The Federal Trade Commission today issued a Revised Notice of Proposed Rulemaking (RNPRM) seeking public comment on a revised proposed rule that would prohibit market manipulation in the petroleum industry. The revised proposed rule would prohibit anyone from engaging in fraud or deceit in wholesale petroleum markets, or misleading any person by omitting important information from statements that might distort petroleum markets because of the omission. Once public comments have been received and reviewed, the FTC will move quickly to conclude the rulemaking proceeding.
Last spring the Commission published an Advance Notice of Proposed Rulemaking to solicit public comments on the appropriate way to interpret and enforce the new authority Congress provided in the Energy Independence and Security Act of 2007 (EISA) to prevent market manipulation in the petroleum industry. After reviewing comments, the Commission published a Notice of Proposed Rulemaking (NPRM) on August 19, 2008, which set forth a proposed petroleum market manipulation rule and invited written comments on issues it raised. In response to the NPRM, the FTC received 34 comments from interested parties, including consumers, a consumer advocacy group, academics, a federal agency, state government agencies, a member of Congress, industry members, and trade and bar associations. On November 6, 2008, Commission staff held a one-day public workshop on the proposed rule. Commenters and workshop participants provided valuable feedback on several key issues relating to the proposed rule. Based on the record developed in this proceeding to date, the Commission has crafted the revised proposed rule for public comment.
The Revised Proposed Rule. The revised proposed rule in the RNPRM announced today retains the anti-fraud approach of the August 2008 proposed rule. The revised proposed rule would prohibit fraudulent and deceptive conduct that could harm wholesale petroleum markets. Specific examples of prohibited conduct include false public announcements of planned pricing or output decisions, false statistical or data reporting, and wash sales intended to disguise the actual liquidity or price of a particular product or market for that product. The revised proposed rule also would prohibit material omissions from a statement that, although otherwise literally true, are misleading under the circumstances.
Specifically, the revised proposed rule would prohibit anyone, directly or indirectly, in connection with the purchase or sale of crude oil, gasoline, or petroleum distillates at wholesale, from (a) knowingly engaging in any act, practice, or course of business – including the making of any untrue statement of material fact – that operates or would operate as a fraud or deceit upon any person, or (b) intentionally failing to state a material fact that under the circumstances renders a statement made by such person misleading, provided that such omission distorts or tends to distort market conditions for any such product.
The revised proposed rule would not impose any affirmative duties, obligations, or record-keeping requirements. Anyone violating an FTC rule promulgated under EISA, such as the revised proposed rule, if adopted, may face civil penalties of up to $1 million per violation per day, in addition to any relief available to the Commission under the FTC Act.
Opportunity for Public Comment. The Commission is seeking public comments on the revised proposed rule, as well as answers to the specific questions in the RNPRM. Comments must be received no later than May 20, 2009. Because the public already has had the opportunity to comment on many of the concepts presented in the revised proposed rule – through both written comments and workshop presentations and participation – the Commission believes that a 30-day comment period is appropriate.
The Commission vote to issue the RNPRM was 4-0. It will be available on the FTC’s Web site and likely will be published in the Federal Register on or about April 21, 2009.
Copies of the Revised Notice of Proposed Rulemaking are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
(FTC File No. P082900)