The U.S. Federal Trade Commission 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 probe similar to the multi-jurisdictional inquiry into bank manipulation of the London interbank offered rate, or Libor, the people said. FTC 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 FTC, which routinely monitors wholesale and retail gasoline prices in the U.S. looking for anticompetitive behavior, agreed with the Justice Department’s antitrust division to handle the probe, said the people. The fact that the FTC is handling the probe 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 probe in the U.S. is the latest example in a growing pattern of simultaneous EU-U.S. probes 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 FTC 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 FTC, declined to comment on the investigation. Antoine Colombani, the spokesman for EU Competition Commissioner Joaquin Alumina, declined to comment on the extent to which the EU is coordinating with the FTC. Kathleen Tanzy, a spokeswoman for Plats in the U.S, didn’t immediately respond to a request for comment.
The EU oil probe, 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 if oil price manipulation did take place, it would have caused “huge” damage to consumers.
Last month, EU 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.
Platts’s 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-mails, phone calls, instant messages and Platts electronic system, called the eWindow. Then the company calculates the day’s price as of 4:30 p.m. London time.
That benchmark price affects the value of over-the-counter oil derivatives, Brent futures traded on the ICE Futures Europe Exchange in London, and cargoes of crude from Canada to Australia.
Platts also publishes thousands of daily assessments across multiple commodities, which are used to price gasoline, diesel, biofuels, natural gas, electricity and petrochemicals. 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.
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