WASHINGTON -- The Federal Trade Commission (FTC) said that it would begin an investigation to determine whether rising retail gasoline prices are the result of market manipulation or other anticompetitive behavior, according to U.S. Senator Maria Cantwell (D-Wash.).
This marks the FTC's first use of new authority authored by Cantwell, which makes it a crime to manipulate wholesale oil markets. FTC Chairman Jon Leibowitz announced the investigation in a letter and phone call to Cantwell yesterday, saying that the Commission has authorized the use of "compulsory process," [image-nocss] including subpoenas, to determine whether certain players are in violation of a the law.
Cantwell first demanded an investigation three months ago in a bipartisan letter sent to the FTC urging the regulatory body to use the authority she granted it to actively police the markets and ensure consumers are paying fair and market-based prices at the pump.
"Americans deserve to know what's really behind the rapid increase in gas prices burdening families and businesses," Cantwell said Monday. "Bad actors who are artificially driving up gas prices ought to be brought to justice and face stiff punishment. I am pleased the FTC is using this new authority to protect consumers. The American public deserves to have aggressive policing of these markets and for the FTC to enforce these new laws."
In November 2009, the FTC's final Petroleum Market Manipulation Rule (click here) went into effect, which was promulgated in compliance with legislation Cantwell authored in 2005 and shepherded into law in 2007. The legislation sought to prevent manipulation schemes from happening in the oil industry by creating a federal ban on oil market manipulation.
Cantwell's provision empowers the FTC to levy civil penalties of up to $1 million per day. Over the course of the FTC's nearly two-year rulemaking needed to fulfill its congressionally mandated responsibility to prevent manipulation in the oil and petroleum markets, Cantwell pushed the FTC to lay out the strongest rules possible. The final FTC rule essentially adopted all of Cantwell's recommendations, she said.
In the letter sent to the FTC in March, Cantwell urged the FTC to be more proactive and aggressive in enforcing its market manipulation rule, noting the success the Federal Energy Regulatory Commission (FERC) has had in ferreting out bad actors in the electricity and natural gas markets using identical authority she helped author and shepherd into law.
Cantwell has long fought to prevent market manipulation and excessive speculation from artificially driving up the price of oil and prices faced by consumers at the pump. In recent months, she has called on the Commodity Futures Trading Commission (CFTC) to not delay any further in implementing overdue rules on speculative position limits. The 2010 Wall Street Reform bill called for the CFTC to implement speculative position limits in energy markets within 180 days of enactment. The CFTC is more than five months late on its January 2011 deadline to take action, she said.
According to Cantwell, numerous experts have concluded that excessive trading in oil futures is causing oil price volatility unrelated to supply-and-demand fundamentals and contributing to rising gasoline prices.
In recent weeks, CFTC Chairman Gary Gensler said that 80% of the oil futures market is held by speculators.
During last year's financial market reform debate, Cantwell pushed for tough and effective rules and the elimination of loopholes to prevent speculators from manipulating the oil market. She fought to ensure that the bill required the CFTC to enact position limits to diminish, eliminate or prevent excessive speculation that disrupts the market. Mandatory speculative position limits, which the CFTC are in the process of setting now, and strong anti-manipulation tools were main contributors to Cantwell's eventual support of the Wall Street reform law.
Click hereto read the full text of Lebowitz's letter.
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