The U.S. Federal Trade Commission has opened a formal investigation into how prices of crude oil and petroleum-derived products are set, mirroring a European Union inquiry into pricing practices in the energy markets, two people familiar with the matter said.
The investigation, now in a preliminary stage, will probably become a broad inquiry similar to the multi-jurisdictional investigation into bank manipulation of the London interbank offered rate, or Libor, the people said. Trade commission investigators are reviewing the progress their European counterparts have made, said the people, who asked not to be named because the matter is confidential.
The Federal Trade Commission, which routinely monitors wholesale and retail gasoline prices in the U.S. looking for anti-competitive behavior, agreed with the Justice Department’s antitrust division to handle the investigation, said the people. The fact that the trade commission is handling the inquiry instead of the Justice Department is an indication U.S. regulators don’t suspect the conduct being investigated is criminal, the people said.
The opening of the oil price investigation in the U.S. is the latest example in a growing pattern of simultaneous European Union-U.S. investigations that have included inquiries into Libor, standard essential patents and Internet search manipulation, as well as merger reviews in the music and airline industries. The extent to which regulators of both jurisdictions can collaborate depends on whether the companies being targeted sign waivers allowing regulators to share data.
The inquiry will probably include agency-issued civil investigative demands, which are similar to subpoenas, as the Federal Trade Commission scrutinizes how price-reporting companies such as Platts, the energy news and data provider owned by McGraw Hill Financial Inc., help determine the cost of raw materials, the people said.
Platts publishes the Dated Brent benchmark that helps determine the price of more than half the world’s oil.
Peter Kaplan, a spokesman for the trade commission, declined to comment on the investigation. Antoine Colombani, the spokesman for European Union Competition Commissioner Joaquin Alumnia, declined to comment on the extent to which the European Union is coordinating with the Federal Trade Commission.
Kathleen Tanzy, a spokesman for Platts in the U.S, didn’t immediately respond to a request for comment.
The European Union oil price investigation, which extends to undisclosed crude derived products and biofuels, underscores how pricing in some energy markets lacks the transparency of financial products such as stocks and U.S. corporate bonds. It also marks the third time global pricing benchmarks have drawn the regulators’ scrutiny in the past year following investigations into bank manipulation of the Libor, and ISDAFix, the benchmark for the $379 trillion swaps market.
Almunia, Europe’s top antitrust official, said May 28 that if oil price manipulation did take place, it would have caused “huge” damage to consumers.
Last month, European Union investigators searched the offices of Royal Dutch Shell Plc, Statoil ASA, BP Plc and Platts, and requested records from some of Europe’s biggest trading houses, including Vitol Group, Gunvor Group Ltd. and Glencore Xstrata Plc.
Plattss’ Dated Brent crude assessment is based on the price of trades, bids and offers on four grades of North Sea crude and related contracts. Platts gathers information from traders through e-mail, phone calls, instant messages and Platts electronic system, called the eWindow. Then the company calculates the day’s price as of 10:30 a.m.
The suspected violations are related to Platts price assessments for crude, refined products and biofuels, and may have been going on since 2002, Statoil said in a May 14 statement.
Information for this article was contributed by Liam Vaughan, Gavin Finch, Ambereen Choudhury, Stephanie Bodoni, Gaspard Sebag and Asjylyn Loder of Bloomberg News.
Business, Pages 21 on 06/25/2013