Notice2025-08226
United States of America v. XCL Resources Holdings, LLC, Verdun Oil Company II, LLC, and EP Energy LLC
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 12, 2025
Issuing agencies
Justice DepartmentAntitrust Division
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 90 (Monday, May 12, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 90 (Monday, May 12, 2025)]
[Notices]
[Pages 20190-20193]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-08226]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States of America v. XCL Resources Holdings, LLC, Verdun
Oil Company II, LLC, and EP Energy LLC
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that the Response of Plaintiff
United States to Public Comment on the Proposed Final Judgment in
United States of America v. XCL Resources Holdings, LLC, Verdun Oil
Company II, LLC, and EP Energy LLC, Civil Action No. 1:25-cv-00041 has
been filed in the United States District Court for the District of
Columbia, together with the response of the United States to the
comment.
Copies of the public comment and the United States' Response are
available for inspection on the Antitrust Division's website at <a href="http://www.justice.gov/atr">http://www.justice.gov/atr</a>.
Suzanne Morris,
Deputy Director of Civil Enforcement Operations.
United States District Court for the District of Columbia
United States of America, Plaintiff, v. XCL Resources Holdings,
LLC, Verdun Oil Company II LLC, and EP Energy LLC, Defendants.
Civil Action No. 1:25-cv-00041-TSC
Response of Plaintiff United States to Public Comment on the Proposed
Final Judgment
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act (the ``APPA'' or ``Tunney Act''), 15 U.S.C. 16, the
United States hereby responds to the one public comment received
regarding the proposed Final Judgment in this case. After careful
consideration of the submitted comment, the United States continues to
believe that the civil penalties and injunctive relief required by the
proposed Final Judgment provides an effective and appropriate remedy
for the violation alleged in the Complaint and is therefore in the
public interest. The United States will move the Court for entry of the
proposed Final Judgment after the public comment and this response have
been published as required by 15 U.S.C. 16(d).
I. Procedural History
On July 26, 2021, Defendants Verdun Oil Company II LLC (``Verdun'')
and EP Energy LLC (``EP'') entered into a Membership Interest Purchase
Agreement (``Purchase Agreement'') whereby Verdun proposed to acquire
EP for approximately $1.4 billion. The proposed transaction was subject
to notification and waiting-period requirements imposed by Section 7A
of the Clayton Act, 15 U.S.C. 18a, commonly known as the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the ``HSR Act''). Defendants
made the required pre-merger notification filing with the antitrust
agencies; they failed, however, to satisfy their waiting-period
obligations. Instead, upon executing the Purchase Agreement, EP allowed
Verdun and its sister company, Defendant XCL Resources Holdings, LLC
(``XCL''), to assume operational and decision-making control over
significant aspects of EP's day-to-day business operations.
The United States filed a civil antitrust Complaint against
Defendants on January 7, 2025, seeking civil penalties and equitable
relief for the violation of the HSR Act. The Complaint alleges that
Defendants were in continuous violation of the HSR Act from July 26,
2021, through October 27, 2021, when Defendants amended the Purchase
Agreement and Verdun and XCL ceased exercising operational control over
EP's business. See Dkt. No. 1-1.
At the same time the Complaint was filed, the United States filed a
proposed Final Judgment and a Stipulation and Order in which the United
States and Defendants consent to entry of the proposed Final Judgment
after compliance with the requirements of the Tunney Act, 15 U.S.C. 16.
See Dkt. Nos. 1-2, 1-3. The proposed Final Judgment requires Defendants
to pay civil penalties totaling of $5,684,377 within 30 days of entry
of the Final Judgment, prohibits Defendants from engaging in specified
conduct designed to prevent future violations of the HSR Act, and
imposes compliance and compliance-reporting obligations.
Pursuant to the APPA's requirements, the United States filed a
Competitive Impact Statement (``CIS'') on January 7, 2025, describing
the transaction and the proposed Final Judgment. See Dkt. No. 1-4. On
January 21, 2025, the United States published the Complaint, proposed
Final Judgment, and CIS in the Federal Register, see 90 FR 7159, and
caused notice regarding the same, together with directions for the
submission of written comments relating to the proposed Final Judgment,
to be published in The Washington Post for seven days, from January 15,
2025 through January 21, 2025. The 60-day period for public comment
ended on March 24, 2025. The United States received one comment,
attached as Exhibit A.
II. The Complaint and the Proposed Final Judgment
The Complaint alleges that Defendants were in continuous violation
of the HSR Act each day beginning on July 26, 2021, and ending on
October 27, 2021, when XCL and Verdun ceased exercising operational
control over relevant aspects of EP's business.
The HSR Act's reporting and waiting-period requirements apply to a
transaction if, as a result of the transaction, the acquirer will
``hold'' assets or voting securities valued above the applicable
thresholds. Under HSR Rule 801.1(c), to ``hold'' assets or voting
securities means ``beneficial ownership,
[[Page 20191]]
whether direct, or indirect through fiduciaries, agents, controlled
entities or other means.'' 16 CFR 801.1(c). Thus, under the HSR Act,
parties must make an HSR Act filing and observe a waiting period before
transferring beneficial ownership of the assets or voting securities to
be acquired. The Statement of Basis and Purpose accompanying the Rules
explains that beneficial ownership is determined on a case-by-case
basis, based on the indicia of beneficial ownership which include,
among others, the right to obtain the benefit of any increase in value
or dividends and the risk of loss of value. 43 FR 33449 (July 31,
1978). A firm may also gain beneficial ownership by obtaining
``operational control'' of an asset.
The rights provided by EP to XCL and Verdun in the Purchase
Agreement, and XCL and Verdun's exercise of those rights in the period
following signing the Purchase Agreement, transferred beneficial
ownership of EP's business to XCL and Verdun before Defendants had
fulfilled their obligations under the HSR Act. Specifically, the
Purchase Agreement provided for the immediate transfer of control over
key aspects of EP's business to XCL and Verdun, including granting XCL
and Verdun approval rights over EP's ongoing and planned crude oil
development and production activities and many of EP's ordinary-course
expenditures. XCL put an immediate halt to EP's new well-drilling
activities, so that XCL could control the development and production
plans for EP's drilling assets moving forward. Even though XCL and
Verdun eventually allowed EP to resume its own well-drilling and
planning activities, the temporary halts resulted in EP having crude
oil supply shortages in the following months. Defendants predicted
these shortages would occur, and the Purchase Agreement specifically
provided that XCL and Verdun--not EP--would bear all costs associated
with EP's supply shortages.
XCL and Verdun also exercised operational control over EP by, inter
alia, working directly with EP's customers on EP's behalf; requiring EP
to provide competitively sensitive information to XCL and Verdun
businesspeople; requiring approval of ordinary-course expenditures; and
coordinating with EP on EP's contract negotiations with certain
customers in the Eagle Ford production area. The illegal conduct lasted
through October 27, 2021, when the Defendants executed an amendment to
the Purchase Agreement which allowed EP to once again operate
independently and in the ordinary course of business, without XCL's or
Verdun's control over its day-to-day operations.
The Defendants were in violation of the HSR Act for a period of 94
days, from when the Purchase Agreement was signed on July 26, 2021
until the Purchase Agreement was amended on October 27, 2021.
As explained in the CIS, the proposed Final Judgment will prevent
future violations of the HSR Act of the type Defendants committed and
secures monetary civil penalties. The proposed Final Judgment sets
forth prohibited and permitted conduct, requires Defendants to maintain
compliance programs, and provides procedures to ensure ongoing
compliance. These conditions will expire ten years after the entry of
the Final Judgment. The proposed Final Judgment also imposes civil
penalties in the amount of $5,684,377. The penalty amount was adjusted
downward from the maximum permitted under the HSR Act, in part because
Defendants were willing to resolve the matter by consent decree and
avoid a prolonged investigation and litigation.
III. Standard of Judicial Review
Under the Clayton Act and APPA, proposed Final Judgments, or
``consent decrees,'' in antitrust cases brought by the United States
are subject to a 60-day comment period, after which the court shall
determine whether entry of the proposed Final Judgment is ``in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the court, in accordance with the statute as amended in 2004, is
required to consider:
(A) the competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
Id. Sec. 16(e)(1)(A) & (B). In considering these statutory factors,
the court's inquiry is necessarily a limited one, as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (D.C. Cir. 1995); United States v. U.S. Airways Group,
Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (noting the government has
broad discretion of the adequacy of the relief at issue); United States
v. InBev N.V./S.A., No. 08-1965 (JR), 2009-2 Trade Cas. (CCH) ] 76,736,
2009 U.S. Dist. LEXIS 84787, at *3, (D.D.C. Aug. 11, 2009) (noting that
the court's review of a consent judgment is limited and only inquires
``into whether the government's determination that the proposed
remedies will cure the antitrust violations alleged in the complaint
was reasonable, and whether the mechanism to enforce the final judgment
are clear and manageable'').
As the United States Court of Appeals for the District of Columbia
Circuit has held the APPA requires the court to consider, among other
things, the relationship between the specific allegations in the
government's Complaint and the remedy secured, whether the proposed
Final Judgment is sufficiently clear, whether its enforcement
mechanisms are sufficient, and whether it may positively harm third
parties. See Microsoft, 56 F.3d at 1458-62. With respect to the
adequacy of the relief secured by the proposed Final Judgment, a court
may not ``make de novo determination of facts and issues.'' United
States v. W. Elec. Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993) (quotation
marks omitted); see also Microsoft, 56 F.3d at 1460-62; United States
v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); United States v.
Enova Corp., 107 F. Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S.
Dist. LEXIS 84787, at *3.
Instead, ``[t]he balancing of competing social and political
interests affected by a proposed antitrust decree must be left, in the
first instance, to the discretion of the Attorney General.'' W. Elec.
Co., 993 F.2d at 1577 (quotation marks omitted). ``The court should
also bear in mind the flexibility of the public interest inquiry: the
court's function is not to determine whether the resulting array of
rights and liabilities is the one that will best serve society, but
only to confirm that the resulting settlement is within the reaches of
the public interest.'' Microsoft, 56 F.3d at 1460 (quotation marks
omitted); see also United States v. Deutsche Telekom AG, No. 19-2232
(TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding
requirements would ``have enormous practical consequences for the
government's ability to negotiate future settlements,'' contrary to
congressional intent. Microsoft, 56 F.3d at 1456. ``The Tunney Act was
not intended to create a disincentive to the use of the consent
decree.'' Id.
[[Page 20192]]
The United States' predictions about the efficacy of the remedy are
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at
1461 (recognizing courts should give ``due respect to the Justice
Department's . . . view of the nature of its case''); United States v.
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In
evaluating objections to settlement agreements under the Tunney Act, a
court must be mindful that [t]he government need not prove that the
settlements will perfectly remedy the alleged antitrust harms[;] it
need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'' (internal
citations omitted)); United States v. Republic Servs., Inc., 723 F.
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to
which the government's proposed remedy is accorded''); United States v.
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A
district court must accord due respect to the government's prediction
as to the effect of proposed remedies, its perception of the market
structure, and its view of the nature of the case.''). The ultimate
question is whether ``the remedies [obtained by the Final Judgment are]
so inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest.' '' Microsoft, 56 F.3d at 1461
(quoting W. Elec. Co., 900 F.2d at 309).
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (concluding
that ``the `public interest' is not to be measured by comparing the
violations alleged in the complaint against those the court believes
could have, or even should have, been alleged''). Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue.
Microsoft, 56 F.3d at 1459-60. As this Court confirmed in SBC
Communications, courts ``cannot look beyond the complaint in making the
public interest determination unless the complaint is drafted so
narrowly as to make a mockery of judicial power.'' 489 F. Supp. 2d at
15.
In its 2004 amendments to the APPA, Congress made clear its intent
to preserve the practical benefits of using judgments proposed by the
United States in antitrust enforcement, adding the unambiguous
instruction that ``[n]othing in this section shall be construed to
require the court to conduct an evidentiary hearing or to require the
court to permit anyone to intervene.'' 15 U.S.C. 16(e)(2); see also
U.S. Airways, 38 F. Supp. 3d at 76 (indicating that a court is not
required to hold an evidentiary hearing or to permit intervenors as
part of its review under the Tunney Act). This language explicitly
wrote into the statute what Congress intended when it enacted the
Tunney Act in 1974. As Senator Tunney explained: ``The court is nowhere
compelled to go to trial or to engage in extended proceedings which
might have the effect of vitiating the benefits of prompt and less
costly settlement through the consent decree process.'' 119 Cong. Rec.
24,598 (1973) (statement of Sen. Tunney). ``A court can make its public
interest determination based on the competitive impact statement and
response to public comments alone.'' U.S. Airways, 38 F. Supp. 3d at 76
(citing Enova Corp., 107 F. Supp. 2d at 17).
IV. Summary of the Comment and the United States' Response
The United States received one public comment in response to the
proposed Final Judgment from a member of the public. The commenter
inquires as to (a) whether the Defendant companies were publicly traded
and, if so, whether the conduct alleged in the Complaint affected the
pricing of stock transactions, and (b) whether civil penalties would
address harm, if any, to consumers potentially paying more at the gas
pump.
Nothing in the comment warrants a change to the proposed Final
Judgment or supports a conclusion that the proposed Final Judgment is
not in the public interest. Section (g)(1) of the HSR Act, 15 U.S.C.
18a(g)(1), provides that the United States may recover a civil penalty
for violations of the HSR Act. Here, Defendants will pay civil
penalties totaling $5,694,377 pursuant to the terms of the proposed
Final Judgment, representing approximately 65 percent of the statutory
maximum.\1\ The United States has determined that this amount, along
with the additional injunctive relief, will appropriately penalize
Defendants and deter it and others from future violations of the HSR
Act. As required by the APPA, the comment \2\ and this response will be
published in the Federal Register.
---------------------------------------------------------------------------
\1\ The maximum daily civil penalty, which had been $10,000, was
increased to $11,000 for violations occurring on or after November
20, 1996, pursuant to the Debt Collection Improvement Act of 1996,
Public Law 104-134 Sec. 31001(s) and FTC Rule 1.98, 16 D.C.F.R.
1.98, 61 FR 54548 (Oct. 21, 1996). The maximum daily penalty is
adjusted annually in accordance with the Federal Civil Penalties
Inflation Adjustment Act Improvement Act of 2015, and is currently
$53,088 for violations occurring on or after January 17, 2025. See,
90 Fed Reg. 5580 (Jan. 17, 2025). The maximum daily penalty in
effect at the time of Defendant's conduct was $46,517 per day.
\2\ Aside from a redaction of personally identifiable
information, the comment is provided in its entirety.
---------------------------------------------------------------------------
V. Conclusion
After careful consideration of the public comment, the United
States continues to believe that the proposed Final Judgment provides
an effective and appropriate remedy for the violation alleged in the
Complaint and is therefore in the public interest. The United States
will move this Court to enter the Final Judgment after the comment and
this response are published as required by 15 U.S.C. 16(d).
Dated: May 6, 2025.
Respectfully Submitted,
For Plaintiff United States of America
/s/ Kenneth A. Libby
-----------------------------------------------------------------------
Kenneth A. Libby,
Special Attorney for the United States, c/o Federal Trade
Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580, Tel:
(202) 326-2694, Email: <a href="/cdn-cgi/l/email-protection#a2c9cecbc0c0dbe2c4d6c18cc5cdd4"><span class="__cf_email__" data-cfemail="3e5552575c5c477e584a5d10595148">[email protected]</span></a>.
Exhibit A
Miercoles 08 Emero 2025
Dear Ms. Petrizzi,
Following news release on <a href="http://justice.gov">justice.gov</a> website. I'm submitting my
comments or questions about Tunney Act enforcement in USA vrs. XCL,
Verdun, EP energy.
1. DOJ is asking on penalties for HSR Act. The companies are
publicly traded? Iff, then where there public transactions on price for
stock affected by their concert in pricing. How is that being
litigated?
2. The price of by products, i.e. gas at the pump would have being
affected by those actions? That would mean civil penalties for those
affected?
[[Page 20193]]
I thank you for allowing to learn from your pursuit of the rule of
law. That premise of equality, freedom, and justice is what makes the
United States and its constitution a most beatiful country. Something
admirable and worth protecting.
Praying for your continued success.
Saludos cordiales,
[Redacted]
[FR Doc. 2025-08226 Filed 5-9-25; 8:45 am]
BILLING CODE 4410-11-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on May 12, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.