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, two people familiar with the matter said.
The investigation, now in a preliminary stage, will probably broaden into a multi-jurisdictional affair like the inquiry into manipulation of the London interbank offered rate, or Libor, the people said. FTC investigators are reviewing the progress made by their European counterparts, the people said, asking not to be identified because the matter is confidential.
The FTC, which routinely monitors wholesale and retail gasoline prices in the U.S. to look for anticompetitive behavior, agreed with the Justice Department’s antitrust division to handle the probe, said the people. The assignment of the matter to the FTC instead of the Justice Department is an indication that U.S. regulators don’t suspect the conduct they’re scrutinizing is criminal, the people said.
The opening of the oil-price investigation in the U.S. is the latest in a growing number of simultaneous EU-U.S. inquiries into areas including Libor, standard essential patents and Internet search manipulation, as well as merger reviews in the music and airline industries. The extent to which regulators in each jurisdiction can collaborate with one another depends on whether the companies under review sign waivers allowing data about them to be shared.
The probe 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 contributes to setting the price of more than half the world’s oil.
The FTC hasn’t contacted Platts, Kathleen Tanzy, spokeswoman for the New York-based company, said yesterday in an e-mail.
“We will fully cooperate with legislators and regulators to ensure the effective functioning of the oil markets and other physical commodities markets that we cover,” Tanzy said.
Peter Kaplan, a spokesman for the FTC, declined to comment on the investigation. Antoine Colombani, the spokesman for EU Competition Commissioner Joaquin Almunia in Brussels, declined to comment on the extent of the EU’s coordination with the FTC.
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’s price assessments for crude, refined products and biofuels, and may have been going on since 2002, Statoil said in a May 14 statement.
Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy markets news and information.
Separately, the U.S. Commodity Futures Trading Commission is reviewing complaints of bogus bids and offers in the West Texas Intermediate crude-oil market, a practice known as “spoofing,” according to Bart Chilton, a commissioner.
Spoofing, which is illegal, involves bids or offers that are entered with the intent of canceling them before the trade is carried out. WTI, traded on CME Group Inc.’s New York Mercantile Exchange, is the world’s biggest energy-futures contract.
“I asked the staff to tell me if there’s been spoofing in the oil market over the past few days,” Chilton said yesterday during an interview in Chicago, after receiving more than half a dozen complaints from traders.
The U.K. Serious Fraud Office said last month it was “urgently” reviewing whether to open a criminal probe into the allegations.