and sale of crude oil in the United
States. XCL operates in the Uinta Basin of Utah. Verdun operates in the
Eagle Ford area of Texas. EP operates in both the Uinta Basis and the
Eagle Ford area. Shortly thereafter, Defendants' parent entities filed
the pre-acquisition Notification and Report forms required by Section
7A of the Clayton Act. After reviewing the parties' filings, the
Federal Trade Commission (``FTC'') opened an investigation into the
competitive effects of the proposed transaction. XCL and EP were two of
four significant oil and gas development and production companies in
northeast Utah's Uinta Basin. The FTC alleged in its complaint that,
after the acquisition of EP, if XCL reduced the volume of crude oil
that it supplied to Salt Lake City, Salt Lake City area refiners would
be forced to pay more for Uinta Basin waxy crude oil. Ultimately, the
FTC obtained a consent agreement resolving its concerns about the
impact of the transaction on competition in the market for the
development, production, and sale of waxy crude oil in the Uinta Basin
area of Utah. The consent agreement required Defendants to divest all
of EP's Utah operations to a qualified third-party operator, Crescent
Energy. Entry of the consent agreement terminated the HSR Act waiting
period on March 25, 2022. XCL and Verdun consummated the transaction on
March 30, 2022, and EP is now a wholly owned subsidiary of Verdun.
B. Defendants' alleged violation of Section 7A
The HSR Act requirements apply to a transaction if, as a result of
the transaction, the acquirer will ``hold'' assets or voting securities
valued above the thresholds. Under HSR Rule 801.1(c), to ``hold''
assets or voting securities means ``beneficial ownership, whether
direct, or indirect through fiduciaries, agents, controlled entities or
other means.'' 16 CFR 801.1(c). Thus, under the Act, parties must make
an HSR Act filing and observe a waiting period before transferring
beneficial ownership of the assets or voting securities to be acquired.
The Statement of Basis and Purpose accompanying the Rules explains that
beneficial ownership is determined on a case-by-case basis, based on
the indicia of beneficial ownership which include, among others, the
right to obtain the benefit of any increase in value or dividends and
the risk of loss of value. 43 FR 33,449 (July 31, 1978). A firm may
also gain beneficial ownership by obtaining ``operational control'' of
an asset.
The combination of XCL and Verdun's agreement to purchase EP and
their assumption of key ordinary-course functions transferred
beneficial ownership of EP's business to XCL and Verdun before they had
fulfilled their obligations under the HSR Act. Specifically, the July
26, 2021 Purchase Agreement provided for the immediate transfer of
control over key aspects of EP's business to XCL and Verdun, including
granting XCL and Verdun approval rights over EP's ongoing and planned
crude oil development and production activities and many of EP's
ordinary-course expenditures. XCL put an immediate halt to EP's new
well-drilling activities, so that XCL--not EP--could control the
development and production plans for EP's drilling assets moving
forward. Even though XCL and Verdun allowed EP to resume its own well-
drilling and planning activities after Defendants realized that the FTC
would investigate the transaction, the temporary halts resulted in EP
having crude oil supply shortages in the following months. Defendants
predicted these shortages and specifically provided in the Purchase
Agreement that XCL and Verdun--not EP--would
[[Page 7169]]
bear all costs associated with EP's supply shortages.
XCL and Verdun also exercised operational control over EP by, inter
alia, working directly with EP's customers on EP's behalf; requiring EP
to provide competitively sensitive information to XCL and Verdun
businesspeople; requiring approval of ordinary-course expenditures; and
coordinating with EP on EP's contract negotiations with certain
customers in the Eagle Ford production area. The illegal conduct lasted
through October 27, 2021, when the Defendants executed an amendment to
the Purchase Agreement which allowed EP to operate independently once
again and in the ordinary course of business, without XCL's or Verdun's
control over its day-to-day operations. The Defendants were in
violation of the HSR Act for a period of 94 days, from when the
Purchase Agreement was signed, on July 26, 2021, until the Purchase
Agreement was amended, on October 27, 2021. Among other things, XCL's
temporary halting of EP's development activities contributed to EP
having crude oil supply shortages in September and October 2021 at a
time when the United States was experiencing significant supply
shortages and spiking crude oil prices due to sudden demand increases
as COVID-19 restrictions eased. XCL and EP--direct competitors in the
marketplace--then worked in concert to supply EP's customers to satisfy
EP's customer supply commitments. Verdun also coordinated with EP on
EP's contract negotiations with certain customers in the Eagle Ford
production area. Specifically, Verdun observed that certain EP
contracts included below-market prices and directed EP to raise them in
the next contracting period. EP complied.
Agreements that transfer some indicia of beneficial ownership, even
if common in an industry, may violate Section 7A if entered into while
the buyer intends to acquire the asset. Entering into such agreements
before the HSR Act waiting period expires defeats the purpose of the
HSR Act by enabling the acquiring person to direct the acquired
person's business to bring about the effects of an acquisition prior to
completion of the agencies' antitrust review.
III. Explanation of the Proposed Final Judgment
The relief required by the proposed Final Judgment will prevent
future violations of Section 7A of the Clayton Act of the type
Defendants committed and secures a monetary civil penalty for XCL's,
Verdun's, and EP's violation of Section 7A. The proposed Final Judgment
sets forth prohibited and permitted conduct, a compliance program the
Defendants must follow, and procedures available to the United States
to determine and ensure compliance with the Final Judgment. Section XI
provides that these conditions will expire ten years after the entry of
the Final Judgment.
A. Prohibited Conduct
Section V of the proposed Final Judgment is designed to prevent
future HSR Act violations of the sort alleged in the Complaint. During
the ``pre-consummation period'' of any future HSR-reportable
transaction--after executing an agreement or letter of intent for a
transaction subject to the reporting requirements of the HSR Act and
until the expiration of the statutory waiting period or abandonment of
the transaction--the Defendants are prohibited from entering into any
agreement with the other contracting party or parties to combine,
merge, or transfer, in whole or in part, any operational or decision-
making control over businesses, assets, or interests to be acquired.
This injunction applies to all transactions subject to the reporting
requirements of the HSR Act, regardless of the particular products
involved or whether any other party to the transaction competes with
the Defendants. The injunction also prevents an acquirer from obtaining
approval rights or authority over ordinary-course decisions of the to-
be-acquired entity or unrestricted access to certain categories of non-
public information. To be clear, the injunction is not intended to
cover all means of transferring beneficial ownership--which is assessed
on a case-by-case basis depending on a variety of factors--but to
broadly cover the Defendants' conduct in this matter and prevent
recurrence.
B. Permitted Conduct
Section VI of the proposed Final Judgment identifies certain
agreements and conduct that are permitted by the Judgment. Paragraphs
VI(A) and VI(B) ensure that the decree will not be interpreted to
forbid specified ``conduct of business'' covenants that are typically
found in merger agreements. These are customary provisions found in
most merger agreements and are intended to protect the value of the
transaction and prevent a to-be-acquired person from wasting assets.
Paragraph VI(C) ensures that the decree does not prevent certain
ordinary-course agreements in the oil and gas industry. Paragraph VI(D)
recognizes narrow exceptions to the restrictions on access to non-
public information in Paragraph V(A)(4) for certain activities, such as
participating in litigation.
C. Compliance
Sections VII and VIII of the proposed Final Judgment set forth
various compliance procedures. Section VII sets up an affirmative
compliance program directed toward ensuring compliance with the
limitations imposed by the proposed Final Judgment and with the federal
antitrust laws. The compliance program includes the designation of a
qualified antitrust compliance officer who is required to ensure that
the relevant Defendant distributes a copy of the Final Judgment to each
current and succeeding director, office, employee, agent, or other
person with the responsibility over sales, marketing, strategic
planning, exploration and development, or mergers and acquisitions;
briefs each such person regarding compliance with the Final Judgment
and the antitrust laws as they apply to Defendants' activities; and
obtains certification annually from each such person that he or she
understands his or her obligations under the Final Judgment and agrees
to abide by its terms. In addition, Defendants must provide a copy of
the Final Judgment to certain parties entering a merger or acquisition
with a Defendant prior to signing the definitive agreement. Section VII
of the proposed Final Judgment further requires the compliance officer
to certify to the United States that Defendant is in compliance and to
report any violations of the Final Judgment.
To facilitate monitoring of Defendants' compliance with the Final
Judgment, Section VIII grants DOJ access, upon reasonable notice, to
Defendants' records and documents relating to matters contained in the
Final Judgment. Defendants must also make its personnel available for
interviews or depositions regarding such matters. In addition,
Defendants must, upon request, prepare written reports relating to
matter contained in the Final Judgment.
D. Civil Penalties
The proposed Final Judgment imposes a $5,684,377 civil penalty for
Defendants' violation of the HSR Act. The United States adjusted the
penalty downward from the maximum permitted under the HSR Act in part
because the Defendants were willing to resolve the matter by consent
decree and avoid a prolonged investigation and litigation. The relief
will have a beneficial effect on competition because
[[Page 7170]]
it will deter future instances in which parties seek to immediately
acquire control of an independent competitive presence before filing
the required pre-acquisition notifications with the agencies and
observing the required waiting period. At the same time, the penalty
will not have any adverse effect on competition.
IV. Remedies Available to Potential Private Litigants
There is no private antitrust action for HSR Act violations;
therefore, entry of the proposed Final Judgment will neither impair nor
assist the bringing of any private antitrust action.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and the Defendants have stipulated that the
proposed Final Judgment may be entered by this Court after compliance
with the provisions of the APPA, provided that the United States has
not withdrawn its consent. The APPA conditions entry of the decree upon
this Court's determination that the proposed Final Judgment is in the
public interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or within sixty (60) days of
the first date of publication in a newspaper of the summary of this
Competitive Impact Statement, whichever is later. All comments received
during this period will be considered by the United States Department
of Justice, which remains free to withdraw its consent to the proposed
Final Judgment at any time prior to the Court's entry of judgment. The
comments and the response of the United States will be filed with this
Court. In addition, comments will be posted on the U.S. Department of
Justice, Antitrust Division's internet website and, under certain
circumstances, published in the Federal Register. Written comments
should be submitted to: Maribeth Petrizzi, Special Attorney, United
States, c/o Federal Trade Commission, 600 Pennsylvania Avenue NW, CC-
8416, Washington, DC 20580, Email: [email protected].
The proposed Final Judgment provides that this Court retains
jurisdiction over this action, and the parties may apply to this Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
As an alternative to the proposed Final Judgment, the United States
considered a full trial on the merits against the Defendants. The
United States is satisfied, however, that the relief required by the
proposed Final Judgment will remedy the violation alleged in the
Complaint and deter violations by similarly situated entities in the
future. Thus, the proposed Final Judgment achieves all or substantially
all of the relief the United States would have obtained through
litigation but avoids the time, expense, and uncertainty of a full
trial on the merits.
VII. Standard of Review Under the Appa for the Proposed Final Judgment
Under the Clayton Act and APPA, proposed Final Judgments, or
``consent decrees,'' in antitrust cases brought by the United States
are subject to a sixty (60) day comment period, after which the court
shall determine whether entry of the proposed Final Judgment is ``in
the public interest.'' 15 U.S.C. 16(e)(1). In making that
determination, the court, in accordance with the statute as amended in
2004, is required to consider:
(A) the competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
Id. Sec. 16(e)(1)(A) & (B). In considering these statutory factors,
the court's inquiry is necessarily a limited one, as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (D.C. Cir. 1995); United States v, U.S. Airways Group,
Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (noting the government has
broad discretion of the adequacy of the relief at issue); United States
v. InBev N.V./S.A., No. 08-1965 (JR), 2009-2 Trade Cas. (CCH) ] 76,736,
2009 U.S. Dist. LEXIS 84787, at *3, (D.D.C. Aug. 11, 2009) (noting that
the court's review of a consent judgment is limited and only inquires
``into whether the government's determination that the proposed
remedies will cure the antitrust violations alleged in the complaint
was reasonable, and whether the mechanism to enforce the final judgment
are clear and manageable.'').
As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other things,
the relationship between the remedy secured and the specific
allegations in the government's Complaint, whether the proposed Final
Judgment is sufficiently clear, whether its enforcement mechanisms are
sufficient, and whether it may positively harm third parties. See
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the proposed Final Judgment, a court may not ``make
de novo determination of facts and issues.'' United States v. W. Elec.
Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted);;
see also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc.,
152 F. Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107
F. Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787,
at *3.
Instead, ``[t]he balancing of competing social and political
interests affected by a proposed antitrust decree must be left, in the
first instance, to the discretion of the Attorney General.'' W. Elec.
Co., 993 F.2d at 1577 (quotation marks omitted). ``The court should
also bear in mind the flexibility of the public interest inquiry: the
court's function is not to determine whether the resulting array of
rights and liabilities is the one that will best serve society, but
only to confirm that the resulting settlement is within the reaches of
the public interest.'' Microsoft, 56 F.3d at 1460 (quotation marks
omitted); see also United States v. Deutsche Telekom AG, No. 19-2232
(TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding
requirements would ``have enormous practical consequences for the
government's ability to negotiate future settlements,'' contrary to
congressional intent. Microsoft, 56 F.3d at 1456. ``The Tunney Act was
not intended to create a disincentive to the use of the consent
decree.'' Id.
The United States' predictions about the efficacy of the remedy are
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at
1461 (recognizing courts should give ``due respect to the Justice
Department's . . . view of the nature of its case''); United
[[Page 7171]]
States v. Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C.
2016) (``In evaluating objections to settlement agreements under the
Tunney Act, a court must be mindful that [t]he government need not
prove that the settlements will perfectly remedy the alleged antitrust
harms[;] it need only provide a factual basis for concluding that the
settlements are reasonably adequate remedies for the alleged harms.''
(internal citations omitted)); United States v. Republic Servs., Inc.,
723 F. Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review
to which the government's proposed remedy is accorded''); United States
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A
district court must accord due respect to the government's prediction
as to the effect of proposed remedies, its perception of the market
structure, and its view of the nature of the case.''). The ultimate
question is whether ``the remedies [obtained by the Final Judgment are]
so inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest.''' Microsoft, 56 F.3d at 1461 (quoting
W. Elec. Co., 900 F.2d at 309).
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (concluding
that ``the `public interest' is not to be measured by comparing the
violations alleged in the complaint against those the court believes
could have, or even should have, been alleged''). Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue.
Microsoft, 56 F.3d at 1459-60. As this Court confirmed in SBC
Communications, courts ``cannot look beyond the complaint in making the
public interest determination unless the complaint is drafted so
narrowly as to make a mockery of judicial power.'' 489 F. Supp. 2d at
15.
In its 2004 amendments to the APPA, Congress made clear its intent
to preserve the practical benefits of using judgments proposed by the
United States in antitrust enforcement, adding the unambiguous
instruction that ``[n]othing in this section shall be construed to
require the court to conduct an evidentiary hearing or to require the
court to permit anyone to intervene.'' 15 U.S.C. 16(e)(2); see also
U.S. Airways, 38 F. Supp. 3d at 76 (indicating that a court is not
required to hold an evidentiary hearing or to permit intervenors as
part of its review under the Tunney Act). This language explicitly
wrote into the statute what Congress intended when it enacted the
Tunney Act in 1974. As Senator Tunney explained: ``The court is nowhere
compelled to go to trial or to engage in extended proceedings which
might have the effect of vitiating the benefits of prompt and less
costly settlement through the consent decree process.'' 119 Cong. Rec.
24,598 (1973) (statement of Sen. Tunney). ``A court can make its public
interest determination based on the competitive impact statement and
response to public comments alone.'' U.S. Airways, 38 F. Supp. 3d at 76
(citing Enova Corp., 107 F. Supp. 2d at 17).
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Date: January 7, 2025
Respectfully Submitted,
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Kenneth A. Libby, Special Attorney, U.S. Department of Justice,
Antitrust Division, c/o Federal Trade Commission, 600 Pennsylvania
Avenue NW, Washington, DC 20580, Phone: (202) 326-2694, Email:
[email protected].
[FR Doc. 2025-01252 Filed 1-17-25; 8:45 am]
BILLING CODE 4410-11-P