Prohibition of Energy Market Manipulation Rule Review
| Published date | 02 March 2021 |
| Citation | 86 FR 12091 |
| Record Number | 2021-04196 |
| Section | Rules and Regulations |
| Court | Federal Trade Commission |
Federal Register, Volume 86 Issue 39 (Tuesday, March 2, 2021)
[Federal Register Volume 86, Number 39 (Tuesday, March 2, 2021)]
[Rules and Regulations]
[Pages 12091-12092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04196]
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FEDERAL TRADE COMMISSION
16 CFR Part 317
[RIN 3084-AB57]
Prohibition of Energy Market Manipulation Rule Review
AGENCY: Federal Trade Commission.
ACTION: Confirmation of rule.
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SUMMARY: The Federal Trade Commission (``Commission'') has completed
its regulatory review of its Prohibition of Energy Market Manipulation
Rule implementing Section 811 of Subtitle B of Title VIII of the Energy
Independence and Security Act of 2007. This regulatory review is part
of the Commission's periodic review of all its regulations and guides.
The Commission has determined to retain the Rule in its present form.
DATES: This action is effective March 2, 2021.
ADDRESSES: Relevant portions of the record of this proceeding,
including this document, are available at https://www.ftc.gov.
FOR FURTHER INFORMATION CONTACT: Peter Richman (202-326-2563),
Assistant Director, Mergers III, Bureau of Competition, Federal Trade
Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Commission reviews its rules and guides periodically to seek
information about their benefits and costs, as well as their regulatory
and economic impact. This information assists the Commission in
identifying rules and guides that warrant modification or rescission.
Pursuant to this process, on June 5, 2020, the Commission initiated
a regulatory rule review by publishing a document in the Federal
Register requesting public comment (``Request'') on the Prohibition of
Energy Market Manipulation Rule (``Rule'').\1\ The Commission sought
comment on standard regulatory review questions such as whether the
Rule continues to serve a useful purpose; the costs and benefits of the
Rule for consumers and businesses; and what effects, if any,
technological or economic changes have had on the Rule. In addition to
generally requesting comments recommending modifications to the Rule,
the Commission also invited comment regarding two specific issues.
First, the Commission requested comment identifying any evidence Sec.
317.3 of the Rule does not reach behavior that falls within the scope
of acts prohibited by its authorizing statute, 42 U.S.C. 17301, and
violates the antitrust or consumer protection laws. Second, the
Commission invited comment with respect to the definition of
``knowingly'' in Sec. 317.2(c) of the Rule, its possible limitations,
and the appropriateness of a modification of the definition to capture
acts, practices, or courses of business a person ``knew or should have
known'' were fraudulent or deceptive.
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\1\ Federal Trade Commission: Rule Review; Request for Public
Comment, 85 FR 34548 (June 5, 2020).
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After considering the comments and evidence, the Commission has
determined to retain the Rule without modification.
II. Background
The Rule, authorized by the Energy Independence and Security Act of
2007 (``EISA''),\2\ prohibits market manipulation in connection with
the purchase or sale of crude oil or petroleum products. The Rule
prohibits fraudulent or deceptive conduct (including making false or
misleading statements of material fact) in connection with wholesale
purchases or sales of crude oil, gasoline, or petroleum distillates.
The Rule separately bans the intentional failure to state a material
fact when the omission (1) makes the statement misleading and (2)
distorts or is likely to distort market conditions for any product
covered by the Rule. The Commission issued the Rule on August 6, 2009,
with an effective date of November 4, 2009.
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\2\ 42 U.S.C. 17301-17305.
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III. Regulatory Review Comment and Analysis
The Commission received one substantive comment, submitted by
Eversheds Sutherland (US) LLP (``ESUS''). ESUS recommends the
Commission rescind the Rule. The comment addresses whether there is a
continuing need for the Rule and its benefits and costs, but not any of
the other questions in the Request. This rule review summarizes the
comment and
[[Page 12092]]
explains the Commission's decision to retain the Rule in its current
form.
ESUS recommends the Commission rescind the Rule partly because the
Commodity Futures Trading Commission (``CFTC'') has the legal authority
and the ability to regulate market manipulation of wholesale petroleum
markets.\3\ This overlap in regulatory authority is by design.\4\ It is
intended to facilitate cooperation and ensure comprehensive enforcement
that enhances regulatory certainty for businesses and consumers, a
point the CFTC made in 2011 in response to a similar comment during the
CFTC's rulemaking process.\5\ The Commission stated its intent to
cooperate with other agencies, including the CFTC, when adopting the
Rule in 2009,\6\ and memorialized that commitment in a 2011 Memorandum
of Understanding with the CFTC. Under the Memorandum of Understanding,
the Commission and the CFTC continue to cooperate on ``issues of common
regulatory interest, particularly as such interest relates to market
manipulation, [to] foster fair competition and promote the integrity of
the markets, including petroleum markets.'' \7\
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\3\ Comment of Eversheds Sutherland (US) LLP at 3-5 (Sep. 3,
2020), available at https://beta.regulations.gov/comment/FTC-2020-0047-0003.
\4\ Federal Trade Commission: Prohibitions on Market
Manipulation; Final Rule, 74 FR at 40690, n.58 (Aug. 12, 2009)
(citing Comment of Senator Maria Cantwell at 2); see also Comment of
Senator Cantwell at 2 (``Congress, however, specifically intended
for the Commission to exercise this new authority by working
cooperatively and in tandem with the CFTC to prevent and deter any
manipulative activity, including in the futures markets, which would
affect wholesale petroleum markets.''). ESUS identifies the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010
(``Dodd-Frank'') as a source of legal authority for the CFTC to
regulate market manipulation of wholesale petroleum markets. The
Commission notes that Senator Cantwell, who sponsored the EISA
provision authorizing the Rule, also helped lead the effort to pass
the Dodd-Frank provision to which ESUS refers. Federal Trade
Commission: Prohibitions on Market Manipulation; Final Rule, 74 FR
at 40704 (Aug. 12, 2009); Commodity Futures Trading Commission:
Prohibition on the Employment, or Attempted Employment, of
Manipulative and Deceptive Devices and Prohibition on Price
Manipulation; Final Rule, 76 FR at 41410 (July 14, 2011).
\5\ Commodity Futures Trading Commission: Prohibition on the
Employment, or Attempted Employment, of Manipulative and Deceptive
Devices and Prohibition on Price Manipulation; Final Rule, 76 FR at
41409 (July 14, 2011).
\6\ Federal Trade Commission: Prohibitions on Market
Manipulation; Final Rule, 74 FR at 40691 (Aug. 12, 2009).
\7\ Federal Trade Commission, Memorandum of Understanding
Between the Commodity Futures Trading Commission and the Federal
Trade Commission Regarding Information Sharing in Areas of Common
Regulatory Interest, at 1 ] 3 (Apr. 12, 2011), available at https://www.ftc.gov/policy/cooperation-agreements/commodity-futures-trading-commission-federal-trade-commission.
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ESUS also asserts that rescinding the Rule eliminates the risk
market participants will incur penalties from both the Commission and
the CFTC for the same act of market manipulation.\8\ This risk has
never materialized.
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\8\ Comment of Eversheds Sutherland (US) LLP at 8 (Sep. 3,
2020), available at https://beta.regulations.gov/comment/FTC-2020-0047-0003.
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ESUS also asserts the Rule imposes compliance costs on market
participants and diverts Commission resources away from enforcement of
consumer protection and antitrust laws.\9\ With respect to compliance
costs on market participants, the Commission notes the Rule does not
require any affirmative compliance efforts such as recordkeeping or
disclosure of information; rather, the Rule requires only that market
participants refrain from fraudulent and deceptive statements or
behavior.\10\ As ESUS points out, the CFTC's broader authority to
regulate market manipulation includes prohibiting the conduct the
Commission's Rule prohibits.\11\ Maintaining compliance programs to
avoid violating these substantially similar requirements does not lead
to additive compliance costs. As a result, and given the absence of any
additional substantiation of compliance costs associated with the Rule,
the Commission concludes the Rule continues to impose minimal costs on
businesses.
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\9\ Id. at 9.
\10\ Federal Trade Commission: Prohibitions on Market
Manipulation; Final Rule, 74 FR at 40701 (Aug. 12, 2009).
\11\ Comment of Eversheds Sutherland (US) LLP at 6, 9 (Sep. 3,
2020), available at https://beta.regulations.gov/comment/FTC-2020-0047-0003.
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Finally, after consideration, and given the benefits to consumers
relative to the costs associated with Rule enforcement, the Commission
declines to adopt ESUS' position that rescinding the Rule ``would allow
the FTC to rededicate limited internal resources to its core consumer
protection and antitrust missions.'' \12\
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\12\ Id.
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IV. Conclusion
After considering the comment and the evidence, the Commission
concludes (1) there is a continuing need for the Rule; (2) the Rule
benefits consumers and businesses; (3) the Rule does not impose
substantial economic burdens; and (4) the benefits outweigh the minimal
costs the Rule imposes. Accordingly, the Commission has determined to
retain the current Rule and is terminating this review.
By direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2021-04196 Filed 3-1-21; 8:45 am]
BILLING CODE 6750-01-P
