The Federal Trade Commission has put out new rules over how it will regulate oil markets today:
“The Rule prohibits fraudulent or deceptive conduct that could harm wholesale petroleum markets. Specific examples of such 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 of a market or the price of a particular product. The Rule also prohibits material omissions from a statement that, although true, is misleading under the circumstances.”
“Oil supplies are near twenty year highs and demand for oil is at a ten year low – so why have gasoline prices gone up a dollar a gallon since the beginning of the year?” Cantwell said. “With this new rulemaking, the FTC has established a clear, bright line to distinguish healthy market practices from illegal manipulation which will help restore consumer confidence in the fairness of prices at the pump.”
Commissioner William Kovacic cast the lone dissenting vote, saying he felt the rule has to potential to make thousands of routine and necessary business transactions illegal:
“To my mind, a minimally acceptable rule would have departed from the Commission’s Final Rule in two major respects. First, it would have incorporated into Paragraph 3(a) the requirements that the conduct be intentional and either actually or likely distorts market conditions. Second, the rule would not have contained a separate command dealing with omissions, thus deleting Paragraph 3(b) of the Commission’s Final Rule.5 As it stands, I cannot say that the Final Rule is in the public interest.”
Stay tuned for more reactions as they come pouring forth.
The American Petroleum Institute says the new rules might “discourage companies from providing information to the marketplace” and that the size of the fines — $1million per day until the violation is fixed — is “clearly is an overreaction by the FTC when strong deterrents already are in place.”
However, they’re pleased that FTC is providing a 90-day window for industry “to design and implement compliance programs. And, they note: “There have been numerous and extensive FTC investigations of the petroleum industry that have not uncovered any evidence that market manipulation has distorted petroleum markets or harmed consumers.”