40686 Federal Register / Vol. 74, No. 154 / Wednesday, August 12, 2009 / Rules and Regulations 

1 Section 811 is part of Subtitle B of Title VIII 

of EISA, which has been codified at 42 U.S.C. 

17301-17305. 

2 42 U.S.C. 17001-17386. 

3 42 U.S.C. 17301. 

4 42 U.S.C. 17302. 

5 Section 813(a) provides that Subtitle B shall be 

enforced by the FTC ‘‘in the same manner, by the 

same means, and with the same jurisdiction as 

though all applicable terms of the Federal Trade 

Commission Act [(‘‘FTC Act’’)] (15 U.S.C. 41 et seq.) 

were incorporated into and made a part of [Subtitle 

B].’’ Section 813(b) provides that a violation of any 

provision of Subtitle B ‘‘shall be treated as an unfair 

or deceptive act or practice proscribed under a rule 

issued under [S]ection 18(a)(1)(B) of the [FTC Act] 

(15 U.S.C. 57a(a)(1)(B)).’’ 42 U.S.C. 17303. 

6 Section 814(a) of Subtitle B provides that – ‘‘[i]n 

addition to any penalty applicable under the [FTC 

Act]’’ – ‘‘any supplier that violates [S]ection 811 or 

812 shall be punishable by a civil penalty of not 

more than $1,000,000.’’ Further, Section 814(c) 

provides that ‘‘each day of a continuing violation 

shall be considered a separate violation.’’ 42 U.S.C. 

17304. 

7 Section 815(a) provides that nothing in Subtitle 

B ‘‘limits or affects’’ Commission authority ‘‘to 

bring an enforcement action or take any other 

measure’’ under the FTC Act or ‘‘any other 

provision of law.’’ Section 815(b) provides that 

‘‘[n]othing in [Subtitle B] shall be construed to 

modify, impair, or supersede the operation’’ of: (1) 

any of the antitrust laws (as defined in Section 1(a) 

of the Clayton Act, 15 U.S.C. 12(a)), or (2) Section 

5 of the FTC Act ‘‘to the extent that . . . [S]ection 5 

applies to unfair methods of competition.’’ Section 

815(c) provides that nothing in Subtitle B 

‘‘preempts any State law.’’ 42 U.S.C. 17305. 

8 As the Commission stated in each of the prior 

Notices issued in this proceeding, the phrase 

‘‘crude oil gasoline or petroleum distillates’’ is used 

without commas in Section 811 (as well as in the 

first clause of Section 812), while the phrase is used 

with commas in Section 812(3): ‘‘crude oil, 

gasoline, or petroleum distillates.’’ The absence of 

commas is obviously a non-substantive, 

typographical error; therefore, the Commission 

reads all parts of both sections to cover all three 

types of products: crude oil, gasoline, and 

petroleum distillates. See FTC, Prohibitions On 

Market Manipulation and False Information in 

Subtitle B of The Energy Independence and Security 

Act of 2007, 73 FR 25614, 25621 n.59 (May 7, 2008); 

FTC, Prohibitions On Market Manipulation and 

False Information in Subtitle B of Title VIII of The 

Energy Independence and Security Act of 2007, 73 

FR 48317, 48320 n.40 (Aug. 19, 2008); FTC, 

Prohibitions On Market Manipulation in Subtitle B 

of Title VIII of The Energy Independence and 

Security Act of 2007, 74 FR 18304, 18305 n.11 (Apr. 

22, 2009). 

9 Rulemaking documents are available at: (http:// 

www.ftc.gov/ftc/oilgas/rules.htm). 

10 73 FR 25614. 

11 73 FR at 25620-24. The comment period for the 

ANPR closed on June 23, 2008, after the 

Commission granted an extension requested by a 

major industry trade association. Letter from the 

American Petroleum Institute to FTC Secretary 

Donald S. Clark, (May 19, 2008), available at 

(http://www.ftc.gov/os/comments/ 

marketmanipulation/ 

080519ampetrolinstreqeot.pdf); FTC, Prohibitions 

On Market Manipulation and False Information in 

Subtitle B of Title VIII of The Energy Independence 

and Security Act of 2007, 73 FR 32259 (June 6, 

2008). 

12 Attachment D contains a list of commenters 

who submitted comments on the ANPR. Electronic 

FEDERAL TRADE COMMISSION 

16 CFR Part 317 

[Project No. P082900] 

RIN 3084–AB12 

Prohibitions on Market Manipulation 

AGENCY: Federal Trade Commission. 

ACTION: Final Rule. 

SUMMARY: In this document, the Federal 

Trade Commission (‘‘Commission’’ or 

‘‘FTC’’) issues its Statement of Basis and 

Purpose (‘‘SBP’’) and final Rule, 

pursuant to Section 811 of Subtitle B of 

Title VIII of The Energy Independence 

and Security Act of 2007 (‘‘EISA’’).1 The 

final Rule prohibits any person, directly 

or indirectly, in connection with the 

purchase or sale of crude oil, gasoline, 

or petroleum distillates at wholesale, 

from knowingly engaging in any act, 

practice, or course of business – 

including the making of any untrue 

statement of material fact – that operates 

or would operate as a fraud or deceit 

upon any person, or intentionally failing 

to state a material fact that under the 

circumstances renders a statement made 

by such person misleading, provided 

that such omission distorts or is likely 

to distort market conditions for any 

such product. 

EFFECTIVE DATE: November 4, 2009. 

ADDRESSES: Requests for copies of the 

final Rule and the SBP should be sent 

to: Public Records Branch, Room 130, 

Federal Trade Commission, 600 

Pennsylvania Avenue, N.W., 

Washington, DC 20580. The complete 

record of this proceeding is also 

available at that address. Relevant 

portions of the proceeding, including 

the final Rule and the SBP, are available 

at (www.ftc.gov). 

FOR FURTHER INFORMATION CONTACT: 

Patricia V. Galvan, Deputy Assistant 

Director, Bureau of Competition, 

Federal Trade Commission, 600 

Pennsylvania Avenue, N.W., 

Washington, DC 20580, (202) 326-3772. 

SUPPLEMENTARY INFORMATION: 

Statement of Basis and Purpose 

I. Background 

EISA became law on December 19, 

2007.2 Subtitle B of Title VIII of EISA 

targets market manipulation in 

connection with the purchase or sale of 

crude oil, gasoline, or petroleum 

distillates at wholesale, and the 

reporting of false or misleading 

information related to the wholesale 

price of those products. Specifically, 

Section 811 prohibits ‘‘any person’’ 

from ‘‘directly or indirectly’’: (1) using 

or employing ‘‘any manipulative or 

deceptive device or contrivance,’’ (2) ‘‘in 

connection with the purchase or sale of 

crude oil gasoline or petroleum 

distillates at wholesale,’’ (3) that 

violates a rule or regulation that the FTC 

‘‘may prescribe as necessary or 

appropriate in the public interest or for 

the protection of United States 

citizens.’’3

Section 812 prohibits ‘‘any person’’ 

from reporting information that is 

‘‘required by law to be reported’’ – and 

that is ‘‘related to the wholesale price of 

crude oil gasoline or petroleum 

distillates’’ – to a federal department or 

agency if the person: (1) ‘‘knew, or 

reasonably should have known, [that] 

the information [was] false or 

misleading;’’ and (2) intended such false 

or misleading information ‘‘to affect 

data compiled by the department or 

agency for statistical or analytical 

purposes with respect to the market for 

crude oil, gasoline, or petroleum 

distillates.’’4

Subtitle B also contains three 

additional sections that address, 

respectively, enforcement of the Subtitle 

(Section 813),5 penalties for violations 

of Section 812 or any FTC rule 

promulgated pursuant to Section 811 

(Section 814),6 and the interplay 

between Subtitle B and existing laws 

(Section 815).7

After considering the rulemaking 

record in this proceeding, the 

Commission adopts the final Rule 

pursuant to its authority under Section 

811. The final Rule prohibits any 

person, directly or indirectly, in 

connection with the purchase or sale of 

crude oil, gasoline, or petroleum 

distillates at wholesale, from (a) 

knowingly engaging in any act, practice, 

or course of business – including the 

making of any untrue statement of 

material fact – that operates or would 

operate as a fraud or deceit upon any 

person, or (b) intentionally failing to 

state a material fact that under the 

circumstances renders a statement made 

by such person misleading, provided 

that such omission distorts or is likely 

to distort market conditions for any 

such product.8

II. The Rulemaking Proceeding 

The rulemaking proceeding9 began 

with the publication of an Advance 

Notice of Proposed Rulemaking 

(‘‘ANPR’’) on May 7, 2008.10 In the 

ANPR, the Commission solicited 

comments on whether it should 

promulgate a rule under Section 811, 

and, if so, the appropriate scope and 

content of such a rule.11 In response to 

the ANPR, the Commission received 155 

comments from interested parties.12


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versions of the comments are available at: (http:// 

www.ftc.gov/os/comments/marketmanipulation/ 

index.shtm). In calculating the number of 

comments submitted in response to a Notice issued 

in this proceeding, the Commission treated multiple 

filings by the same commenter, or a comment filed 

jointly by a group of commenters, as a single 

comment. 

13 Section II.A. of the Notice of Proposed 

Rulemaking (‘‘NPRM’’) discusses commenters’ 

views and the Commission’s response to 

commenters on the propriety of a Section 811 rule. 

See 73 FR at 48320-23. 

14 Section III. of the ANPR provides an overview 

of the antecedents of Section 811 and relevant legal 

precedent. See 73 FR at 25616-19. Section I.B. of 

the NPRM describes ANPR commenters’ views on 

the appropriate model for a Section 811 rule. See 

73 FR at 48319 & nn.31-32. 

15 See Securities Exchange Act of 1934 (‘‘SEA’’) 

10(b), 15 U.S.C. 78j(b); 17 CFR 240.10b-5 (‘‘Rule 

10b-5’’). 

16 See Natural Gas Act 4A, 15 U.S.C. 717c-1; 

Federal Power Act 222, 16 U.S.C. 791a; Prohibition 

of Natural Gas Market Manipulation, 18 CFR 1c.1; 

Prohibition of Electric Energy Market Manipulation, 

18 CFR 1c.2. 

17 See Commodity Exchange Act (‘‘CEA’’) 9(a)(2), 

7 U.S.C. 13(a)(2). 

18 73 FR 48317. 

19 73 FR at 48332-34. In response to a petition 

from a major trade association, the Commission 

extended the deadline for submission of comments 

on the NPRM from September 18, 2008, to October 

17, 2008. Letter from the American Petroleum 

Institute to FTC Secretary Donald S. Clark, (Sept. 

5, 2008), available at (http://www.ftc.gov/os/ 

comments/marketmanipulation2/538416- 

00006.pdf); FTC, Prohibitions on Market 

Manipulation and False Information in Subtitle B 

of Title VIII of The Energy Independence and 

Security Act of 2007, 73 FR 53393 (Sept. 16, 2008). 

20 Attachment B contains a list of commenters 

who responded to the NPRM. 

21 Attachment C contains a list of participants in 

the workshop. The discussion topics for the 

workshop included the use of SEC Rule 10b-5 as a 

model for an FTC market manipulation rule; the 

proper scienter standard for a rule; the appropriate 

reach of a rule; the type of conduct that would 

violate a rule; and the desirability of including 

market or price effects as an element of a rule 

violation. Information relating to the workshop, 

including a program, transcript, and archived 

webcast, is available at: (http://www.ftc.gov/bcp/ 

workshops/marketmanipulation/index.shtml). 

22 Section IV.A. of the Revised Notice of Proposed 

Rulemaking (‘‘RNPRM’’) provides an overview of 

NPRM commenters’ and workshop participants’ 

views regarding the proposed Rule. See 74 FR at 

18308-10. 

23 74 FR 18304. 

24 Attachment A contains a list of commenters 

who submitted comments on the RNPRM, together 

with the abbreviations used to identify each 

commenter referenced in this SBP. All commenter 

references are to those comments submitted in 

response to the RNPRM, unless otherwise noted. 

25 42 U.S.C. 17301. Section 811 states: 

It is unlawful for any person, directly or 

indirectly, to use or employ, in connection with the 

purchase or sale of crude oil[,] gasoline[,] or 

petroleum distillates at wholesale, any 

manipulative or deceptive device or contrivance, in 

contravention of such rules and regulations as the 

Federal Trade Commission may prescribe as 

necessary or appropriate in the public interest or for 

the protection of United States citizens. 

26 73 FR at 48320-21. 

27 ‘‘Perhaps no other industry’s performance is so 

visibly and deeply felt.’’ FTC Bureau of Economics, 

The Petroleum Industry: Mergers, Structural 

Continued 

Commenters expressed differing views 

regarding the desirability of and the 

appropriate legal basis for any such 

rule.13 They also proposed a variety of 

models upon which to base a market 

manipulation rule, including those used 

by other federal agencies pursuant to 

each agency’s respective market 

manipulation authority,14 such as the 

Securities and Exchange Commission 

(‘‘SEC’’),15 the Federal Energy 

Regulatory Commission (‘‘FERC’’),16

and the Commodity Futures Trading 

Commission (‘‘CFTC’’).17

After reviewing the ANPR comments, 

on August 19, 2008, the Commission 

published a Notice of Proposed 

Rulemaking (‘‘NPRM’’)18 setting forth 

the text of a proposed Rule modeled on 

SEC Rule 10b-5 and inviting written 

comments on issues raised by the 

proposed Rule.19 The NPRM described 

the basis for and scope of the proposed 

Rule; definitions of terms in the Rule; 

conduct prohibited by the Rule; and the 

elements of a cause of action under the 

Rule. In response to the NPRM, the 

Commission received 34 comments 

from interested parties.20 On November 

6, 2008, Commission staff held a oneday public workshop on the proposed 

Rule.21 Commenters and workshop 

participants presented views concerning 

several key issues relating to the 

proposed Rule, particularly regarding 

the application of a SEC Rule 10b-5 

model to wholesale petroleum markets 

and the relevance of securities law to 

the petroleum industry.22

The Commission published a Revised 

Notice of Proposed Rulemaking 

(‘‘RNPRM’’) setting forth a revised 

proposed Rule on April 22, 2009,23 and 

describing certain modifications to the 

initially proposed Rule and the basis for 

the modifications. As with the initially 

proposed Rule, the Commission based 

the revised proposed Rule on the antifraud model of SEC Rule 10b-5, but 

modified the revised proposed Rule to 

accommodate differences between 

securities markets and wholesale 

petroleum markets. The RNPRM also set 

forth questions and alternative rule 

language designed to elicit further views 

from interested parties. In response to 

the RNPRM, the Commission received 

17 comments from interested parties, 

including a consumer advocacy group, a 

United States Senator, an academic, a 

federal agency, industry members, 

energy news and price reporting 

organizations, and trade and bar 

associations.24

The Commission has reviewed the 

entire record in this proceeding, 

including comments submitted in 

response to the RNPRM. Based on this 

review, as well as its extensive 

petroleum industry law enforcement 

experience, the Commission hereby 

adopts a final Rule that is virtually 

identical to the revised proposed Rule. 

The Commission’s analysis of certain 

commenter proposals and its basis for 

adopting each of the final Rule’s 

provisions are detailed below. 

III. Legal Basis for the Rule 

Section 811 of EISA provides the legal 

basis for the final Rule. Section 811 

prohibits ‘‘any person’’ from ‘‘directly or 

indirectly’’ using or employing ‘‘any 

manipulative or deceptive device or 

contrivance’’ – in connection with the 

purchase or sale of crude oil, gasoline, 

or petroleum distillates at wholesale – 

that violates a rule or regulation that the 

Commission ‘‘may prescribe as 

necessary or appropriate in the public 

interest or for the protection of United 

States citizens.’’25 In enacting Section 

811, Congress specifically authorized 

the Commission to determine whether a 

rule prohibiting manipulative conduct 

in wholesale petroleum markets would 

be appropriate and in the public 

interest. As the Commission explained 

in the NPRM in this proceeding: 

[T]he initial inquiry in determining 

whether it should promulgate a rule 

requires understanding the phrase 

‘‘necessary or appropriate in the 

public interest or for the protection of 

United States citizens.’’ The use of the 

disjunctive ‘‘or’’ in the first clause of 

this phrase indicates that the 

Commission would be within its 

[authority] to promulgate a rule that is 

either: (1) ‘‘necessary . . . in the public 

interest or for the protection of United 

States citizens,’’or (2) ‘‘appropriate in 

the public interest or for the 

protection of United States citizens.’’ 

Similarly, the Commission need only 

show that a rule would be either ‘‘in 

the public interest’’ or ‘‘for the 

protection of United States citizens.’’ 

Thus, the Commission could proceed 

in its rulemaking if, at a minimum, 

the endeavor is ‘‘appropriate . . . in the 

public interest.’’26

The Commission has determined that 

the final Rule – which defines for 

market participants the Section 811 

statutory prohibition against using or 

employing ‘‘any manipulative or 

deceptive device or contrivance’’ – is 

appropriate and in the public interest. 

The prices of petroleum products 

significantly affect the daily lives of 

American consumers and the daily 

operations of American businesses.27


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Change, and Antitrust Enforcement, at 1 (Aug. 

2004), available at (http://www.ftc.gov/os/2004/08/ 

040813mergersinpetrolberpt.pdf). 

28 Markets absorb all available information – good 

or bad – and continually adjust price signals and 

other market data to any new information. When 

economic actors can presume that market data have 

not been artificially manipulated, they can rely on 

that data to make decisions that they believe will 

advance their individual economic objectives. 

Fraudulent or deceptive conduct taints the integrity 

of the market process. 

29 Commenters recognized the negative effects of 

fraud and deceit in wholesale petroleum markets. 

See, e.g., CAPP, ANPR, at 1 (‘‘CAPP recognizes that 

fraud and manipulation pose a potential threat to 

the successful and efficient functioning of 

petroleum markets in North America.’’ ); MFA, 

ANPR, at 1 (‘‘Price manipulation has a corrosive 

effect on the proper functioning of any market.’’ ); 

API, ANPR, at 50 (‘‘We agree that the provision of 

false or misleading pricing information to private 

reporting entities could be problematic.’’ ); 

Sutherland, ANPR, at 3 (‘‘[O]il marketers and 

traders are the first victims of unfair business 

practices. They, therefore, support efforts by 

Congress to deter manipulation and the use of 

deceptive devices.’’ ); see also MS AG, NPRM, at 

2 (‘‘The proposed Rule will benefit consumers 

significantly because market manipulation can 

artificially inflate prices of petroleum products and 

cause consumers to pay more for essential goods, 

such as gasoline.’’ ). 

30 See 73 FR at 48321 (noting that ‘‘a rule that 

allows the Commission to guard against conduct 

that undermines the integrity of the petroleum 

market would be in the public interest’’). 

31 15 U.S.C. 78j(b). 

32 Id. (emphasis added). See generally Ernst & 

Ernst v. Hochfelder, 425 U.S. 185, 197 (1976). 

33 The language from the Securities Act of 1933 

also supported issuance of SEC Rule 10b-5. Section 

17(a) of the Securities Act of 1933 originally 

prohibited: 

any person in the sale of securities by the use of 

any means or instruments of transportation or 

communication in interstate commerce or by the 

use of the mails, directly or indirectly – 

(1) to employ any device, scheme or artifice to 

defraud, or 

(2) to obtain money or property by means of any 

untrue statement of a material fact or any omission 

to state a material fact necessary in order to make 

the statements made, in the light of the 

circumstances under which they were made, not 

misleading, or 

(3) to engage in any transaction, practice, or 

course of business which operates or would operate 

as a fraud or deceit upon the purchaser. 

Through the promulgation of Rule 10b-5, the SEC 

intended, inter alia, to apply the same prohibitions 

contained in Section 17(a) of the 1933 Act to 

purchasers as well as to sellers. Birnbaum v. 

Newport Steel Corp., 193 F.2d 461, 463 (2d Cir. 

1952). Amended several times over the intervening 

years, the current text of Section 17(a) is codified 

at 15 U.S.C. 77q(a). 

34 17 CFR 240.10b-5. In addition, the SEC’s rules 

under SEA Section 10(b) prohibit a number of 

specific practices in specific circumstances. See 17 

CFR 240.10b-1 through 240.10b-18. 

35 Schreiber v. Burlington Northern, Inc., 472 U.S. 

1, 6 (1985) (quoting Ernst & Ernst, 425 U.S. at 199)) 

(emphasis in original). The Supreme Court has 

defined ‘‘the term [manipulation to refer] generally 

to practices, such as wash sales, matched orders, or 

rigged prices, that are intended to mislead investors 

by artificially affecting market activity.’’ Santa Fe 

Indus., Inc. v. Green, 430 U.S. 462, 476 (1977). ‘‘A 

matched order is the entering of a sell (or buy) order 

knowing that a corresponding buy (or sell) order of 

substantially the same size, at substantially the 

same time and at substantially the same price either 

has been or will be entered. A wash trade [or wash 

sale] is a securities transaction which involves no 

change in the beneficial ownership of the security. 

Parking [another form of manipulation] is the sale 

of securities subject to an agreement or 

understanding that the securities will be 

repurchased by the seller at a later time and at a 

price which leaves the economic risk on the seller.’’ 

SEC v. Farni, Exchange Act Release No. 39133 

(Sept. 25, 1997), available at (http://www.sec.gov/ 

litigation/admin/3439133.txt). 

36 See FERC, Prohibition of Energy Market 

Manipulation, 71 FR 4244, 4246 (Jan. 26, 2006) 

(final anti-manipulation Rule). 

37 Section 4A of the Natural Gas Act, 15 U.S.C. 

717c-1; Section 222 of the Federal Power Act, 16 

U.S.C. 824v. 

38 7 U.S.C. 5(b); accord Merrill Lynch, Pierce, 

Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 372 

n.50 (1982). 

39 7 U.S.C. 2(a)(1)(A). 

40 7 U.S.C. 2(a)(1)(A), (C)-(D). 

41 See, e.g., In the Matter of CMS Mktg. Servs. & 

Trading Co., Comm. Fut. L. Rep. (CCH) Õ 29,634 

(C.F.T.C. Nov. 25, 2003) (finding liability for the 

submission of false information to private reporting 

services); see also Wilson v. CFTC, 322 F.3d 555, 

560-61 (8th Cir. 2003) (affirming the CFTC’s order 

Because fraudulent or deceptive 

conduct within wholesale petroleum 

markets injects false information into 

the market process, it distorts market 

data and thus undermines the ability of 

consumers and businesses to make 

purchase and sales decisions congruent 

with their economic objectives.28 As a 

consequence, decision-making risks and 

attendant costs increase, and economic 

efficiency declines in the overall 

economy. Fraudulent or deceptive 

conduct within wholesale petroleum 

markets thus can have wide ranging 

ramifications throughout the United 

States economy.29 For these reasons, the 

Commission has determined to issue the 

final Rule.30

Well-established statutory, judicial, 

and regulatory constructs and principles 

– and the language of Section 811 itself 

– strongly support the final Rule. As the 

Commission noted in the ANPR, the 

Section 811 prohibition of the use or 

employment of any ‘‘manipulative or 

deceptive device or contrivance’’ is 

virtually identical to the prohibition in 

Section 10(b) of the Securities Exchange 

Act of 1934 (‘‘SEA’’).31 Specifically, 

SEA Section 10(b) prohibits the use or 

employment of: 

any manipulative or deceptive device 

or contrivance in contravention of 

such rules as the [SEC] may prescribe 

as necessary or appropriate in the 

public interest or for the protection of 

investors.32

Relying upon SEA Section 10(b),33 the 

SEC promulgated its anti-fraud rule, 

Rule 10b-5, making it unlawful for any 

person: 

(a) To employ any device, scheme, or 

artifice to defraud; 

(b) To make any untrue statement of 

a material fact or to omit to state a 

material fact necessary in order to make 

the statements made, in the light of the 

circumstances under which they were 

made, not misleading . . .; or 

(c) To engage in any act, practice, or 

course of business which operates or 

would operate as a fraud or deceit upon 

any person. . . . 

in connection with the purchase or 

sale of any security.34

In examining SEA Section 10(b) and 

SEC Rule 10b-5, the Supreme Court has 

stated that the statute, as enforced 

through the rule, prohibits ‘‘intentional 

or willful conduct designed to deceive 

or defraud investors by controlling or 

artificially affecting the price of 

securities.’’35

The FERC relied upon a statutory 

framework similar to the securities laws 

to promulgate largely identical rules 

prohibiting natural gas market 

manipulation and electric energy market 

manipulation.36 The Energy Policy Act 

of 2005 amended the Natural Gas Act 

and the Federal Power Act to prohibit 

precisely the same type of conduct as 

SEA Section 10(b); that is, the use or 

employment of ‘‘any manipulative or 

deceptive device or contrivance (as 

those terms are used in [SEA Section 

10(b)] . . .)’’ in natural gas and electricity 

markets.37

Similar statutory and regulatory 

frameworks prohibit the use of 

manipulative practices in other parts of 

the economy. The Commodity Exchange 

Act (‘‘CEA’’) is intended, among other 

things, ‘‘to deter and prevent price 

manipulation or any other disruptions 

to market integrity . . . .’’38 The CEA 

provides that the CFTC possesses 

jurisdiction for ‘‘transactions involving 

contracts of sale of a commodity for 

future delivery, traded or executed on a 

contract market . . . or derivatives 

transaction execution facility . . . or any 

other board of trade, exchange, or 

market . . . .’’39 It further provides for 

CFTC anti-manipulation authority over 

cash and physical transactions, as well 

as certain derivatives transactions 

relating to securities.40

The SEC, the FERC, and the CFTC all 

have taken action against market 

manipulation pursuant to the 

authorities described above. For 

example, the CFTC has initiated law 

enforcement actions against defendants 

for submitting false statements to 

private reporting services, government 

agencies, and the news media, and for 

engaging in trading practices that give 

the false appearance of trading 

activity.41 The FERC similarly has found 


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finding defendant engaged in wash sales and 

imposing sanctions); United States v. Reliant Energy 

Servs., Inc., 420 F. Supp. 2d 1043, 1059-60 (N.D. 

Cal. 2006) (finding allegations that defendant 

withheld supply from the market while 

intentionally disseminating false and misleading 

rumors and information to the California 

Independent System Operator, brokers, and other 

traders regarding defendant’s power generation 

plants were sufficient to withstand a motion to 

dismiss for failure to state a claim of manipulation). 

42 See, e.g., FERC, Final Report on Price 

Manipulation in Western Markets, Dkt. No. PA02- 

2-000 (Mar. 2003), available at (http:// 

www.ferc.gov/industries/electric/indus-act/ 

wec.asp). The FERC issued a Policy Statement and 

promulgated regulations to address price formation 

concerns that resulted from the reporting of false 

information to price index publishers. See FERC, 

Transparency Provisions of Section 23 of the 

Natural Gas Act, 73 FR 1014 (Jan. 4, 2008); FERC, 

Report on Natural Gas and Electricity Price Indices, 

Dkt. No. PL03-3-004, AD03-7-004 (May 5, 2004), 

available at (http://www.ferc.gov/EventCalendar/ 

Files/20040505135203-Report-Price-Indices.pdf); 

FERC, Policy Statement on Natural Gas and Electric 

Price Indices, 104 F.E.R.C. ? 61,121 (July 24, 2003). 

43 See, e.g., SEC v. Rana Research, Inc., 8 F.3d 

1358, 1361, 1364 (9th Cir. 1993) (finding that the 

defendant’s press release contained materially false 

and misleading statements); SEC v. Softpoint, Inc., 

958 F. Supp. 846 (S.D.N.Y. 1997) (finding defendant 

liable under SEC Rule 10b-5 when defendant 

disseminated false information to the market 

through press releases and SEC filings). 

44 The Commission believes that the language of 

Section 811 reflects congressional intent that the 

Commission look to SEC Rule 10b-5 in crafting a 

market manipulation rule. See Evans v. United 

States, 504 U.S. 255, 260 n.3 (1992) (‘‘‘[I]f a word 

is obviously transplanted from another legal source, 

whether the common law or legislation, it brings 

the old soil with it.’’’ (quoting Felix Frankfurter, 

Some Reflections on the Reading of Statutes, 47 

Colum. L. Rev. 527, 537 (1947))); Morissette v. 

United States, 342 U.S. 246, 263 (1952) (noting 

where Congress borrows terms of art it ‘‘presumably 

knows and adopts the cluster of ideas that were 

attached to each borrowed word’’); see also Nat’l 

Treasury Employees Union v. Chertoff, 452 F.3d 

839, 857 (D.C. Cir. 2006) (stating that ‘‘[t]here is a 

presumption that Congress uses the same term 

consistently in different statutes.’’ ). 

45 73 FR at 48322. 46 Most NPRM commenters who addressed the 

initially proposed Rule opined that it would be 

appropriate. See, e.g., ATA, NPRM, at 2 (supporting 

the proposed Rule ‘‘as an additional tool to help 

preserve the integrity of vital energy markets’’); 

IPMA, NPRM, at 4 (‘‘The proposed Rule does meet 

the rulemaking standard that it is ‘necessary or 

appropriate in the public interest or for the 

protection of United States[] citizens.’’’ ); see also 

MFA, ANPR, at 4-5 (‘‘We believe the Commission 

should adopt appropriate rules prohibiting 

manipulation in the purchase and sale of crude oil, 

gasoline and petroleum distillates at wholesale 

. . . .’’ ). 

47 As with prior comments submitted in this 

proceeding, most RNPRM commenters directed 

their statements to the application of a Section 811 

rule, rather than to whether the revised proposed 

Rule met Section 811’s rulemaking standard. See 

also 74 FR at 18308 n.40 (noting that most NPRM 

commenters focused their comments on the 

application of the proposed Rule). See, e.g., CAPP 

at 1-2 (opining that the modifications to the revised 

proposed Rule – including, in particular, the 

adoption of an express scienter standard and the 

inclusion of market conditions language in the 

omissions section – ensured that the Rule ‘‘would 

serve the public interest’’); CFA at 4 (stating that the 

revised proposed Rule ‘‘promotes the public 

interest and is perfectly consistent with the 

legislative language’’); PMAA at 3 (noting that the 

revisions to the revised proposed Rule are 

‘‘appropriate’’); see also ATAA at 2-3 

(‘‘applaud[ing] the Commission’s decision to 

exercise its rulemaking authority,’’ arguing that 

‘‘[m]arket manipulation, fraud, and deceptive 

practices distort the market, inflate prices, and 

inure to the detriment of the entire economy’’). But 

see API at 2, 4-5 (disagreeing that a Section 811 rule 

would be appropriate because, in its view, a 

weighing of ‘‘likely benefits and costs supports a 

decision not to promulgate any rule at this time’’). 

48 In final Rule Section 317.3(b), the Commission 

has substituted the phrase ‘‘is likely’’ for the word 

‘‘tends’’ in revised proposed Rule Section 317.3(b). 

See Section IV.D.3.b. below for further discussion. 

The Commission also has modified the definition 

of ‘‘knowingly.’’ See Section IV.C.3. below for 

further discussion. 

49 See 74 FR at 18310. 

50 See United States v. Russo, 74 F.3d 1383, 1391 

(2d Cir. 1996) (‘‘[F]rauds which ‘mislead[] the 

general public as to the market value of securities’ 

and ‘affect the integrity of the securities markets’ 

. . . fall well within [Rule 10b-5].’’ (quoting In re 

Ames Dep’t Stores, Inc. Stock Litig., 991 F.2d 953, 

966 (2d Cir. 1993))) (citation omitted); see also 

Superintendent of Ins. of N.Y. v. Bankers Life & Cas. 

Co., 404 U.S. 6, 12 (1971) (stating that ‘‘‘preserving 

the integrity of securities markets’’’ is one of the 

purposes of Section 10(b) (quoting Superintendent 

of Ins. of N.Y. v. Bankers Life & Cas. Co., 430 F.2d 

355, 261 (2d Cir. 1970))). 

51 See, e.g., API at 29 (‘‘The proper objective of 

any rule issued under Section 811 is to cover 

deceptive conduct . . . .’’ ); CAPP at 2 (‘‘Manipulative 

conduct that makes use of false information in 

market transactions does not constitute routine or 

acceptable commercial behavior, and is reasonably 

within the scope of prohibited conduct.’’ ); CFDR 

(Mills), Tr. at 38-39 (‘‘From my point of view, fraud 

is a good demarcation for any antimanipulation 

rule, because it provides a basis by which people 

can govern themselves and know with some 

understanding of what kind of conduct is going to 

violate a rule or not.’’ ); PMAA (Bassman), Tr. at 

47 (‘‘[U]sing fraud . . . is very clear, because none of 

the people operating in this market operate without 

the benefit of legal counsel. Any legal counsel 

understands the concept of fraud, and fraud does 

belong here.’’ ); NPRA, NPRM, at 2 (‘‘NPRA 

endorses the FTC’s determination that 

implementation of the EISA should be 

accomplished through a rule against fraud and 

deception that harms the competitive functioning of 

wholesale petroleum markets and, ultimately, 

consumers.’’ ). 

52 See 15 U.S.C. 78j(b). As noted above, the antimanipulation authority granted to the FERC also 

contains the identical conduct prohibition, and the 

statute granting that authority explicitly directed 

Continued 

evidence of practices such as false 

reporting to price index publishers.42 In 

addition, the SEC has pursued law 

enforcement actions against actors that 

have disseminated false information to 

the market, and against actors that have 

engaged in conduct creating the false 

appearance of trading activity.43

When Congress authorized the FTC to 

prohibit the use or employment of 

manipulative or deceptive devices or 

contrivances, it empowered the 

Commission to rely upon the foregoing 

statutory, judicial, and regulatory 

principles to promulgate its Rule.44 The 

final Rule, based at least in part on SEC 

Rule 10b-5, will prohibit practices that 

inject false information into 

transactions. The final Rule thereby 

helps to protect the integrity of the price 

discovery process in wholesale 

petroleum markets. Moreover, the final 

Rule will prevent the same types of 

fraudulent or deceptive practices that 

the SEC, the CFTC, and the FERC have 

pursued in the markets they 

respectively regulate and will strike at 

the core of what EISA explicitly 

proscribes – market manipulation.45

This conclusion finds support in the 

rulemaking record. Throughout the 

proceeding, most commenters 

supported the FTC’s proposal to 

promulgate a market manipulation 

rule,46 and most RNPRM commenters 

that addressed the issue opined that the 

revised proposed Rule would be 

appropriate and in the public interest.47

The Commission has determined, 

therefore, that the final Rule – which at 

its most fundamental level prohibits 

fraudulent or deceptive conduct – is 

appropriate and in the public interest. 

IV. Discussion of the Final Rule 

A. Overview 

After reviewing the full rulemaking 

record developed in this proceeding, the 

Commission has concluded that 

promulgating a final Rule that is 

virtually identical to the revised 

proposed Rule best reflects 

congressional intent while 

accommodating the specific 

characteristics of wholesale petroleum 

markets. The final Rule therefore differs 

from the revised proposed Rule only as 

a consequence of two clarifying 

changes.48 In the RNPRM, the 

Commission tentatively determined to 

modify the proscriptions of the initially 

proposed Rule – which were nearly 

identical to SEC Rule 10b-5 – in order 

to account for differences between 

wholesale petroleum markets and 

securities markets.49 The Commission 

has now concluded that the revised 

proposed Rule, promulgated as the final 

Rule, would prevent manipulative 

conduct in wholesale petroleum 

markets while limiting attendant costs, 

a primary concern for many industry 

commenters. 

In tailoring the final Rule, the 

Commission has accounted for Section 

811’s direction that the final Rule be an 

anti-fraud rule guided by the principles 

of SEC Rule 10b-5 and relevant 

precedent. These principles focus on the 

protection of market integrity.50 The 

rulemaking record reflects support for 

an anti-fraud standard.51 Although the 

conduct prohibition in Section 811 is 

identical to language found in SEA 

Section 10(b),52 the inclusion of the 


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the FERC to rely upon SEA Section 10(b) in 

defining the terms ‘‘manipulative or deceptive 

device or contrivance.’’ See 15 U.S.C. 717c-1; 16 

U.S.C. 824v. 53 Some commenters argued that the final Rule 

should extend to conduct such as speculative 

activity or the unilateral exercise of market power, 

because in their view such conduct is inherently 

manipulative. See, e.g., CFA at 8 (arguing that the 

Commission ‘‘could have considered the exercise of 

market power and excessive speculation as 

manipulation’’ because they ‘‘have no economic 

justification’’); Greenberger at 1 (opining that the 

proposed Rule could offer a tough enforcement 

mechanism against speculative activity); Senator 

Cantwell at 2-3 (asserting that Congress intended for 

the FTC’s rule to reach a broad range of conduct, 

including the withholding of supply); Pirrong, 

NPRM, at 2 (arguing that the proposed Rule should 

not focus on fraud or deceit, but rather on the 

exercise of market power). However, the rulemaking 

record does not support extending the final Rule to 

cover such conduct, except to the extent that the 

practices used are part of a course of conduct that 

otherwise violates the final Rule. 

54 Many commenters, in this regard, urged the 

Commission to be cognizant of the realities of 

normal business practice within wholesale 

petroleum markets so as to avoid crafting a rule that 

unduly chills legitimate business conduct. See 

ISDA at 5-6; API at 32; Sutherland at 3. For 

example, commenters asserted that discerning an 

unlawful material omission in the context of 

complex wholesale petroleum market transactions 

would be far more difficult than in securities 

markets. See CFDR at 4; API at 15. 

55 74 FR at 18316. 

56 See 74 FR at 18316. 

57 Section 813(a) of EISA provides that Subtitle 

B shall be enforced by the FTC ‘‘in the same 

manner, by the same means, and with the same 

jurisdiction as though all applicable terms of the 

[FTC] Act (15 U.S.C. 41 et seq.) were incorporated 

into and made a part of [Subtitle B].’’ 42 U.S.C. 

17303 (emphasis added). 

58 In response to the RNPRM, AOPL continued 

to urge the Commission to ‘‘state explicitly that oil 

pipelines regulated by FERC under the [Interstate 

Commerce Act] are outside the coverage’’ of any 

FTC rule. AOPL at 1-2. ATAA, on the other hand, 

continued to oppose any safe harbors or exemptions 

for pipelines in order to give full effect to the 

purpose of EISA. ATAA at 3-4 (‘‘[N]othing in either 

Section 811 or Subtitle B suggests the FTC should 

consider limiting or competing concerns in its 

implementing regulations.’’ ); see also PMAA at 2 

(agreeing with the Commission’s decision not to 

adopt a safe harbor for pipelines); cf. Greenberger 

at 3 (contending that the Commission should ‘‘not 

offer[] an overly broad safe harbor from the FTC’s 

statutorily mandated jurisdiction’’). 

Other commenters renewed their request for the 

Commission to recognize what they believed to be 

the CFTC’s ‘‘exclusive jurisdiction’’ over futures 

markets by making clear that its rule would not 

extend to futures trading activity. See CFTC at 2 

(‘‘There is no language in EISA that supersedes or 

limits the CFTC’s exercise of [the CEA’s] exclusive 

jurisdiction over futures trading.’’ ); MFA at 2 

(asking ‘‘the Commission to adopt a safe harbor 

from its proposed Part 317 rules for futures markets 

activities’’ and that ‘‘the safe harbor . . . apply even 

if the market participant’s futures trading allegedly 

had an impact on cash or other non-futures market 

oil or gasoline prices’’); see also Sutherland at 4 

(stating that ‘‘to prosecute conduct already 

regulated by the CFTC . . . will waste sparse 

resources and increase the costs to all market 

participants’’). But see, e.g., 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.’’ ); 

Greenberger at 2 (‘‘Congress clearly intended the 

FTC to have power in this area that would not be 

blocked by the CFTC . . . .’’ ); CFA at 8 (stating that 

Congress did not preclude the Commission from 

extending its rule to futures markets). See generally 

Section IV.B. of the RNPRM for a discussion of the 

arguments previously raised by commenters 

regarding the jurisdictional scope of any Section 

811 rule with respect to pipelines and futures 

markets. 74 FR at 18310-11. 

language ‘‘as necessary or appropriate’’ 

in Section 811 provides the Commission 

with flexibility – within the framework 

of an anti-fraud model – to use its 

expertise to tailor the Rule to the 

characteristics of wholesale petroleum 

markets. 

The Commission therefore has 

promulgated an anti-fraud Rule that, 

although modeled on SEC Rule 10b-5, is 

tailored to account for significant 

differences between wholesale 

petroleum markets and securities 

markets.53 In this regard, the 

Commission has determined that the 

level of needed protection against fraud 

or deceit in wholesale petroleum market 

transactions should take into account 

that market participants typically are 

sophisticated and experienced 

commercial actors who are able to 

engage in a substantial amount of self 

protection, including filling in relevant 

information gaps. By contrast, small 

individual retail securities investors 

often possess less complete information 

than counter-parties such as securities 

brokers – and may also be significantly 

less sophisticated in discerning relevant 

information gaps. Additionally, the 

regulatory system overlaying securities 

markets, of which SEC Rule 10b-5 is a 

part, prescribes more comprehensive 

requirements – including in particular 

more comprehensive disclosure 

requirements – than the regulatory 

system applicable to wholesale 

petroleum markets.54 Accounting for 

these contextual differences in crafting 

the final Rule, the Commission has 

sought to achieve the appropriate 

balance between the flexibility needed 

to prohibit fraud-based market 

manipulation without burdening 

legitimate business activity. To achieve 

this result, the final Rule differs from 

the initially proposed Rule in three 

significant ways. 

First, the final Rule, like the revised 

proposed Rule, comprises a two-part 

conduct prohibition in contrast to the 

three-part conduct prohibition in the 

initially proposed Rule. The 

consolidation of parts ‘‘more clearly and 

precisely denote[s] the unlawful 

conduct [that the Rule] prohibits.’’55

Second, each paragraph of the conduct 

prohibition in the final Rule contains an 

explicit and tailored scienter standard.56

The Commission has adopted differing 

scienter standards in order to address 

commenters’ concerns that the initially 

proposed Rule – which used only a 

single, ‘‘knowingly’’ scienter standard – 

would have chilled some legitimate 

business conduct, especially with 

respect to the prohibition on misleading 

omissions of material facts from 

affirmative statements. Third, the final 

Rule prohibits only those omissions of 

material facts that distort or are likely to 

distort market conditions for a covered 

product. This limitation too addresses 

concerns about unintended interference 

with legitimate business activity. 

B. Section 317.1: Scope 

Section 813 provides the Commission 

with the same jurisdiction and power 

under Subtitle B of EISA as does the 

FTC Act, 15 U.S.C. 41 et seq.57 With 

certain exceptions, the FTC Act 

provides the agency with jurisdiction 

over nearly every economic sector. 

Because EISA does not expand or 

contract coverage under the FTC Act, 

any ‘‘person’’ engaged in any activity 

subject to Commission jurisdiction 

under the FTC Act is covered by the 

final Rule. Conversely, any ‘‘person’’ 

engaged in any activity not subject to 

Commission jurisdiction under the FTC 

Act is not subject to Commission 

jurisdiction under the final Rule. 

The only comments received in 

response to the RNPRM with respect to 

the scope of a final rule concerned 

pipelines and futures markets, and 

contained essentially the same 

arguments the commenters had made in 

previous comments.58 The Commission 

rejects the latest arguments, and 

reiterates that the scope of the final Rule 

is coextensive with the reach of the FTC 

Act. 

With respect to pipelines, as the 

Commission stated in the RNPRM, not 

all pipelines necessarily fall outside the 

coverage of the FTC Act. Certain 

pipeline companies or their activities 

may fall outside the coverage of the FTC 

Act to the extent that they are acting as 

common carriers. However, pipeline 

companies and their owners or affiliates 

often are involved in multiple aspects of 

the petroleum industry – including the 

purchase or sale of petroleum products, 

and the provision of transportation 

services – and they may engage in 

conduct in connection with wholesale 

petroleum markets covered by EISA. 

The Commission has therefore 

determined that it must assess on a caseby-case basis whether any particular 

person – or any conduct at issue – falls 

outside the scope of the final Rule, and/ 


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59 7 U.S.C. 2(a)(1)(A). 

60 74 FR at 18310-12; 73 FR at 48323-25. Several 

commenters supported the Commission’s intention 

to work cooperatively with other agencies in 

exercising its Section 811 authority. CFTC at 2; 

MFA at 4; ISDA at 3; see also 74 FR at 18311 n.82. 

61 74 FR at 18312. 

62 74 FR at 18312; 73 FR at 48325. 

63 74 FR at 18312 (adopting the initially proposed 

Rule’s definition of ‘‘gasoline’’). 

64 See IPMA at 4 (arguing that the final Rule 

should include non-petroleum based commodities, 

such as ethanol and other oxygenates, in its 

definition of ‘‘gasoline’’). 

65 74 FR at 18312. 

66 74 FR at 18312. 

67 74 FR at 18312. 

68 See 74 FR at 18305, 18312. 

69 Argus at 2. 

70 ISDA contended that ‘‘[t]he commonly 

understood meaning of ‘knew or must have known’ 

is to have actual or constructive knowledge,’’ and 

that ‘‘[i]ncluding duplicative language in the 

definition could have unintended effects.’’ ISDA at 

11. CFDR also supported deleting the phrase, but 

for a different reason; CFDR argued that the legal 

concept of ‘‘constructive knowledge’’ is 

inconsistent with a ‘‘‘knew or must have known’ 

scienter standard’’ because ‘‘‘[c]onstructive 

knowledge’ . . . often is applied to hold a person 

accountable for information that he or she ‘should 

have known,’ even if he or she did not.’’ CFDR at 

3. 

71 In an opinion by Judge Posner, the Court of 

Appeals for the Seventh Circuit recently reaffirmed 

the Sundstrand extreme recklessness standard. SEC 

v. Lyttle, 538 F.3d 601, 603 (7th Cir. 2008). 

72 See 73 FR at 48329; 74 FR at 18318. As the 

Supreme Court has noted, ‘‘[e]very Court of Appeals 

that has considered the issue [of civil liability under 

SEA Section 10(b) and Rule 10b-5] has held that a 

plaintiff may meet the scienter requirement by 

showing that the defendant acted intentionally or 

recklessly, though the Circuits differ on the precise 

formulation of recklessness.’’ Tellabs, Inc. v. Makor 

Issues & Rights, Ltd., 551 U.S. 308, 319 n.3 (2007) 

(citing Ernst & Ernst, 425 U.S. at 194 n.12); 

Ottmann v. Hunger Orthopedic Group, Inc., 353 

F.3d 338, 343 (4th Cir. 2003) (collecting Court of 

Continued 

or whether the conduct at issue falls 

under the ‘‘in connection with’’ 

language in the final Rule, which is 

discussed below in Section IV.D.1.b. 

For similar reasons, although the 

Commission recognizes the CFTC’s 

jurisdiction ‘‘with respect to accounts, 

agreements . . . and transactions 

involving contracts of sale of a 

commodity for future delivery,’’59 the 

Commission declines to adopt a blanket 

safe harbor for futures markets 

activities. Nonetheless, consistent with 

its longstanding practice of coordinating 

its enforcement efforts with other 

federal or state law enforcement 

agencies where it has overlapping or 

complementary jurisdiction – as stated 

in the NPRM and the RNPRM – the 

Commission intends to work 

cooperatively with the CFTC to execute 

the Commission’s objective to prevent 

fraud or deceit in wholesale petroleum 

markets.60

C. Section 317.2: Definitions 

The final Rule defines six terms: 

‘‘crude oil,’’ ‘‘gasoline,’’ ‘‘knowingly,’’ 

‘‘person,’’ ‘‘petroleum distillates,’’ and 

‘‘wholesale.’’ The only change to the 

definitions set forth in the revised 

proposed Rule is a non-substantive 

change to the definition of ‘‘knowingly.’’ 

These definitions establish the scope of 

the final Rule’s coverage and provide 

guidance as to how the Commission 

intends to enforce the Rule. Only a few 

commenters addressed the definitions 

proposed in the RNPRM, and most of 

them focused on the definition of 

‘‘knowingly.’’ These comments, together 

with the Commission’s analysis of the 

definitions included in the final Rule, 

are discussed below. 

1. Section 317.2(a): ‘‘Crude Oil’’ 

Section 317.2(a) of the revised 

proposed Rule defined ‘‘crude oil’’ as 

‘‘the mixture of hydrocarbons that 

exists: (1) in liquid phase in natural 

underground reservoirs and that 

remains liquid at atmospheric pressure 

after passing through separating 

facilities, or (2) as shale oil or tar sands 

requiring further processing for sale as 

a refinery feedstock.’’61 No commenters 

addressed this definition in response to 

the RNPRM. 

Thus, Section 317.2(a) of the final 

Rule retains, without modification, the 

definition of ‘‘crude oil’’ in the revised 

proposed Rule. Consistent with its 

position in the NPRM and RNPRM, the 

Commission intends for the definition 

to include liquid crude oil and any 

hydrocarbon form that can be processed 

into a refinery feedstock, but to exclude 

natural gas, natural gas liquids, or noncrude refinery feedstocks.62

2. Section 317.2(b): ‘‘Gasoline’’ 

Section 317.2(b) of the revised 

proposed Rule defined ‘‘gasoline’’ to 

mean: ‘‘(1) finished gasoline, including, 

but not limited to, conventional, 

reformulated, and oxygenated blends, 

and (2) conventional and reformulated 

gasoline blendstock for oxygenate 

blending.’’63 Only one commenter, 

IPMA, addressed this definition, arguing 

for the inclusion of renewable fuels 

such as ethanol and other oxygenates.64

Section 317.2(b) of the final Rule 

retains, without modification, the 

definition of ‘‘gasoline’’ in the revised 

proposed Rule. As the Commission 

stated in the RNPRM, it ‘‘intends to 

capture those commodities regularly 

traded as finished gasoline products or 

as gasoline products requiring only 

oxygenate blending to be finished, 

under this definition.’’65 The 

Commission declines to extend the 

definition of ‘‘gasoline’’ to include 

products that are not listed in Section 

811 – such as renewable fuels (e.g., 

ethanol) and blending components (e.g., 

alkylate and reformate). Nonetheless, 

the Commission concludes that it may 

apply the final Rule to conduct 

implicating those non-covered products 

if appropriate under the ‘‘in connection 

with’’ language of the final Rule, as 

discussed below in Section IV.D.1.b. As 

the Commission noted in the RNPRM, 

using the ‘‘in connection with’’ language 

provides the Commission ‘‘with 

sufficient flexibility to protect wholesale 

petroleum markets from manipulation 

without expanding the reach of a 

Section 811 rule to cover products not 

identified in the statute.’’66

3. Section 317.2(c): ‘‘Knowingly’’ 

Section 317.2(c) of the revised 

proposed Rule defined ‘‘knowingly’’ to 

mean ‘‘with actual or constructive 

knowledge such that the person knew or 

must have known that his or her 

conduct was fraudulent or deceptive.’’67

The revised proposed Rule thus 

expressly provided that a person must 

engage in the proscribed conduct 

‘‘knowingly’’ in order to violate Section 

317.3(a); that is, that a person must 

‘‘knowingly’’ engage in fraudulent or 

deceptive conduct.68

Although one commenter noted that 

the proposed definition clarified that 

‘‘inadvertent mistakes – caused perhaps 

by the disorderly nature of markets – 

would not be actionable as 

manipulation,’’69 other commenters 

addressed a different point. These 

commenters urged the Commission to 

delete the phrase ‘‘with actual or 

constructive knowledge’’ from the 

definition, in order to avoid confusion 

about its interpretation.70

The Commission has determined to 

adopt this recommendation. Thus, final 

Rule Section 317.2(c) defines 

‘‘knowingly’’ to mean ‘‘that the person 

knew or must have known that his or 

her conduct was fraudulent or 

deceptive.’’ The Commission 

emphasizes, however, that this 

modification in the definition of 

‘‘knowingly’’ does not change its 

meaning. 

For purposes of enforcement of final 

Rule Section 317.3(a), the Commission 

has determined that a showing of 

extreme recklessness is, at a minimum, 

necessary to prove the scienter element. 

In this regard, the Commission adopts, 

in part, the ‘‘extreme recklessness’’ 

standard established by the United 

States Court of Appeals for the Seventh 

Circuit.71 Though the Circuits may 

differ on the application of extreme 

recklessness,72 almost all of them have 


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Appeals cases). The Supreme Court, however, has 

reserved the question whether extreme reckless 

behavior is, in fact, sufficient to establish civil 

liability under SEA Section 10(b) and Rule 10b-5. 

See Tellabs, Inc., 551 U.S. at 319 n.3. 

73 Phillips v. LCI Int’l, Inc., 190 F.3d 609, 621 (4th 

Cir. 1999); SEC v. Steadman, 967 F.2d 636, 641 

(D.C. Cir. 1992); Hollinger v. Titan Capital Corp., 

914 F.2d 1564, 1569 (9th Cir. 1990) (en banc); 

Hackbert v. Holmes, 675 F.2d 1114, 1118 (10th Cir. 

1982); Broad v. Rockwell, 642 F.2d 929, 961 (5th 

Cir. 1981) (en banc); McLean v. Alexander, 599 F.2d 

1190, 1197 (3d. Cir. 1979); Mansbach v. Prescott, 

Ball, & Turben, 598 F.2d 1017, 1025 (6th Cir. 1979); 

see also Greebel v. FTP Software, 194 F.3d 185, 198 

(1st Cir. 1999); Camp v. Dema, 948 F.2d 455, 461 

(8th Cir. 1991). 

74 Sundstrand Corp. v. Sun Chem. Corp., 553 

F.2d 1033, 1045 (7th Cir.), cert. denied, 434 U.S. 

875 (1977) (quoting Franke v. Midwestern Okla. 

Dev. Auth., 428 F. Supp. 719, 725 (W.D. Okla. 

1976)). The Court of Appeals for the District of 

Columbia Circuit relied upon Sundstrand to 

establish the ‘‘extreme recklessness’’ scienter 

standard applicable to SEC Rule 10b-5. See SEC v. 

Steadman, 967 F.2d 636, 641-42 (D.C. Cir. 1992) 

(adopting Sundstrand’s extreme recklessness 

standard). 

75 SEC v. Lyttle, 538 F.3d at 603-04, quoting 

Makor Issues & Rights, Ltd. v. Tellabs Inc., 513 F.3d 

702, 704 (7th Cir. 2008). 

76 74 FR at 18313 (adopting the initially proposed 

Rule’s definition of ‘‘person’’). 

77 74 FR at 18313; see, e.g., Telemarketing Sales 

Rule, 16 CFR 310.2(v); Disclosure Requirements and 

Prohibitions Concerning Franchising, 16 CFR 

436.1(n). 

78 74 FR at 18313 (adopting the initially proposed 

Rule’s definition of ‘‘petroleum distillates’’). 

79 74 FR at 18313; 73 FR at 48325. 

80 74 FR at 18313. 

81 See 74 FR at 18313. 

82 74 FR at 18314. 

83 74 FR at 18314. 

84 74 FR at 18314; see also 73 FR at 48326. 

85 PMAA at 2 (agreeing with the Commission’s 

position on rack sales); Greenberger at 3 (supporting 

the RNPRM’s definition of ‘‘wholesale’’ that 

includes rack transactions). 

86 SIGMA at 2 (‘‘[Rack] prices are set by the 

supplier’s view of the market and are not normally 

fixed by reference to other suppliers’ prices.’’ ). 

87 74 FR at 18313-14. 

now adopted this standard.73 Similarly, 

the Commission has concluded that the 

standard should apply to the final Rule, 

and the Commission believes that it is 

appropriate because it provides for both 

effective rule enforcement and clarity to 

market participants. 

The ‘‘extreme recklessness’’ standard 

articulated by the Seventh Circuit 

requires a showing that an actor knew 

or must have known that his conduct 

created a danger of misleading buyers or 

sellers.74 The Seventh Circuit has stated 

that this showing can be made with 

respect to securities fraud by 

establishing that the actor’s conduct 

constitutes ‘‘an extreme departure from 

the standards of ordinary care . . . to the 

extent that the danger [of misleading 

buyers or sellers] was either known to 

the defendant or so obvious that the 

defendant must have been aware of 

it.’’75 However, whereas standards of 

ordinary care are well developed in the 

context of securities markets, they are 

less well defined in the context of 

wholesale petroleum markets. For this 

reason, the Commission has concluded 

that a showing of a departure from 

‘‘ordinary care’’ is not required to 

establish scienter under final Rule 

Section 317.3(a). The Commission 

therefore has determined that, for 

purposes of final Rule Section 317.3(a), 

proving scienter will require showing 

only that a person either knew or must 

have known that his or her conduct 

created a danger of misleading buyers or 

sellers. 

This definition of ‘‘knowingly’’ gives 

petroleum industry participants the 

appropriate guidance as to the level of 

scienter required to establish a final 

Rule Section 317.3(a) violation. The 

Commission further discusses the 

application of the ‘‘knowingly’’ standard 

in Section IV.D.2.a. below. 

4. Section 317.2(d): ‘‘Person’’ 

Section 317.2(d) of the revised 

proposed Rule defined the term 

‘‘person’’ to mean: ‘‘any individual, 

group, unincorporated association, 

limited or general partnership, 

corporation, or other business entity.’’76

No commenters addressed this 

definition in response to the RNPRM. 

As stated in the RNPRM, the 

Commission believes that ‘‘this 

definition is consistent with the 

jurisdictional reach of the FTC Act, as 

well as with prior usage in other FTC 

rules.’’77 Therefore, Section 317.2(d) of 

the final Rule retains the revised 

proposed definition of ‘‘person’’ without 

modification. 

5. Section 317.2(e): ‘‘Petroleum 

Distillates’’ 

Section 317.2(e) of the revised 

proposed Rule defined ‘‘petroleum 

distillates’’ to mean ‘‘(1) jet fuels, 

including, but not limited to, all 

commercial and military specification 

jet fuels, and (2) diesel fuels and fuel 

oils, including, but not limited to, No. 

1, No. 2, and No. 4 diesel fuel, and No. 

1, No. 2, and No. 4 fuel oil.’’78 No 

commenters addressed this definition in 

response to the RNPRM. 

The Commission has determined to 

include in final Rule Section 317.2(e), 

without modification, the definition of 

‘‘petroleum distillates’’ in revised 

proposed Rule Section 317.2(e). As 

stated in the NPRM and the RNPRM, 

this definition includes ‘‘finished fuel 

products, other than ‘gasoline,’ 

produced at a refinery or blended in 

tank at a terminal.’’79 As the 

Commission explained in the RNPRM, 

the definition of ‘‘petroleum distillates’’ 

also includes middle distillate refinery 

fuel streams, and thus encompasses all 

product streams above heavy fuel oils – 

up to and including lighter products 

such as on-road diesel, heating oil, and 

kerosene-based jet fuels – but does not 

extend to heavy fuel oils.80 Consistent 

with the RNPRM, the Commission has 

also determined that the definition of 

‘‘petroleum distillates’’ does not extend 

to renewable fuels such as biodiesel.81

The Commission addresses the intended 

application of the final Rule to conduct 

implicating non-covered products, such 

as renewable fuels, in its discussion of 

the ‘‘in connection with’’ language in 

Section IV.D.1.b. below. 

6. Section 317.2(f): ‘‘Wholesale’’ 

Section 317.2(f) of the revised 

proposed Rule defined the term 

‘‘wholesale’’ to mean: ‘‘(1) all purchases 

or sales of crude oil or jet fuel; and (2) 

all purchases or sales of gasoline or 

petroleum distillates (other than jet fuel) 

at the terminal rack level or upstream of 

the terminal rack level.’’82 As stated in 

the RNPRM, the Commission intended 

the definition of ‘‘wholesale’’ to include 

all bulk sales of crude oil and jet fuel 

(even when not for resale) and all 

terminal rack sales,83 but not to extend 

to retail sales of gasoline, diesel fuels, or 

fuel oils to consumers.84

Two commenters, PMAA and 

Greenberger, supported the inclusion of 

sales at the terminal rack level in the 

definition.85 SIGMA, by contrast, 

renewed its opposition to including 

such transactions, arguing in part that 

rack prices are ‘‘unlikely to alter overall 

price levels in the markets served out of 

a terminal or terminal cluster’’ and that 

‘‘there are no reported instances of price 

manipulation practices at the rack 

terminal level.’’86

The Commission is not persuaded 

that there is little or no potential for 

market manipulation at or below the 

terminal rack level. As the Commission 

stated in the RNPRM, ‘‘prohibited 

conduct may in fact occur at the 

terminal rack level’’ and ‘‘[s]uch a 

determination requires analysis on a 

case-by-case basis.’’87 Moreover, 

terminal rack sales are ‘‘wholesale’’ 

transactions as that term is commonly 

defined, and excluding them from the 

definition of ‘‘wholesale’’ would 

therefore place the final Rule at odds 

with the express language of EISA, 

which addresses manipulative conduct 

in wholesale markets. The Commission 

has consequently determined to retain 

in final Rule Section 317.2(f), without 

modification, the definition of 


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88 In addition to the revised proposed rule, the 

RNPRM invited commenters to consider a single, 

unified conduct provision prohibiting all fraudulent 

or deceptive conduct, including material omissions 

(and deleting the separate prohibition of such 

omissions). In particular, the alternative provision 

would have made it unlawful for ‘‘any person, 

directly or indirectly, in connection with the 

purchase or sale of crude oil, gasoline, or petroleum 

distillates at wholesale, to engage in any act 

(including the making of any untrue statement), 

practice, or course of conduct with the intent* to 

defraud or deceive, provided that such act, practice, 

or course of conduct distorts or tends to distort 

market conditions for any such product.’’ 74 FR at 

18327. The phrase ‘‘with the intent’’ would have 

been defined to mean that the alleged violator 

intended to mislead – regardless of whether he or 

she specifically intended to affect market prices 

(that is, possessed specific intent), or knew or must 

have known of the probable consequences of such 

conduct – and regardless of whether the conduct 

was likely to defraud or deceive the target 

successfully. Id. 

89 The initially proposed Rule stated: 

It shall be unlawful for any person, directly or 

indirectly, in connection with the purchase or sale 

of crude oil, gasoline, or petroleum distillates at 

wholesale, 

(a) To use or employ any device, scheme, or 

artifice to defraud, 

(b) To make any untrue statement of a material 

fact or to omit to state a material fact necessary in 

order to make the statements made, in the light of 

the circumstances under which they were made, 

not misleading, or 

(c) To engage in any act, practice, or course of 

business that operates or would operate as a fraud 

or deceit upon any person. 

73 FR at 48334. This wording and format were 

virtually identical to SEC Rule 10b-5. 

90 As the Commission noted in the ANPR, the 

NPRM, and the RNPRM, nothing in connection 

with this Section 811 [r]ulemaking, any 

subsequently enacted rules, or related efforts should 

be construed to alter the standards associated with 

establishing a deceptive or an unfair practice in a 

case brought by the Commission. 73 FR at 48322 

n.61; 73 FR at 25619 n.55; 74 FR at 18316 n.144. 

Specifically, no showing of any degree of scienter 

is required to establish that a particular act or 

practice is deceptive or unfair, and therefore 

violates Section 5 of the FTC Act. See, e.g., FTC v. 

Bay Area Bus. Council, Inc., 423 F.3d 627, 635 (7th 

Cir. 2005); FTC v. Freecom Commc’ns., Inc., 401 

F.3d 1192, 1202 (10th Cir. 2005); FTC v. Amy Travel 

Serv., Inc., 875 F.2d 564, 573-74 (7th Cir. 1989). 

91 Revised proposed Rule Section 317.3(b) 

contained a market conditions proviso that did not 

exist in the initially proposed Rule; that is, that the 

material omission ‘‘distorts or tends to distort 

market conditions’’ for a covered product. As noted 

above, the Commission has determined to substitute 

the phrase ‘‘is likely’’ for the word ‘‘tends’’ in final 

Rule Section 317.3(b). See Section IV.D.3.b. below 

for further discussion. 

92 Consistent with its position in the NPRM and 

the RNPRM, the Commission currently does not 

expect to impose specific conduct or duty 

requirements such as a duty to supply product, a 

duty to provide access to pipelines or terminals, a 

duty to disclose, or a duty to update or correct 

information. In particular, the final Rule would not 

require covered entities to disclose price, volume, 

and other data to individual market participants, or 

to the market at large, beyond any obligation that 

may already exist. See 73 FR at 48326-27; 74 FR at 

18325. 

93 See 73 FR at 48332. 

94 See, e.g., ISDA at 2 (contending that the revised 

proposed Rule ‘‘includes several significant 

improvements’’); SIGMA at 1 (stating that the 

revised proposed Rule ‘‘dramatically improv[ed]’’ 

upon the NPRM and ANPR); API at 25, 34 (noting 

the improvements in the revised proposed Rule); 

CFA at 2 (‘‘[T]he Commission has done a good job 

in its revisions.’’ ); Sutherland at 2 (commending 

the revised proposed Rule for ‘‘striking a balance 

between protecting consumers from manipulation 

and avoiding unnecessary costs to market 

participants’’); Argus at 2 (stating that the revised 

proposed Rule provided greater clarity to the 

petroleum industry); CAPP at 1-2 (supporting the 

Continued 

‘‘wholesale’’ in revised proposed Rule 

Section 317.2(f). 

D. Section 317.3: Prohibited Practices 

Section 317.3 sets forth the conduct 

prohibited by the final Rule. 

Specifically, this provision states: 

It shall be unlawful for any person, 

directly or indirectly, in connection 

with the purchase or sale of crude oil, 

gasoline, or petroleum distillates at 

wholesale, to: 

(a) Knowingly engage in any act, 

practice, or course of business – 

including the making of any untrue 

statement of material fact – that operates 

or would operate as a fraud or deceit 

upon any person; or 

(b) Intentionally mislead by failing to 

state a material fact that under the 

circumstances renders a statement made 

by such person misleading, provided 

that such omission distorts or is likely 

to distort market conditions for any 

such product. 

The final Rule thus prohibits 

fraudulent or deceptive conduct, 

including statements made misleading 

as a result of an omission of material 

fact, within or in connection with 

wholesale petroleum markets. 

Final Rule Section 317.3 is virtually 

identical to Section 317.3 in the revised 

proposed rule.88 As the Commission 

detailed in the RNPRM in discussing the 

proposed scope and application of the 

two paragraphs of Section 317.3, the 

final Rule therefore broadly prohibits 

fraudulent or deceptive conduct, which 

may take various forms, including 

statements that are misleading as the 

result of an omission of material 

information. As articulated in the 

RNPRM, the Commission has altered the 

initially proposed Rule and its conduct 

prohibitions to clarify the type of 

conduct covered by the final Rule.89

First, the Commission has consolidated 

the conduct prohibition in Section 317.3 

of the initially proposed Rule from three 

paragraphs into two paragraphs. The 

first paragraph applies to overt conduct 

that is fraudulent or deceptive; the 

second paragraph applies only to 

material omissions. The Commission 

has determined that this consolidation 

defines the unlawful conduct that the 

Rule prohibits more precisely than the 

three paragraphs in the initially 

proposed Rule did. Second, the 

Commission has adopted separate 

scienter standards for each of the two 

paragraphs to address concerns that the 

initially proposed Rule would chill 

legitimate business activity, and, in so 

doing, has established a higher scienter 

standard for the second paragraph than 

for the first.90 Third, the Commission 

has addressed concerns that specifically 

prohibiting material omissions would 

create an undue risk of deterring 

voluntary disclosures of information. It 

has addressed this concern by requiring 

a showing that the omission at issue 

distorts or is likely to distort market 

conditions for a covered product.91 By 

tailoring the final Rule in this fashion, 

the Commission believes it achieves an 

appropriate balance between the needs 

of effective enforcement and unduly 

burdening legitimate business practices. 

Accordingly, final Rule Section 

317.3(a) prohibits any conduct that 

operates or would operate as a fraud or 

a deceit, provided that the alleged 

violator engaged in the prohibited 

conduct knowingly; that is – as defined 

in the final Rule – with extreme 

recklessness. Final Rule Section 

317.3(b) separately prohibits statements 

that are misleading because a material 

fact is omitted intentionally and the 

omission distorts or is likely to distort 

conditions in a wholesale petroleum 

market. The intent requirement – and 

the proviso that an omission must 

distort or be likely to distort market 

conditions for a covered product in 

order to violate Section 317.3(b) – 

address many commenters’ concerns 

that the omissions provision in initially 

proposed Rule Section 317.3(b) would 

have chilled legitimate business 

activity. The Commission believes that 

these features of final Rule Section 

317.3(b) focus it on fraudulent or 

deceptive conduct likely to threaten the 

integrity of wholesale petroleum 

markets. 

The Commission has concluded that 

the final Rule does not cover 

inadvertent mistakes, unintended 

conduct, or legitimate conduct 

undertaken in the ordinary course of 

business.92 This limitation further helps 

to avoid impeding beneficial business 

behavior. The final Rule also does not 

impose any recordkeeping 

requirements.93

Nearly all the commenters who 

discussed the conduct prohibition in the 

revised proposed Rule supported the 

modifications that the Commission 

made to the initially proposed Rule.94


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inclusion of an explicit scienter requirement and 

market conditions proviso to Section 317.3(b)); 

CFDR at 2 (stating that the revised proposed Rule 

was a ‘‘substantial improvement[]’’); Platts at 2 

(contending that the revised proposed Rule 

improved upon the proposed Rule); PMAA at 2-3 

(noting that the revised proposed Rule was an 

improvement). Greenberger and ATAA, however, 

recommended that the Commission adopt the 

initially proposed Rule, arguing that it best fulfilled 

the broad mandate of EISA. Greenberger at 2; ATAA 

at 1. Some commenters took no position on the 

revised proposed Rule except to advance specific 

concerns regarding the scope of a rule. See generally 

CFTC; MFA; IPMA; AOPL. 

95 See, e.g., Senator Cantwell at 3 (‘‘[T]he 

Commission’s Final Rule should reflect Congress’ 

intent that a finding of recklessness should be 

sufficient to satisfy the scienter element for 

manipulative conduct . . . .’’ ); CFA at 9 (suggesting 

that the Commission apply the recklessness 

standard to both prongs of the final Rule); see also 

Greenberger at 3 (agreeing that recklessness is the 

appropriate scienter standard under a Section 811 

rule). 

96 See, e.g., Senator Cantwell at 4 (arguing that 

the market conditions proviso unnecessarily limited 

the scope of the Commission’s authority); 

Greenberger at 3 (advocating against the market 

conditions proviso in Section 317.3(b)); CFA at 8 

(stating that the modifications to the Rule 

‘‘unnecessarily narrow[ed] the scope of protection 

afforded to the public’’). 

97 See, e.g., Sutherland at 3 (stating that a single 

specific intent standard would allow the 

Commission to ‘‘target essentially the same conduct 

as is targeted by the Revised NPRM but with less 

risk of chilling desirable market behavior’’); Argus 

at 2 (advocating for a specific intent requirement if 

individual companies and trade associations do not 

believe the revised proposed Rule provides the 

necessary clarity); API at 26 (contending that a 

single specific intent standard would make rule 

enforcement more effective). But see CFDR at 2 

(noting that the scienter requirement in the revised 

proposed Rule is ‘‘relatively clear’’). 

98 See, e.g., ISDA at 3, 14 (suggesting that the 

Commission apply a market conditions proviso to 

both prongs of Section 317.3); API at 37-38 (arguing 

that a showing of market effects should be required, 

but that if instead the market conditions proviso 

were retained, it should apply to all conduct 

covered by the Rule); Sutherland at 4 (encouraging 

the Commission to ‘‘require prohibited behavior to 

impact the market’’); CFDR at 4-5 (asking the 

Commission to ‘‘make intent to corrupt market 

pricing an element of the offense’’). 

99 See, e.g., API at 12 (recommending that the 

Commission eliminate the prohibition on 

omissions); Sutherland at 3 (arguing that market 

participants are sophisticated parties who 

‘‘generally do not require special remediation’’ for 

omissions in the context of negotiations); CFDR at 

4 (advocating against adopting an explicit 

omissions liability provision). 

100 See, e.g., Sutherland at 2-3 (arguing that the 

alternative rule language provided ‘‘greater clarity 

than the Revised NPRM’’); ISDA at 4-5 (contending 

that the alternative rule language was ‘‘better 

suited’’ to wholesale petroleum markets because it 

better defined the scope of impermissible conduct); 

API at 20 (arguing for adoption of the alternative 

rule language with clarifications); Platts at 2 (urging 

the Commission to consider adopting the 

alternative rule language); CFDR at 4 n.3 (preferring 

the approach of the alternative rule language to 

omissions). Many of these commenters suggested 

further modifications to the alternative rule 

language. See, e.g., API at 2-4; Platts at 2; 

Sutherland at 2-3. 

101 See 74 FR at 18308. 

102 42 U.S.C. 17301 (‘‘It is unlawful for any 

person, directly or indirectly, to use or employ . . . .’’ 

(emphasis added)). 

103 CFA at 4-5 (‘‘By including the phrase directly 

or indirectly, making no mention of intentionality 

or effect, and citing only the public interest, the 

Congress clearly invited the [FTC] to. . . reject the 

inclusion of a finding of intent in order to find 

unlawful conduct.’’ ). See Sections IV.D.2.a. and 

IV.D.3.a. for a discussion of the scienter 

requirements in the final Rule. 

104 74 FR at 18317. 

Many commenters urged, however, 

additional modifications to Section 

317.3. For example, a few commenters 

recommended that the Commission 

broaden the scope of the revised 

proposed Rule by applying the extreme 

recklessness standard to Section 

317.3(b) – as well as to Section 

317.3(a)95 – and by eliminating the 

market conditions proviso in Section 

317.3(b).96 Other commenters, by 

contrast, recommended that the 

Commission narrow the revised 

proposed Rule by: (1) adopting a single 

specific intent standard and applying it 

to both parts of Section 317.3;97 (2) 

applying either a specific market effect 

requirement or a market conditions 

proviso to both parts of Section 317.3;98

and (3) eliminating the prohibition on 

material omissions.99 Some of these 

commenters believed that the 

alternative rule language would better 

address their concerns.100

The Commission has considered 

commenters’ concerns carefully, and 

has determined not to effect further 

changes to the scope of the revised 

proposed Rule. The Commission has 

concluded that narrowing the Rule, as 

suggested by some commenters, would 

unnecessarily encumber its ability to 

reach conduct that likely constitutes 

market manipulation, contrary to the 

objectives of Section 811, and that the 

modifications to the initially proposed 

Rule (which was nearly identical to SEC 

Rule 10b-5) appropriately tailor the final 

Rule to reflect the characteristics of 

wholesale market transactions. 

Additionally, the Commission has 

concluded that broadening the rule to 

reach other types of conduct, as 

suggested by some commenters, would 

be inconsistent with the statutory 

language authorizing the Commission to 

prohibit market manipulation pursuant 

to the framework of SEC Rule 10b-5, an 

anti-fraud rule. 

The broad prohibition in final Rule 

Section 317.3(a) permits the 

Commission to reach all types of 

fraudulent or deceptive conduct likely 

to harm wholesale petroleum markets. 

The extreme recklessness standard in 

Section 317.3(a) appropriately focuses 

that paragraph on conduct that presents 

an obvious risk of misleading buyers or 

sellers, and ensures that this provision 

does not reach inadvertent mistakes, 

which could have had the unintended 

effect of curtailing beneficial market 

activity. The Commission believes that 

the design of the separate and more 

limited prohibition of Section 317.3(b) – 

a prohibition on statements that are 

misleading as a result of an omission of 

a material fact – addresses commenters’ 

concerns about the difficulty of 

distinguishing between benign and 

harmful omissions. The Commission 

believes that this objective is achieved 

by the greater evidentiary burden 

imposed by Section 317.3(b) of the final 

Rule – a higher scienter requirement 

and a market conditions proviso. 

The Commission therefore issues final 

Rule Section 317.3 in a form virtually 

identical to Section 317.3 in the revised 

proposed Rule. In so doing, the 

Commission has specifically tailored 

each paragraph of final Rule Section 

317.3 to bring about an appropriate 

balance between effective prohibition of 

undesirable conduct and avoidance of 

unintended chilling of desirable 

economic activity.101 A more detailed 

discussion of the final Rule’s conduct 

provisions and the Commission’s 

response to commenters is set forth 

below. 

1. Preamble Language 

a. ‘‘Directly or Indirectly’’ 

The phrase ‘‘directly or indirectly’’ – 

which originates in Section 811 of 

EISA102 and is also included in the 

preamble to final Rule Section 317.3 – 

delineates the level of involvement 

necessary to establish liability under the 

final Rule. In particular, it means that 

the final Rule imposes liability not only 

upon any person who directly engages 

in manipulation but also upon any 

person who does so indirectly. 

One commenter, CFA, opined that 

Congress included the phrase ‘‘directly 

or indirectly’’ in part to support a 

recklessness standard for a Section 811 

rule.103 The Commission disagrees with 

this reading of the statute. Rather, the 

Commission has determined that 

‘‘directly or indirectly’’ describes the 

level of involvement necessary to 

establish liability under the final Rule, 

not any particular scienter standard. 

Thus, consistent with its position in the 

RNPRM, the Commission has 

determined that the phrase ‘‘directly or 

indirectly’’ in the final Rule should ‘‘be 

interpreted and applied to prevent a 

person from engaging in the prohibited 

conduct, either alone or through 

others.’’104


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105 AOPL argued that the phrase ‘‘in connection 

with’’ cannot give the Commission jurisdiction over 

oil pipelines regulated by the FERC under the ICA. 

AOPL at 7-8. The Commission addresses the final 

Rule’s application to pipelines in Section IV.B. 

106 Merrill Lynch, Pierce, Fenner & Smith, Inc. v. 

Dabit, 547 U.S. 71, 85 (2006) (holding that the ‘‘in 

connection with’’ language requires a nexus 

between fraudulent conduct and a securities 

transaction). 

107 Senator Cantwell at 2-3. 

108 IPMA at 4. 

109 See 74 FR at 18317-18. 

110 See Dabit, 547 U.S. at 85 (affirming a broad 

interpretation of the ‘‘in connection with’’ 

requirement). 

111 The Commission emphasizes that it does not 

intend to regulate or otherwise second-guess market 

participants’ legitimate supply and operational 

decision-making, contrary to the assertion of some 

commenters. See API, NPRM, at 30-32 (urging the 

Commission not to interpret the ‘‘in connection 

with’’ language as reaching upstream conduct and 

statements, including operational and supply 

decisions); NPRA, NPRM, at 33 (arguing that ‘‘any 

possibility of liability under an FTC rule for [supply 

or operational] decisions could seriously distort 

refiners’ decision making and disrupt competitive 

activity in petroleum markets’’). 

112 See 74 FR at 18317-18. 

113 A further safeguard against regulatory 

overreach respecting supply or operational 

decisions is that a violation of the final Rule also 

requires that the requisite scienter standard be 

demonstrated. The requirement that this element be 

proved clarifies that the final Rule does not reach 

conduct arising out of an error or miscalculation, 

either because the actor did not knowingly engage 

in fraudulent or deceptive conduct, or because the 

actor did not intentionally mislead by omitting 

material facts from statements. 

114 74 FR at 18318. 

115 The Commission generally does not intend to 

reach bilateral negotiations as a matter of course. 

Fraud or deception arising out of such negotiations 

may be more appropriately treated under state law. 

This position is consistent with that of the FERC in 

interpreting similar market manipulation authority. 

See 71 FR at 4251-52 (stating that ‘‘absent a tariff 

requirement or [FERC] directive,’’ the FERC 

‘‘generally will not apply [its] final [antimanipulation] rule to bilateral contract 

negotiations’’). 

116 See prior Notices for further discussion of 

commenters who support an anti-fraud rule. 74 FR 

at 18308 & n.47; 73 FR at 48319 & n.28. 

117 See, e.g., Sutherland at 3 (supporting ‘‘a 

prohibition against intentional false statements or a 

prohibition against intentional fraudulent 

conduct’’); API at 29 (‘‘The proper objective of any 

rule issued under Section 811 is to cover deceptive 

conduct . . . .’’ ); ATAA at 3 (‘‘ATA[A] hopes that if 

the FTC adopts the revised proposed rule, it will 

apply and enforce that rule consistent with the 

broad anti-fraud mandate of the EISA.’’ ); CAPP at 

2 (‘‘Manipulative conduct that makes use of false 

information in market transactions does not 

constitute routine or acceptable commercial 

behavior, and is reasonably within the scope of 

prohibited conduct.’’ ). 

118 See, e.g., ISDA at 6 (‘‘Any rule that the 

Commission enacts should require proof that a 

market participant specifically intended to engage 

in a fraudulent or deceptive practice . . . .’’ ); CFDR 

at 2 (arguing that a Section 811 rule ‘‘must require 

that a person act with an intent to corrupt market 

pricing’’); Sutherland, NPRM, at 5 (urging the 

Commission to require a showing ‘‘that the 

defendant specifically intended to manipulate the 

market’’). 

119 See, e.g., API at 34 (arguing that including 

such a proviso would ‘‘focus[] the rule on the sort 

of conduct Congress sought to address: acts and 

practices that manipulate a market’’); ISDA at 3 

Continued 

b. ‘‘In Connection With’’ 

Section 811 authorizes the 

Commission to prohibit manipulative 

conduct undertaken ‘‘in connection 

with’’ the purchase or sale of crude oil, 

gasoline, or petroleum distillates at 

wholesale.105 Thus, the final Rule 

reaches market manipulation that 

occurs in the wholesale purchase or sale 

of products covered by Section 811 (and 

defined in the final Rule) – and ‘‘in 

connection with’’ such purchases or 

sales – provided that there is a sufficient 

nexus between the prohibited conduct 

and the markets for these products.106

In response to the RNPRM, two 

commenters discussed the ‘‘in 

connection with’’ language. Senator 

Cantwell urged the Commission to 

interpret the phrase ‘‘broadly . . . to 

prevent and deter any manipulative 

conduct,’’ including supply and 

operational decisions, ‘‘that could 

impact wholesale petroleum 

markets.’’107 IPMA supported the 

Commission’s tentative determination to 

reach ethanol and other blending 

products through the ‘‘in connection 

with’’ language.108

As it stated in the RNPRM, the 

Commission believes that Congress 

intended that it construe the phrase ‘‘in 

connection with’’ broadly.109 Such an 

interpretation is consistent with 

precedent from securities law 

interpreting the same phrase in SEC 

Rule 10b-5,110 and will enable the 

Commission to give full effect to the 

statutory language of Section 811, which 

is identical to SEA Section 10(b). In this 

respect, the Commission disagrees with 

commenters that the ‘‘in connection 

with’’ language should never reach 

supply or operational decisions. Instead, 

the language can reach those decisions 

whenever there is a sufficient nexus 

between the conduct at issue and the 

purchase or sale of crude oil, gasoline, 

or petroleum distillates.111

With respect to product coverage, as 

detailed in the RNPRM, the Commission 

intends to reach products – such as 

renewable fuels (e.g., ethanol or 

biodiesel) or blending components (e.g., 

alkylate or reformate) – that are not 

specifically identified in Section 811 

only if there is a sufficient nexus 

between conduct involving those 

products and wholesale petroleum 

markets for covered products.112

Renewable fuels and blending 

components are integral to the overall 

supply of finished motor fuels. Thus, 

manipulating purchases or sales of these 

products can have the requisite nexus 

with wholesale petroleum markets. 

By contrast, the Commission does not 

intend to apply the final Rule to 

commodities whose predominant use is 

in non-petroleum products, or to 

commodities that are inputs for ethanol, 

such as corn and sugar. The connection 

between these commodities and 

wholesale petroleum markets would 

likely be too attenuated to satisfy the ‘‘in 

connection with’’ requirement of 

Section 811. Thus, the Commission will 

determine on a case-by-case basis 

whether supply or operational decisions 

– or conduct in renewable fuels markets 

(or markets for other non-covered 

products) – are ‘‘in connection with’’ 

wholesale petroleum transactions.113

2. Section 317.3(a): General Anti-Fraud 

Provision 

Final Rule Section 317.3(a) is the 

same as revised proposed Section 

317.3(a). Specifically, final Rule Section 

317.3(a) is a general anti-fraud provision 

that prohibits any person from 

knowingly engaging in conduct – 

including the making of false statements 

of material fact – that operates or would 

operate as a fraud or deceit on any 

person. Final Rule Section 317.3(a) thus 

prohibits fraudulent or deceptive 

conduct that not only serves no 

legitimate purpose, but can be expected 

to impair the efficient functioning of 

wholesale petroleum markets.114

Specific examples of conduct that 

would violate Section 317.3(a) include 

false public announcements of planned 

pricing or output decisions; false 

statistical or data reporting; false 

statements made in the context of 

bilateral or multilateral communications 

that result in the dissemination of the 

false information to the broader 

market;115 and fraudulent or deceptive 

conduct such as wash sales. 

The overall record in this proceeding 

reflects widespread support for a market 

manipulation rule that prohibits overt 

fraud or deceit.116 Comments submitted 

in response to the RNPRM add to this 

support.117 Several commenters, 

however, raised concerns regarding the 

scope of revised proposed Section 

317.3(a). For example, some 

commenters recommended that the 

Commission modify the paragraph to 

require the specific intent to commit 

fraud or deceit – or a specific intent to 

manipulate a market – as an element of 

proof.118 These commenters also urged 

the Commission to add a market 

conditions proviso to Section 317.3(a), 

because in their view, such a proviso 

was needed to ensure that the provision 

prohibited market manipulation.119


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(encouraging the Commission to modify the Rule to 

apply the market conditions proviso to both 

prongs); see also Sutherland at 4 (urging the 

Commission ‘‘to require [a showing that] prohibited 

behavior . . . impact the market’’). 

120 74 FR at 18320 n.188. API expressed concern 

that if Section 317.3(a) reaches omissions also 

covered by Section 317.3(b), it would render 

paragraph (b) superfluous. See API at 22-23; see 

also Argus at 2 (stating that some companies need 

clarification that omissions will only be covered by 

Section 317.3(b)). 

121 74 FR at 18318. The extreme recklessness 

standard was also the scienter standard 

contemplated for the initially proposed Rule. See 73 

FR at 48329. 

122 74 FR at 18318. 

123 See, e.g., API at 32, 34 n.38 (arguing that a 

final rule should require a ‘‘specific intent to 

manipulate the market as a prerequisite for 

liability’’ because such a standard ‘‘would 

considerably reduce the element of subjectivity and 

uncertainty that currently exists in [Section 

317.3(a)]’’); ISDA at 6 (positing that, because 

wholesale petroleum market participants trade and 

make decisions in real time, often without perfect 

information, the Commission should only 

‘‘prosecute intentionally fraudulent conduct’’); 

CFDR at 2 (urging the Commission to ‘‘require that 

a person act with an intent to corrupt market 

pricing or otherwise to cause market prices to be 

false, fictitious and artificial’’); see also MFA at 3 

(stating that if the Commission captures futures 

markets under its final Rule, it should adopt 

specific intent, which is consistent with Section 4b 

of the CEA). 

124 See, e.g., Senator Cantwell at 3 (‘‘[T]he 

Commission’s Final Rule should reflect Congress’ 

intent that a finding of recklessness should be 

sufficient to satisfy the scienter element for 

manipulative conduct, including for false 

statements and omissions of material fact.’’ ); CFA 

at 4 (agreeing with the Commission that the 

recklessness standard would be ‘‘appropriate to 

protect the public and [would be] entirely 

consistent with the act’’); CAPP at 1 (supporting the 

revised proposed Rule’s scienter requirement); see 

also Greenberger at 3 (arguing against the addition 

of explicit scienter requirements, which, in his 

view, ‘‘unnecessarily inhibit[ed] the FTC from 

exercising its authority to protect the public from 

market manipulation by making the evidentiary 

requirements more onerous under the revised 

rule’’). 

125 CFA at 4 (stating that a specific intent 

standard ‘‘would lower the standard to allow 

market participants to engage in careless conduct’’). 

126 The Commission has clarified the definition 

of ‘‘knowingly’’ from that set forth in the RNPRM. 

In particular, establishing liability under Section 

317.3(a) will require establishing only that an 

alleged violator ‘‘knew or must have known that his 

or her conduct was fraudulent or deceptive.’’ The 

words ‘‘with actual or constructive knowledge such 

that a person’’ have been deleted. Significantly, this 

modification is not intended to change the meaning 

of ‘‘knowingly’’ or limit the types of evidence that 

the Commission may rely upon in establishing the 

requisite scienter, including both direct and 

circumstantial evidence of a defendant’s state of 

mind. See Section IV.C.3. in ‘‘Definitions’’ for 

further discussion. 

127 As the Commission observed in the NPRM 

and the RNPRM, the FERC adopted a similar 

approach in its interpretation of its antimanipulation rule, noting that ‘‘[t]he final rule is 

not intended to regulate negligent practices or 

corporate mismanagement, but rather to deter or 

punish fraud in wholesale energy markets.’’ 71 FR 

at 4246; see 73 FR at 48328 n.123; 74 FR at 18318 

n.168. 

128 The scienter element would also be satisfied 

if the trader is acting at the behest of another person 

within the same organization who ‘‘knew or must 

have known’’ that the conduct would operate as a 

fraud or deceit. The Commission does not intend, 

however, that the requisite state of mind be 

imputed across persons within an organization. See 

also Section IV.D.1.a. above for a discussion of the 

level of involvement necessary to establish liability 

under the final Rule. 

129 See Sundstrand Corp. v. Sun Chem. Corp., 553 

F.2d 1033, 1045 (7th Cir.), cert. denied, 434 U.S. 

875 (1977) (quoting Franke v. Midwestern Okla. 

Dev. Auth., 428 F. Supp. 719, 725 (W.D. Okla. 

1976)). 

The Commission has considered these 

issues and concerns, but has determined 

that final Rule Section 317.3(a) should 

be identical to revised proposed Rule 

Section 317.3(a) so that it broadly 

prohibits all types of fraudulent or 

deceptive conduct likely to harm 

wholesale petroleum markets. The 

Commission has thus retained the 

‘‘knowingly’’ scienter standard in final 

Rule Section 317.3(a) and has chosen 

not to require a showing that prohibited 

conduct adversely affect market 

conditions. This determination 

comports with the Commission 

conclusion that there is no economic 

justification for overt fraud or 

deception, a view about which there is 

no dispute in the rulemaking record. 

The Commission has determined that 

these choices also provide sufficient 

protection against capturing legitimate 

business conduct – and against reaching 

mistakes – because affirmative 

misstatements are not easily confused 

with benign conduct. 

The Commission also has determined 

that final Rule Section 317.3(a) should 

not reach material omissions because 

they are covered by Section 317.3(b). 

Although the Commission opined in the 

RNPRM that ‘‘any omission that is part 

of a fraudulent or deceptive act, 

practice, or course of business would 

violate Section 317.3(a),’’120 the 

Commission now has concluded that 

the better course is to subject unlawful 

omissions only to enforcement under 

final Rule Section 317.3(b). To do 

otherwise would introduce unnecessary 

confusion, and could potentially limit 

voluntary disclosures beneficial to 

market transparency. Thus, conduct 

covered by Section 317.3(a) does not 

include misleading statements resulting 

from material omissions covered by 

final Rule Section 317.3(b). 

a. A Person Must Knowingly Engage in 

Conduct That Operates or Would 

Operate as a Fraud or Deceit 

Section 317.3(a) of the revised 

proposed Rule provided that a person 

must engage in the proscribed conduct 

‘‘knowingly’’ in order to violate the 

provision. In the RNPRM, the 

Commission tentatively defined the 

term ‘‘knowingly’’ to be coextensive 

with the extreme recklessness 

standard.121 Thus, the Commission 

stated in the RNPRM that extreme 

recklessness would satisfy the intent 

requirement in revised proposed 

Section 317.3(a).122

Several commenters urged the 

Commission to adopt a single, higher 

‘‘specific intent’’ standard for the final 

Rule.123 Other commenters, by contrast, 

contended that an extreme recklessness 

standard would be appropriate and 

consistent with congressional intent.124

For example, CFA argued that the 

proposed extreme recklessness standard 

would be ‘‘more appropriate to protect 

the public’’ because it ‘‘require[d] the 

[market] participants to exercise some 

self-control and to self-regulate their 

behavior.’’125

After considering these views, the 

Commission believes that, because final 

Rule Section 317.3(a) prohibits overt 

fraudulent or deceptive acts – which 

can have no beneficial effect in any 

setting – the extreme recklessness 

standard embodied in the term 

‘‘knowingly’’ is appropriate.126 A higher 

‘‘specific intent to manipulate the 

market’’ standard could, in principle, 

permit harmful conduct to escape 

coverage under the final Rule, simply 

because the actor did not intend to 

manipulate the market. The 

Commission has concluded that such a 

regulatory gap is unacceptable. The 

Commission also has concluded that 

requiring a showing of extreme 

recklessness, rather than ordinary 

recklessness or negligence, provides 

sufficient assurance that final Rule 

Section 317.3(a) does not capture 

inadvertent conduct or mere 

mistakes.127

Thus, to violate final Rule Section 

317.3(a), a person must engage in the 

proscribed conduct ‘‘knowing’’ that it is 

fraudulent or deceptive. For example, a 

trader’s state of mind must encompass 

more than just carrying out the 

ministerial function of transmitting false 

information to a price reporting service. 

Rather, there must be evidence that the 

trader knew or must have known that 

the information transmitted was 

false.128

As discussed above in Section IV.C.3., 

the Commission has adopted, in part, 

the ‘‘extreme recklessness’’ standard set 

out by the United States Court of 

Appeals for the Seventh Circuit.129 The 

Commission has determined that 

establishing a violation of final Rule 

Section 317.3(a) requires, at a minimum, 

evidence that the defendant’s conduct 

presents a danger of misleading buyers 

or sellers that is either known to the 


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130 As also discussed above in Section IV.C.3, 

proof of scienter under final Rule Section 317.3(a) 

shall not require evidence of a departure from 

ordinary standards of care. 

131 74 FR at 18320; see also 73 FR at 48326. See 

Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988) 

(‘‘‘[A]n omitted fact is material if there is a 

substantial likelihood that a reasonable shareholder 

would consider it important in deciding how to 

vote.’’’ (quoting TSC Indus., Inc. v. Northway, Inc., 

426 U.S. 438, 449 (1976))); see, e.g., Greenhouse v. 

MCG Capital Corp., 392 F.3d 650, 658-659 (4th Cir. 

2004) (holding a false statement regarding the 

educational background of the defendant 

company’s Chairman of the Board to be immaterial). 

132 See Basic Inc., 485 U.S. at 234 (‘‘The role of 

the materiality requirement is . . . to filter out 

essentially useless information that a reasonable 

investor would not consider significant, even as 

part of a larger ‘mix’ of factors to consider in 

making his investment decision.’’ (citing TSC 

Indus., 426 U.S. at 448-49)); see also 3 Thomas Lee 

Hazen, Treatise on Securities Regulation 12.9[3], at 

284 (5th ed. 2005). In addition, it should be noted 

that a purchaser or seller is not necessarily entitled 

to all information relating to each of the 

circumstances surrounding a particular transaction. 

See, e.g., In re Apple Computer Sec. Litig., 886 F.2d 

1109, 1115 (9th Cir. 1989) (concluding that ‘‘the 

defendant’s failure to disclose material information 

may be excused where that information has been 

made credibly available to the market by other 

sources’’); see also In re Northern Telecom Ltd. Sec. 

Litig., 116 F. Supp. 2d 446, 459 (S.D.N.Y. 2000) (‘‘A 

company is generally not obligated to disclose 

internal problems because ‘[t]he securities laws do 

not require management to bury the shareholders’ 

in internal details . . . .’’ ) (internal quotations 

omitted). 

133 See, e.g., Folger Adam Co. v. PMI Indus., Inc., 

938 F.2d 1529, 1533 (2d Cir. 1991) (‘‘No matter how 

stated, however, it is well-established that a 

material fact need not be outcome-determinative; 

that is, it need not be important enough that it 

‘would have caused the reasonable investor to 

change his vote.’’’ (quoting TSC Indus., 426 U.S. at 

449)). 134 As the NPRM noted, Section 317.3(a) of the 

proposed Rule was intended to provide a clear ban 

on ‘‘the reporting of false or misleading information 

to government agencies, to third-party reporting 

services, and to the public through corporate 

announcements.’’ 73 FR at 48326. Congress gave the 

Commission authority under Section 812, a separate 

provision from Section 811, to prohibit any person 

from reporting false or misleading information 

related to the wholesale price of petroleum 

products only if it is required by law to be reported 

to a federal department or agency. The prohibitions 

embodied in Section 812 became effective with the 

enactment of EISA on December 19, 2007. See 42 

U.S.C. 17302. 

135 74 FR at 18320. 

136 CFDR contended that the revised proposed 

Rule’s language ‘‘operates or would operate as a 

fraud’’ was at odds with the Rule’s ‘‘knowingly’’ 

standard because federal securities case law 

interprets that phrase as establishing a non-scienter 

standard. CFDR at 4. ISDA also suggested that the 

language ‘‘operates as a fraud’’ confuses the scienter 

standard because the standard merely ‘‘require[s] 

intent to engage in any volitional act that happens 

to ‘operate as a fraud.’’’ ISDA at 8. 

137 See Ernst & Ernst v. Hochfelder, 425 U.S. 185, 

193 (1976). 

138 As noted above, final Rule Section 317.3(b) 

substitutes the phrase ‘‘is likely’’ for the word 

‘‘tends’’ in revised proposed Rule Section 317.3(b). 

See discussion in Section IV.D.3.b. below. 

139 See McMahan & Co. v. Wherehouse Ent., Inc., 

900 F.2d 576, 579 (2d Cir. 1990) (‘‘Some statements, 

although literally accurate, can become, through 

their context and manner of presentation, devices 

which mislead investors.’’ ). 

140 A violation of final Rule Section 317.3(b) 

requires that the person make an affirmative 

statement that is rendered misleading by reason of 

a material omission. The Commission generally 

does not intend that Section 317.3(b) reach silence 

where no statement has been made. 

141 Compare Greenberger at 3 (contending that 

the omissions provision provided ‘‘adequate 

protection to industry participants’’), with API at 12 

(recommending that ‘‘the Commission eliminate 

liability for omissions’’). Some commenters favored 

the alternative rule language because it did not 

explicitly prohibit material omissions. See API at 19 

Continued 

defendant or is so obvious that the actor 

must have been aware of it.130

b. Materiality Standard 

Section 317.3(a) of the final Rule 

prohibits conduct that operates or 

would operate as a fraud or deceit, 

‘‘including the making of any untrue 

statement of material fact.’’ In the 

RNPRM, the Commission proposed a 

materiality standard that treated a fact 

as material if there was a substantial 

likelihood that a reasonable market 

participant would consider it important 

in making a decision to transact because 

the material fact significantly altered the 

total mix of information available.131 No 

commenter addressed the materiality 

standard in the RNPRM. Consequently, 

the Commission adopts that same 

standard for the final Rule. 

The Commission notes that the 

element of materiality limits the 

coverage of the final Rule. Consistent 

with securities law, the Commission 

intends that it not be sufficient simply 

to show that any particular person 

would have found any particular piece 

of information of interest,132 or to show 

that any particular person would have 

acted differently but for the particular 

piece of information at issue.133 Rather, 

the assessment requires a factual inquiry 

into whether the statement, omission, or 

datum at issue is of a character that 

would significantly affect the decisionmaking process of a reasonable market 

participant because it alters the mix of 

available information. This assessment, 

in turn, depends upon the specific 

circumstances surrounding the 

particular statement or omission. 

Guided by securities law precedent, 

the Commission intends to determine 

on a case-by-case basis whether a 

statement (or omission) is material. In 

this regard, the Commission views false 

or deceptive statements as material 

whenever they are of a character likely 

to be significant to participants in the 

broader market. Examples might include 

false representations to the government 

about a company’s current inventory or 

refinery operating status, or false 

representations about the price or 

volumes of past transactions to a private 

price reporting service. 

c. Other Language in Section 317.3(a) 

Final Rule Section 317.3(a) – like the 

initially proposed Rule and the revised 

proposed Rule – prohibits 

misrepresentations of fact because such 

misrepresentations clearly constitute 

fraudulent or deceptive conduct.134 As 

detailed in the RNPRM, many 

commenters and workshop participants 

agreed that such conduct harms the 

marketplace and should be 

prohibited.135 Prohibiting 

misrepresentations of material fact is 

further supported by the enforcement 

approach of other agencies. Final Rule 

Section 317.3(a) thus continues to 

include the phrase ‘‘the making of any 

untrue statement of material fact’’ in 

order to make this prohibition clear. 

A few commenters mistakenly 

believed that the phrase ‘‘operates or 

would operate as a fraud or deceit’’ 

found in Section 317.3(a) would obviate 

the scienter requirement for that 

provision.136 The Commission disagrees 

with this interpretation. The 

Commission notes, for example, that 

SEC Rule 10b-5 contains an identical 

phrase, and the Supreme Court has 

interpreted Rule 10b-5 as requiring 

proof of scienter.137 Thus, the 

Commission has determined not to alter 

the phrase ‘‘operates or would operate 

as a fraud’’ for purposes of final Rule 

Section 317.3(a). In keeping the phrase, 

moreover, the Commission intends that 

Section 317.3(a) reach conduct that 

defrauds or deceives another person or 

that could have the capacity to do so. 

3. Section 317.3(b): Omission of 

Material Information Provision 

Final Rule Section 317.3(b), like 

revised proposed Rule Section 317.3(b), 

prohibits fraudulent or deceptive 

statements that are misleading as a 

result of the intentional omission of 

material facts, where that omission 

distorts or is likely to distort market 

conditions for a covered product.138

Thus, material omissions from a 

statement that is otherwise literally true 

may, under the circumstances present at 

the time the statement is made, render 

that statement misleading.139 The 

Commission therefore has determined 

that prohibiting intentional omissions of 

material facts that distort or are likely to 

distort market conditions is consistent 

with both the objectives of EISA and the 

Commission’s larger mandate to protect 

consumers.140

The record contains comments from 

both those who supported and those 

who objected to a specific omissions 

provision.141 Those objecting argued 


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(urging ‘‘the Commission to adopt the proposed 

alternative rule language and clarify that it would 

cover affirmative statements but not omissions’’); 

CFDR at 4 n.3. 

142 API at 17; see, e.g., Argus at 5 (‘‘[C]ompanies 

may prefer to disclose no information, instead of 

risking violating the rule’s prohibition on omissions 

. . . .’’ ). 

143 CFDR at 2, 4 (contending that an express 

prohibition on material omissions created ‘‘the 

premise of a disclosure duty [to be] formally 

implicated by a rule’’); see also Sutherland at 3 

(‘‘[W]holesale market participants are sophisticated 

parties who generally [would] not require special 

remediation for . . . omissions . . . .’’ ). 

144 See, e.g., ISDA at 2 (stating that the 

Commission’s modifications to the omissions 

provision ‘‘made an important enhancement to the 

ability of firm[s] to ensure compliance with the 

rule’’); Platts at 5 (noting that the revised proposed 

Rule’s omissions provision was ‘‘a step forward’’ 

with regard to clarity and simplicity); CAPP at 2 

(‘‘With [the modifications to the omissions 

provisions], CAPP concur[red] that the revised 

proposed Rule would serve the public interest.’’ ). 

145 74 FR at 18321 (noting that the revised 

proposed Rule ‘‘would not . . . impose an affirmative 

duty to disclose information). This determination 

comports with the suggestions of several 

commenters. See, e.g., Sutherland at 3 (arguing 

against imposing mandatory disclosure obligations 

on wholesale petroleum market participants); CAPP 

at 2 (‘‘CAPP remains concerned that mandatory 

disclosure is a problematic approach in the absence 

of specific, empirical evidence of damaging 

practices or incidences of specific harm.’’ ); Argus 

at 5 (stating that imposing mandatory disclosure 

obligations would lead to confusion and would 

place a severe burden on market participants); ISDA 

at 12-13 (stating that ‘‘[s]uch a requirement would 

create a level of regulatory risk that would deter 

market participants from communicating in any 

substantive way with market participants’’); API at 

23 (arguing that a final rule should not impose a 

duty to correct or update information). 

146 SEC Rule 10b-5 similarly does not create an 

affirmative duty of disclosure. See, e.g., In re Time 

Warner Inc. Sec. Litig., 9 F.3d 259, 267 (2d Cir. 

1993) (‘‘[A] corporation is not required to disclose 

a fact merely because a reasonable investor would 

very much like to know that fact.’’ (citing Basic Inc. 

v. Levinson, 485 U.S. 224, 239 n. 17 (1988))). 

147 API asked the Commission to preserve market 

participants’ incentive to gather and evaluate 

market intelligence by promulgating a rule that does 

not require disclosure of such information. API at 

32-33 & n.37. API argued that collecting and 

evaluating market intelligence is costly, and market 

participants are unlikely to incur these costs if they 

are required to disclose such information. API at 32. 

The Commission agrees that a party should not be 

required to reveal such market intelligence in order 

to comply with the final Rule. For example, a party 

would not be required to reveal estimates of its 

future inventory levels to a counter-party during a 

business negotiation. 

148 In these instances, parties may seek redress 

under state laws for contract or tort claims. These 

laws are more appropriate in such cases. For 

example, state law better addresses issues such as 

whether a counter-party in a commercial 

transaction had an independent ability to verify 

representations made by a party or was otherwise 

entitled to rely on such representations in reaching 

an agreement; whether a contract was entered into 

under false pretenses; or whether a party had a preexisting legal duty to provide information to a 

counter-party. 

149 See also ISDA at 8 (asking the Commission to 

clarify that the Rule’s scienter standard applies to 

a fraudulent act rather than to any volitional act). 

150 See, e.g., API at 3 (stating the Commission 

‘‘correctly recognize[d] the shortcomings of a 

knowledge / extreme recklessness standard as 

applied to omissions’’); CAPP at 1 (approving of the 

revised scienter requirement); Argus at 2 

(supporting the addition of ‘‘intentionally’’ as ‘‘a 

significant effort to reduce [a] chilling effect and 

. . . draw[s] the rule closer to the existing [CEA] 

language’’); see also Platts at 5 (praising revisions 

to the omissions provision, which it believed 

enhanced the clarity and simplicity of the Rule). 

that the Section 317.3(b) prohibition on 

omissions would lead firms to adopt 

compliance programs that curtail 

voluntary disclosures, thereby ‘‘denying 

markets the benefits of the information 

that is readily disclosed today.’’142

Some commenters also questioned 

whether a specific omissions 

prohibition would be ‘‘efficacious’’ 

given the absence of any existing 

disclosure obligations in wholesale 

petroleum markets.143 Still other 

commenters stated that revised 

proposed Section 317.3(b) was superior 

to the initially proposed Rule because 

the revisions enhanced the Rule’s clarity 

regarding the coverage of material 

omissions.144

After reviewing the record, the 

Commission has decided to retain a 

separate prohibition on material 

omissions because this conduct may 

serve as a vehicle to manipulate 

wholesale petroleum markets even in 

the absence of affirmative disclosure 

requirements. In promulgating final 

Rule Section 317.3(b), the Commission 

has accommodated both Section 811’s 

injunction against market manipulation 

and commenters’ concerns that a 

separate omissions provision might 

discourage voluntary disclosures that 

increase beneficial market transparency. 

The Commission has achieved this 

accommodation by crafting the Section 

317.3(b) prohibition of material 

omissions so that it differs from the 

Section 317.3(a) prohibition on overt 

fraud or deceit in two significant ways. 

First, Section 317.3(b) contains a 

stricter scienter standard than does 

Section 317.3(a). Specifically, 

establishing a final Rule Section 

317.3(b) violation requires showing that 

the alleged violator ‘‘intentionally 

fail[ed] to state a material fact that under 

the circumstances render[ed] a 

statement made by such person 

misleading.’’ This scienter standard 

requires that the alleged violator intend 

to mislead by means of a material 

omission rather than simply being 

aware of the potential risk posed by his 

or her conduct; that is, the actor must 

have intentionally omitted information 

from a statement with the further intent 

to make the statement misleading. 

Second, final Rule Section 317.3(b) 

contains a limiting proviso not found in 

final Rule Section 317.3(a). The proviso 

requires that the wrongful conduct at 

issue distort or be likely to distort 

market conditions. The limiting proviso 

provides businesses with the assurance 

that omissions occurring in the context 

of routine business activity are not 

actionable unless they otherwise 

undermine market participants’ ability 

to rely on the integrity of market data. 

Final Rule Section 317.3(b) – like 

final Rule Section 317.3(a) – also does 

not impose an affirmative duty to 

disclose information or a duty to correct 

or update information.145 Rather, 

Section 317.3(b) applies only if a 

covered entity voluntarily provides 

information – or is compelled to provide 

information by statute, order, or 

regulation – but then intentionally fails 

to disclose a material fact that makes the 

information misleading. Section 

317.3(b) therefore does not require 

businesses to provide commercially 

sensitive information to any other 

person absent a pre-existing legal 

obligation to do so.146 Similarly, it is not 

a violation of final Rule Section 317.3(b) 

to withhold market intelligence that a 

company gathered about market 

conditions.147 The failure to provide 

such information would not establish a 

violation of this provision, even if the 

counter-party in a commercial 

negotiation would have acted differently 

if such information had been revealed. 

In addition, the Commission does not 

generally intend that Section 317.3(b) 

reach routine bilateral commercial 

negotiations, which are unlikely to 

inject false information into the market 

process.148

a. Scienter Standard: A Person Must 

Intentionally Make a Misleading 

Statement By Intentionally Omitting 

Material Information 

As noted, Section 317.3(b)’s scienter 

standard requires that a person must 

have intentionally omitted information 

from a statement with the further intent 

to make the statement misleading. 

Significantly, this standard does not 

require a showing that the actor 

intended to manipulate a wholesale 

petroleum market or otherwise intended 

to have an impact on the larger market. 

It requires only that the actor intended 

to make a statement misleading by 

means of an intentional omission of 

material fact. The Commission has 

determined to apply the scienter 

requirement both to the omission of a 

material fact and to the making of a 

misleading statement.149

Several commenters expressed 

general support for the Commission’s 

decision to adopt an ‘‘intentional’’ 

standard for Section 317.3(b).150 Some 


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But see, e.g., Greenberger at 3 (stating that the 

addition of ‘‘intentionally’’ to Section 317.3(b) 

‘‘unnecessarily inhibit[ed] the FTC from exercising 

its authority to protect the public from market 

manipulation . . . .’’ ). 

151 See, e.g., CFDR at 4-5 (‘‘[P]roof of intent to 

corrupt the integrity of market pricing processes or 

an intent otherwise to cause false, fictitious and 

artificial market prices must be a necessary element 

of any anti-manipulation rule.’’ ); API at 3 (arguing 

that specific intent ‘‘is necessary to limit the rule 

to the market-distorting conduct that Congress 

intended to address in Section 811’’). 

152 The edit is consistent with the views of one 

commenter. See API at 38 (arguing that the concept 

of ‘‘tendency’’ may lead to unintended 

interpretations). 

153 One commenter, ATAA, expressed general 

support for the market conditions proviso, but 

ultimately preferred the proposed Rule as 

articulated in the NPRM, which does not contain 

a market conditions proviso or similar limiting 

language. ATAA at 1, 5. 154 ISDA at 13-14. 155 See, e.g., API at 34 (preferring a required 

showing of market effects); ISDA at 9 (‘‘The 

Commission should require proof of market effect 

to find a violation of the rule because public policy 

only should be concerned with fraudulent activity 

that actually affects market prices and, therefore, 

presumably harms wholesale petroleum products 

markets.’’ ); see also Sutherland at 4 (encouraging 

the Commission to require that prohibited behavior 

impact the market). 

156 CFDR at 5; see also API at 38 (‘‘‘Tends to 

distort’ is an imprecise term, subject to expansive 

interpretations imposing liability even on omissions 

that, in the circumstances, had no real chance of 

affecting a covered market or consumers.’’ ). 

157 Senator Cantwell at 4. Commenters also 

expressed support for the Commission decision to 

reject market or price effects requirements. See 

Senator Cantwell at 3-4; CFA at 6; Greenberger at 

3. 

158 As discussed earlier in Section III., markets 

absorb all available information – good or bad – and 

continually adjust price signals and other market 

data to any new information. When economic actors 

can presume that the data of the market have not 

been artificially manipulated, they are able to rely 

on the data to make decisions that they believe will 

advance their individual economic objectives. 

Participants can no longer trust that the data of the 

market reflect underlying market fundamentals. The 

proviso contained in final Rule Section 317.3(b) 

thus focuses enforcement of that provision on 

conduct that inherently threatens confidence in the 

market’s integrity. When material omissions are of 

the character that can be expected to distort 

observable market data, those decisions are perforce 

riskier and the efficiency of the market process is 

reduced. Market participants and the public are less 

able to trust the underlying integrity of the market 

process. 

commenters further urged the 

Commission to elevate the standard to a 

‘‘specific intent to manipulate the 

market’’ because, in their view, it would 

better delineate limits on the conduct 

reached by the Rule.151 The 

Commission has determined not to do 

so because intentional misleading 

statements can be of a character that 

undermines market participants’ overall 

trust in the integrity of market data, 

regardless of whether an actor had a 

specific intent to have that effect or to 

benefit from it. The Commission 

believes, furthermore, that the 

‘‘intentional’’ standard provides market 

participants and their counsel with as 

much clarity as practicable regarding 

the evidentiary burden necessary to 

establish this element of a Section 

317.3(b) violation. Because a violation 

of Section 317.3(b) requires proof of 

intentional conduct, it does not reach 

inadvertent conduct or mere mistakes. 

b. The Omission of Material Information 

Must Distort or Be Likely to Distort 

Market Conditions within a Wholesale 

Market for a Covered Product 

Under the revised proposed Rule, a 

statement made intentionally 

misleading by reason of the intentional 

omission of a material fact would 

violate the Rule only if its dissemination 

‘‘distorts or tends to distort market 

conditions’’ respecting any covered 

product. Final Rule Section 317.3(b) 

retains this limiting market conditions 

language, except that the Commission 

has determined to replace the phrase 

‘‘tends to distort’’ with the phrase ‘‘is 

likely to distort.’’ The Commission has 

effected this modification in order to 

eliminate the possibility of confusion, 

by clarifying that final Rule Section 

317.3(b) focuses upon those material 

omissions that are likely to distort 

market conditions. Thus, establishing a 

violation of final Rule Section 317.3(b) 

expressly requires proof that a material 

omission ‘‘distorts or is likely to distort 

market conditions’’ for a covered 

product.152

Commenters presented various views 

on the desirability of a market 

conditions proviso.153 ISDA opined that 

‘‘the distorts or tends to distort 

requirement . . . will benefit markets 

. . . because it should remove from the 

ambit of the rule, private and other 

conversations and conduct that do not 

distort or tend to distort markets and 

with which the Commission should not 

be concerned.’’154 Other commenters, 

however, including ISDA, continued to 

argue that establishing a rule violation 

should require proof of an actual price 

effect.155 CFDR argued that the 

proposed market conditions proviso was 

an ‘‘imprecise and poor substitute for 

effects on market pricing,’’ and that a 

market manipulation rule should reach 

conduct that ‘‘corrupt[s] the integrity of 

market pricing.’’156 Senator Cantwell 

opposed the proviso, arguing that such 

language would unnecessarily limit the 

Commission’s ability to ‘‘hold[] 

accountable those who employ any 

manipulative ‘device or contrivance’ in 

wholesale oil and petroleum 

markets.’’157

The Commission has concluded that 

the limiting proviso advances the 

effective implementation of Section 811 

in an important way. It ensures that 

Section 317.3(b) prohibits only those 

material omissions that can be expected 

to manipulate a wholesale petroleum 

market. In so doing, it gives market 

participants the certainty that 

statements containing material 

omissions will not be challenged if they 

do not adversely threaten the reliability 

of data in a broader wholesale 

petroleum market. 

Significantly, however, by the 

proviso’s own terms, establishing a final 

Rule Section 317.3(b) violation does not 

require proof of a specific price effect. 

Rather, the phrase ‘‘distorts or is likely 

to distort market conditions’’ speaks 

only to the ability of market participants 

to rely on the integrity of market data in 

making purchase and sales decisions. 

Misleading statements of the kind that 

distort or are likely to distort market 

data taint the integrity of the market 

process.158

In this regard, the core principle 

embodied in the proviso centers around 

the character and the likely market 

reach of the false or misleading 

information that is injected into the 

market by means of misleading 

statements. Specifically, establishing a 

violation of final Rule Section 317.3(b) 

requires showing that the character and 

likely market reach of such false or 

misleading information is likely to make 

market data less reliable. This 

evidentiary burden is lower than 

proving a specific price effect or any 

other specific effect on a market metric. 

Focusing Section 317.3(b) 

enforcement on conduct that inherently 

threatens market integrity because it is 

conduct that distorts or is likely to 

distort market conditions, thus, achieves 

the objectives of Section 811 while 

limiting interference with legitimate 

business activity. For example, proof 

that a person intentionally reported 

price information to a private data 

reporting company that is in the 

business of providing price reports to 

the marketplace – and that the person 

intentionally omitted material facts that 

the reporting company required to be 

reported – would satisfy the market 

conditions proviso. Similarly, 

intentionally omitting material 

information in statements in order to 

mislead government officials during a 

national emergency would violate 

Section 317.3(b) because such conduct 

can be expected to threaten the integrity 

of the data within the market at large 

and on which market participants rely. 


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159 This standard conforms to the approach the 

Commission followed in the RNPRM and NPRM 

with respect to materiality. 74 FR at 18323 n.214; 

73 FR at 48326. 

160 42 U.S.C. 17305. 

161 See, e.g., Disclosure Requirements and 

Prohibitions Concerning Franchising, 16 CFR 

436.10(b). 

162 74 FR at 18323. 

163 See 74 FR at 18323. 

164 See, e.g., Telemarketing Sales Rule, 16 CFR 

310.9; Used Motor Vehicle Trade Regulation Rule, 

16 CFR 455.7. 

165 74 FR at 18323. 

166 5 U.S.C. 601-612. 

167 5 U.S.C. 603. 

168 5 U.S.C. 604. 

169 See 5 U.S.C. 605(b). 

170 The RFA definition of ‘‘small entity’’ refers to 

the definition provided in the Small Business Act, 

which defines a ‘‘small-business concern’’ as a 

business that is ‘‘independently owned and 

operated and which is not dominant in its field of 

operation.’’ 15 U.S.C. 632(a)(1). As noted above, 

Section 317.2(d) of the final Rule defines a 

‘‘person’’ as ‘‘any individual, group, unincorporated 

association, limited or general partnership, 

corporation, or other business entity.’’ 

171 Although no commenters addressed whether 

the revised proposed Rule would have an economic 

impact on small entities, some commenters 

contended that the revised proposed Rule would be 

costly and burdensome to the industry. None of 

these commenters submitted data for the 

Commission to analyze any such economic impact 

of the Rule. See, e.g., API at 8 (adhering to the 

revised proposed Rule will force participants to 

enact burdensome compliance procedures raising 

industry costs and restricting efficient and 

procompetitive conduct); SIGMA at 2 (including 

rack sales in the definition of ‘‘wholesale’’ will 

impose significant compliance requirements on the 

gasoline marketing industry). 

172 42 U.S.C. 17301. 

173 See (http://www.ftc.gov./ftc/oilgas/rules.htm). 

174 74 FR at 18316. 

c. Materiality 

Section 317.3(b) of the final Rule 

prohibits the omission of a ‘‘material 

fact.’’ The standard for materiality for 

Section 317.3(b) is the same as that for 

Section 317.3(a), which is discussed 

above in Section IV.D.2.b. Thus, a fact 

is material if there is a substantial 

likelihood that a reasonable market 

participant would consider it important 

in making a decision to transact, 

because the material fact significantly 

alters the total mix of information 

available.159 The Commission has 

concluded that limiting the reach of 

final Rule Section 317.3(b) to an 

omission of a ‘‘material fact’’ provides 

market participants with clarity as to the 

type of omission that is covered by 

Section 317.3(b). 

E. Section 317.4: Preemption 

Section 815(c) of EISA states that 

‘‘[n]othing in this subtitle preempts any 

State law.’’160 Consequently, Section 

317.4 of the final Rule contains a 

standard preemption provision used in 

other FTC rules, making it clear that the 

Commission does not intend to preempt 

the laws of any state or local 

government, except to the extent of any 

conflict.161 This approach is consistent 

with the position stated in the RNPRM, 

where the Commission explained that 

there is no conflict, and therefore no 

preemption, if state or local law affords 

equal or greater protection from the 

manipulative conduct prohibited by the 

revised proposed Rule.162

No commenters addressed 

preemption of state law. Accordingly, 

the final Rule adopts the preemption 

provision proposed in the RNPRM.163

F. Section 317.5: Severability 

Section 317.5 of the final Rule 

contains a standard severability 

provision used in other FTC rules.164

This provision makes clear that if any 

part of the Rule is held invalid by a 

court, the rest of the Rule will remain 

in effect. The Commission received no 

comments on this issue. Accordingly, 

the Commission adopts without 

alteration the severability provision 

proposed in the RNPRM.165

G. Regulatory Flexibility Act 

The Regulatory Flexibility Act of 1980 

(‘‘RFA’’)166 generally requires a 

description and analysis of proposed 

and final rules that will have a 

significant economic impact on a 

substantial number of small entities. 

Specifically, the RFA requires an agency 

to provide an Initial Regulatory 

Flexibility Analysis (‘‘IRFA’’)167 with a 

proposed Rule and a Final Regulatory 

Flexibility Analysis (‘‘FRFA’’)168 with a 

final rule, if any. The Commission is not 

required to do such analyses if a rule 

would not have such an economic 

effect.169

Although the scope of the final Rule 

may reach a substantial number of small 

entities as defined in the RFA, the 

Commission does not believe that the 

Rule will have a significant economic 

impact on those businesses.170 The 

Commission specifically requested 

comments on the economic impact of 

the revised proposed Rule and received 

none.171 Given that there are no 

reporting requirements, document or 

data retention provisions, or any other 

affirmative duties imposed, it is 

unlikely that the final Rule imposes 

costs to comply beyond standard costs 

associated with ensuring that behavior 

and statements are not fraudulent or 

deceptive. Therefore, the Commission 

believes that the final Rule will not have 

a significant economic impact on a 

substantial number of small entities. 

Notwithstanding this belief, the 

Commission has prepared a FRFA, as 

set forth below. 

1. Need for and Objectives of the Final 

Rule 

Section 811 grants the Commission 

the authority to promulgate a rule that 

is ‘‘necessaryor appropriate in the 

public interest or for the protection of 

United States citizens.’’172 As discussed 

above, the Commission believes that 

promulgating the final Rule is 

appropriate to prevent manipulative 

practices affecting wholesale markets for 

petroleum products, and the 

Commission has tailored the Rule 

specifically to reach manipulative 

behavior that likely impacts those 

commodities described in Section 811. 

The final Rule supplements the 

Commission’s existing antitrust and 

consumer protection law enforcement 

tools. 

2. Significant Issues Raised by the 

Public Comment, Summary of the 

Agency’s Assessment of these Issues, 

and Changes, if any, Made in Response 

to Such Comments 

The Commission received 155 

comments in response to its ANPR, 34 

comments in response to its NPRM, and 

17 comments in response to its RNPRM. 

Further, the Commission staff sought 

additional comment by holding a oneday public workshop to discuss the 

issues arising from the comments. The 

comments and the workshop transcript 

are part of the rulemaking record and 

are available at the Commission’s 

website.173

Based on the record in this 

proceeding, the Commission has 

concluded that the final Rule should be 

a broad, anti-fraud rule guided by the 

principles of SEC Rule 10b-5. Like the 

initially proposed Rule and the revised 

proposed Rule, the final Rule broadly 

prohibits fraudulent or deceptive 

conduct. However, in response to 

commenters’ concerns, the Commission 

has modified the final Rule in three 

ways to clarify the type of conduct that 

would violate the Rule and to mitigate 

chilling of legitimate conduct. 

First, the final Rule, like the revised 

proposed Rule, consolidates the initially 

proposed Rule’s three-part conduct 

prohibition into a two-part conduct 

prohibition that ‘‘more clearly and 

precisely denote[s] the unlawful 

conduct [the Rule] prohibits.’’174

Second, each paragraph of the conduct 

prohibition in the final Rule contains an 

explicit and tailored scienter standard. 

The different scienter standards address 

concerns raised by commenters that the 

initially proposed Rule, which had only 


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175 See id. 

176 Directly covered Directly covered entities 

under the final Rule are classified as small 

businesses under the Small Business Size Standards 

component of the North American Industry 

Classification System (‘‘NAICS’’) as follows: 

petroleum refineries (NAICS code 324110) with no 

more than 1,500 employees nor greater than 

125,000 barrels per calendar day total Operable 

Atmospheric Crude Oil Distillation capacity; 

petroleum bulk stations and terminals (NAICS code 

424710) with no more than 100 employees; and 

petroleum and petroleum products merchant 

wholesalers (except bulk stations and terminals) 

(NAICS code 424720) with no more than 100 

employees. See Small Business Administration 

(‘‘SBA’’), Table of Small Business Size Standards 

Matched to North American Industry Classification 

System Codes (Aug. 22, 2008), available at (http:// 

www.sba.gov/idc/groups/public/documents/ 

sba_homepage/serv_sstd_tablepdf.pdf). 

177 The SBA publication providing data on the 

number of firms and number of employees by firm 

does not provide sufficient precision to gauge the 

number of small businesses that may be impacted 

by the final Rule accurately. The data are provided 

in increments of 0-4 employees, fewer than 20 

employees, and fewer than 500 employees. SBA, 

Employer Firms, & Employment by Employment 

Size of Firm by NAICS Codes, 2006, available at 

(http://www.sba.gov/advo/research/us06_n6.pdf). 

Thus, for the 228 petroleum refiners listed, 188 

show that they have less than 500 employees. 

Although the Commission is unaware of more than 

five refiners with less than 125,000 barrels of crude 

distillation capacity, the data may be kept by 

refinery, rather than refiner. Similar problems exist 

for the bulk terminal and bulk wholesale categories 

listed above, in which the relevant small business 

cut-off is greater than 100 employees. Although the 

Commission sought additional comment on the 

number of small entities covered by the revised 

proposed Rule, it received none. Accordingly, the 

small business data set forth in this FRFA are the 

best estimates available to the Commission at this 

time. 

178 Final Rule Section 317.3(b) applies only if a 

covered entity voluntarily provides information – or 

is compelled to provide information by statute, 

order, or regulation – but then intentionally fails to 

disclose a material fact that makes the information 

misleading. See Section IV.D.3 above. 

179 44 U.S.C. 3501-3521. Under the PRA, federal 

agencies must obtain approval from the Office of 

Management and Budget (‘‘OMB’’) for each 

collection of information they conduct or sponsor. 

‘‘Collection of information’’ means agency requests 

or requirements that members of the public submit 

reports, keep records, or provide information to a 

third party. 44 U.S.C. 3502(3)(A). 

a single, scienter standard, would have 

unacceptably chilled legitimate 

conduct.175 Third, one paragraph of the 

final Rule, the omissions paragraph, 

contains a market conditions proviso 

that will limit the paragraph to only 

those omissions that can be expected to 

result in manipulative conduct harmful 

to consumers without interfering with 

legitimate business conduct. 

3. Description and Estimate of Number 

of Small Entities Subject to the Final 

Rule Or Explanation Why no Estimate is 

Available 

The final Rule applies to entities 

engaging in the purchase or sale of 

crude oil, gasoline, or petroleum 

distillates. These potentially include 

petroleum refiners, blenders, 

wholesalers, and dealers (including 

terminal operators that sell covered 

commodities). Although many of these 

entities are large international and 

domestic corporations, the Commission 

believes that a number of these covered 

entities may be small entities.176

According to the SBA size standards, 

and utilizing SBA source data, the 

Commission estimates that between 

approximately 1,700 and 5,200 covered 

entities would be classified as small 

entities.177

4. Description of Projected Reporting, 

Recordkeeping, and Other Compliance 

Requirements of the Final Rule, 

Including an Estimate of the Classes of 

Small Entities that Will Be Subject to 

the Rule and the Type of Professional 

Skills that Will Be Necessary to Comply 

The final Rule does not contain any 

requirement that covered entities create, 

retain, submit, or disclose any 

information. Accordingly, the Rule will 

impose no recordkeeping or related data 

retention and maintenance or disclosure 

requirements on any covered entity, 

including small entities.178 Given that 

there are no reporting requirements, 

document or data retention provisions, 

or any other affirmative duties imposed, 

it is unlikely that the final Rule imposes 

costs to comply beyond standard costs 

(or skills) associated with ensuring that 

behavior and statements are not 

fraudulent or deceptive. 

5. Steps the Agency Has Taken to 

Minimize Any Significant Economic 

Impact on Small Entities, Consistent 

With the Stated Objectives of the 

Applicable Statutes, Including the 

Factual, Policy, and Legal Reasons for 

Selecting the Alternative(s) Finally 

Adopted, and Why Each of the 

Significant Alternatives, if Any, Was 

Rejected 

The final Rule is narrowly tailored to 

reduce compliance burdens on covered 

entities, regardless of size. In 

formulating the Rule, the Commission 

has taken several significant steps to 

minimize potential burdens. As an 

initial matter, the Rule contains no 

recordkeeping or disclosure obligations. 

The Rule focuses on preventing 

manipulation and deception in 

wholesale petroleum markets. The 

Commission has declined to include 

specific conduct or duty requirements, 

such as a duty to supply product or a 

duty to provide access to pipelines and 

terminals. The Rule also clarifies that 

covered entities need not disclose price, 

volume, or other data to the market. 

H. Paperwork Reduction Act 

The final Rule does not impose any 

new information collection 

requirements under the provisions of 

the Paperwork Reduction Act of 1995 

(‘‘PRA’’).179

List of Subjects in 16 CFR Part 317 

■ Accordingly, for the reasons set forth 

in the preamble, the Commission 

amends Title 16, Chapter I, Subchapter 

C of the Code of Federal Regulations by 

adding part 317 to read as follows: 

PART 317 – PROHIBITION OF ENERGY 

MARKET MANIPULATION RULE 

Sec. 

317.1 Scope. 

317.2 Definitions. 

317.3 Prohibited practices. 

317.4 Preemption. 

317.5 Severability. 

Authority: 42 U.S.C. 17301-17305; 15 

U.S.C. 41-58. 

§ 317.1 Scope. 

This part implements Subtitle B of 

Title VIII of The Energy Independence 

and Security Act of 2007 (‘‘EISA’’), Pub. 

L. 110-140, 121 Stat. 1723 (December 

19, 2007), codified at 42 U.S.C. 17301- 

17305. This Rule applies to any person 

over which the Federal Trade 

Commission has jurisdiction under the 

Federal Trade Commission Act, 15 

U.S.C. 41 et seq. 

§ 317.2 Definitions. 

The following definitions shall apply 

throughout this Rule: 

(a) Crude oil means any mixture of 

hydrocarbons that exists: 

(1) In liquid phase in natural 

underground reservoirs and that 

remains liquid at atmospheric pressure 

after passing through separating 

facilities; or 

(2) As shale oil or tar sands requiring 

further processing for sale as a refinery 

feedstock. 

(b) Gasoline means: 

(1) Finished gasoline, including, but 

not limited to, conventional, 

reformulated, and oxygenated blends; 

and 

(2) Conventional and reformulated 

gasoline blendstock for oxygenate 

blending. 

(c) Knowingly means that the person 

knew or must have known that his or 

her conduct was fraudulent or 

deceptive. 

(d) Person means any individual, 

group, unincorporated association, 

limited or general partnership, 

corporation, or other business entity. 


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1 Congress authorized the rule in section 811 of 

the Act using language from an earlier bill offered 

by Senator Maria Cantwell. See Petroleum 

Consumer Price Gouging Protection Act, S. 1263, 

110th Cong. §§ 4 and 5(a) (2007). 

2 See generally, Comments of the American 

Petroleum Institute and the National Petrochemical 

and Refiners Association in Response to Revised 

Notice of Proposed Rulemaking (May 20, 2009), 

available at (http://www.ftc.gov/os/comments/ 

marketmanipulation3/541354-00009.pdf). 

3 See, e.g., id. at 1 (‘‘In particular, API and NPRA 

welcome the Commission’s recognition that 

wholesale petroleum markets differ significantly 

from securities markets and the Commission’s 

efforts to tailor the proposed rule to reflect those 

differences.’’ ). 

1 42 U.S.C. §§ 17301-17305. 

2 Prohibitions on Market Manipulation, 

Statement of Basis and Purpose and Final Rule (to 

be codified at 16 C.F.R. § 317.3(a)). 

3 Id. (to be codified at 16 C.F.R. § 317.3(b)). 

(e) Petroleum distillates means: 

(1) Jet fuels, including, but not limited 

to, all commercial and military 

specification jet fuels; and 

(2) Diesel fuels and fuel oils, 

including, but not limited to, No. 1, No. 

2, and No. 4 diesel fuel, and No. 1, No. 

2, and No. 4 fuel oil. 

(f) Wholesale means: 

(1) All purchases or sales of crude oil 

or jet fuel; and 

(2) All purchases or sales of gasoline 

or petroleum distillates (other than jet 

fuel) at the terminal rack or upstream of 

the terminal rack level. 

§ 317.3 Prohibited practices. 

It shall be unlawful for any person, 

directly or indirectly, in connection 

with the purchase or sale of crude oil, 

gasoline, or petroleum distillates at 

wholesale, to: 

(a) Knowingly engage in any act, 

practice, or course of business – 

including the making of any untrue 

statement of material fact – that operates 

or would operate as a fraud or deceit 

upon any person; or 

(b) Intentionally fail to state a material 

fact that under the circumstances 

renders a statement made by such 

person misleading, provided that such 

omission distorts or is likely to distort 

market conditions for any such product. 

§ 317.4 Preemption. 

The Federal Trade Commission does 

not intend, through the promulgation of 

this Rule, to preempt the laws of any 

state or local government, except to the 

extent that any such law conflicts with 

this Rule. A law is not in conflict with 

this Rule if it affords equal or greater 

protection from the prohibited practices 

set forth in § 317.3. 

§ 317.5 Severability. 

The provisions of this Rule are 

separate and severable from one 

another. If any provision is stayed or 

determined to be invalid, it is the 

Commission’s intention that the 

remaining provisions shall continue in 

effect. 

By direction of the Commission, 

Commissioner Kovacic dissenting. 

Donald S. Clark 

Secretary 

Note: The following text will not be 

codified in Title 16 of the Code of 

Federal Regulations. 

Statement of Chairman Jon Leibowitz 

When Congress passed the Energy 

Independence and Security Act of 2007, 

it authorized the Commission to 

develop a rule to prevent manipulation 

in wholesale energy markets.1 The goal 

of Congress was for the Commission to 

detect and prevent market manipulation 

that might lead to higher gas prices for 

consumers. After a thorough and 

intensive process, the Commission has 

started to do just that. The rule issued 

by the Commission today is a broad 

anti-fraud measure that will help us 

prohibit conduct that harms consumers 

but that may not violate antitrust laws. 

We are going to use this authority as 

aggressively as possible to stop market 

manipulation that drives up prices at 

the pump. 

Trade associations representing the 

oil industry have voiced concern about 

the new rule. They argue that it will 

chill business conduct in the service of 

stopping something that they don’t 

believe is happening in the first place. 

These industry advocates have proposed 

several specific changes that would 

weaken the rule – requiring a higher 

scienter standard under the general 

liability provision, requiring an explicit 

market distortion element for the entire 

rule, and entirely eliminating liability 

for omissions.2

I am fundamentally opposed to these 

proposals. They would effectively 

neuter the rule and, as my colleague 

Commissioner Rosch notes in his 

concurring statement, they would 

undermine Congressional intent. For 

example, the proposed changes would 

make it harder – if not impossible – to 

prosecute those who manipulate the 

market by intentionally omitting critical 

information from their communications, 

even when those omissions distort 

market conditions and raise gasoline 

prices for all Americans. Such 

omissions can be every bit as deceptive 

as any other type of fraudulent conduct, 

so it is crucial that we have the ability 

to prevent and prosecute them. A rule 

that does not allow us to go after such 

conduct would limit our ability to 

protect consumers. 

The rule as proposed already takes 

into account legitimate industry 

concerns. In fact, we responded directly 

to those concerns by modifying the 

more expansive proposal in the draft 

rule we released last summer, originally 

based on the Securities and Exchange 

Commission rule 

10b-5, to accommodate industry 

worries.3 The current rule, as modified, 

strikes the right balance; it gives the 

Commission the authority to stop 

fraudulent conduct in energy markets 

but does not undermine appropriate 

business activity. 

It is only the fact that gas prices were 

over four dollars per gallon a year ago 

that keeps us from thinking that prices 

are too high today. If we water down 

this rule as suggested by the industry, it 

would hinder our ability to stop 

manipulation of wholesale petroleum 

markets. That would undermine the 

intent of Congress, and undermine the 

efforts of the Commission to protect 

consumers and do our job. 

Dissenting Statement of Commissioner 

William E. Kovacic 

Since early 2008, a task force of the 

staff of the Federal Trade Commission 

(FTC) has devoted extraordinary care, 

skill, and effort to the development of a 

rule to implement Title VIII of The 

Energy Independence and Security Act 

of 2007.1 Their performance on this 

project – from the early research on the 

possible content of a rule through the 

public consultations and drafting of 

options for the Commission’s 

consideration – is a model of superb 

public administration. I thank and 

congratulate them. 

I disagree with the choices taken by 

the Commission today in promulgating 

a Final Rule. In connection with 

wholesale transactions involving ‘‘crude 

oil, gasoline, or petroleum distillates,’’ 

Section 317.3(a) of the Commission’s 

Final Rule makes it illegal to 

‘‘Knowingly engage in any act, practice, 

or course of business . . . that operates or 

would operate as a fraud or deceit’’ on 

any person.2 Section 317.3(b) of the 

Final Rule makes it illegal for a party 

‘‘[i]ntentionally’’ to ‘‘fail to state a 

material fact’’ where ‘‘such omission 

distorts or is likely to distort market 

conditions . . . .’’3 Compared to 

Paragraph 3(a), Paragraph 3(b) imposes 

a more demanding scienter requirement. 

To violate Paragraph 3(b), the person 

must act ‘‘intentionally’’ rather than 

‘‘knowingly,’’ a state of mind that exists 

when the person ‘‘knew or must have 

known that his or her conduct was 


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4 Id. (to be codified at 16 C.F.R. § 317.2(c)). 

5 Such a rule would be similar to the alternative 

rule proposed in the Revised Notice of Proposed 

Rule Making, 74 Fed. Reg. 18304, 18327 (Apr. 22, 

2009). 

6 See 42 U.S.C. § 17301 (permitting the 

Commission to adopt a rule to implement the 

Energy Independence and Security Act if it finds 

such a rule to be in the ‘‘public interest’’). 

7 42 U.S.C. § 17304. 

8 See Federal Trade Commission, Investigation of 

Gasoline Price Manipulation and Post-Katrina Gas 

Price Increases (2006), at (http://www.ftc.gov/ 

reports/060518PublicGasoline 

PricesInvestigation 

ReportFinal.pdf); Federal Trade Commission, 

Gasoline Price Changes: The Dynamic of Supply, 

Demand, and Competition (2005), at (http:// 

www.ftc.gov/reports/gasprices05/ 

050705gaspricesrpt.pdf). 

9 See Statement of Basis and Purpose and Final 

Rule at 33 n.92 (‘‘Consistent with its position in the 

NPRM and the RNPRM, the Commission currently 

does not expect to impose specific conduct or duty 

requirements such as . . . a duty to disclose, or a 

duty to update or correct information.’’ ). 

10 Some states model their consumer protection 

laws on the FTC Act, and some allow private causes 

of action under these laws. Because the Energy 

Independence and Security Act provides that a 

violation of the Act ‘‘shall be treated as an unfair 

or deceptive act or practice proscribed under a rule 

issued under Section 18(a)(1)(B) of the [FTC Act],’’ 

42 U.S.C. § 17303, it is not unreasonable to assume 

that the Final Rule may provide a cause of action 

under some state consumer protection laws. 

fraudulent or deceptive.’’4 Paragraph 

3(b) also contains the requirement, 

missing in Paragraph 3(a), that the 

behavior ‘‘distort market conditions.’’ 

I dissent from the Commission’s 

promulgation of the Final Rule. To my 

mind, a minimally acceptable rule 

would have departed from the 

Commission’s Final Rule in two major 

respects. First, it would have 

incorporated into Paragraph 3(a) the 

requirements that the conduct be 

intentional and either actually or likely 

distorts market conditions. Second, the 

rule would not have contained a 

separate command dealing with 

omissions, thus deleting Paragraph 3(b) 

of the Commission’s Final Rule.5 As it 

stands, I cannot say that the Final Rule 

is in the public interest.6

When implemented, the Final Rule 

will cover a vast number of routine 

transactions – literally thousands daily 

– in petroleum products. These 

transactions are the indispensable 

means by which gasoline, diesel fuel, 

and jet fuel move from refineries to end 

users. Society has an immense stake in 

avoiding unnecessary disruption to 

these undertakings. Violations of the 

Commission’s Final Rule are punishable 

with civil penalties of $1 million per 

violation, and each day on which the 

misconduct continues is treated as a 

separate offense.7

By reason of the drafting choices 

described above, the Commission has 

taken inadequate precautions to ensure 

that the aims of the underlying 

legislation are attained without 

imposing social costs that swamp the 

benefits Congress sought to achieve. 

Because the Final Rule’s requirements 

are unlikely to proscribe only genuinely 

harmful conduct, there is a serious 

danger that it will impede routine 

contracting that is benign or 

procompetitive and thereby make 

Americans worse off by damaging the 

flow of commerce in petroleum 

products. The Commission’s extensive 

work since the 1960s in reviewing 

petroleum industry mergers and 

allegations of anticompetitive conduct 

ought to have made the agency more 

attentive to these considerations. The 

FTC’s previous inquiries have 

determined that price fluctuations for 

petroleum products result principally 

from market forces: prices decline when 

supply rises or demand falls.8 This 

experience does not gainsay the 

potential harm that consumers could 

suffer from manipulation of market 

prices. It does suggest, however, that the 

contributions of a rule against market 

manipulation for petroleum products to 

the solution of the nation’s larger energy 

problems are likely to be small. At the 

same time, the breadth of the 

substantive commands of the 

Commission’s Final Rule, its 

applicability to an expansive range of 

routine contracting, and the severity of 

the penalties for violations create 

serious possibilities for deterring 

suppliers from participating in 

transactions that pose no threat to 

consumers. By incorporating the 

scienter and market distortion elements 

of Paragraph 3(b) into Paragraph 3(a), 

the Commission could have minimized 

these hazards. It unfortunately chose not 

to do so. 

The inclusion in the Final Rule of the 

omissions provision, Paragraph 3(b), is 

a second regrettable decision. A 

proscription on certain acts, practices, 

or courses of business, alone is 

sufficiently broad to capture fraudulent 

omissions. Because the Final Rule is 

modeled on SEC Rule 10b-5, a separate 

and distinct omissions prohibition 

could invite subsequent interpretations 

that the Final Rule requires affirmative 

disclosures. Although the Commission 

explains in the Statement of Basis and 

Purpose that accompanies the Final 

Rule that it does not interpret Paragraph 

3(b) as requiring an affirmative duty to 

disclose,9 it is likely that other 

adjudicators will be called on to 

interpret the Final Rule. These 

adjudicators may not reach the same 

conclusion as the Commission, 

especially to the extent that the Final 

Rule becomes the subject of litigation in 

state courts under state consumer 

protection laws.10

In light of this substantial liability 

risk, the omissions component may well 

force the many firms that engage in 

legitimate transactions with their 

competitors on a daily basis to choose 

between two problematic paths of 

conduct: one way to avoid a potentially 

wrongful omission is to disclose more 

private information to your rival; a 

second approach is to limit investments 

in acquiring potentially relevant 

marketplace information and to reduce 

the number of encounters that could be 

examined through the lens of the 

Commission’s Final Rule. Neither 

alternative is good for consumers. 

Excessive disclosure of private 

information among competitors 

threatens competition and is precisely 

the type of conduct that the FTC 

investigates and challenges under the 

antitrust laws. A competition agency 

should not be in the business of telling 

rivals to give each other more 

information about their business 

operations. A decision to gather less 

marketplace information or to engage in 

fewer transactions promises to translate 

into higher prices that may not 

accurately reflect underlying supply and 

demand conditions. 

Last, the Commission’s Final Rule has 

the capacity to deflect needed attention 

away from root causes of the country’s 

energy problems and to divert effort 

away from the pursuit of effective 

solutions. For example, there is a 

legitimate debate to be had about 

whether gasoline prices adequately 

reflect external costs, such as those 

associated with environmental damage, 

national security, or traffic congestion. 

We also might usefully debate the 

proper mix of increased domestic oil 

production, nuclear power, or 

renewable energy sources to enhance 

energy security. By focusing valuable 

attention on measures that have little 

capacity to address these and other 

fundamental issues, the Commission’s 

Final Rule may serve to relax the 

urgency that the nation ought to feel to 

devise approaches that truly come to 

grips with the larger dimensions of the 

energy problem. 

Concurring Statement of Commissioner 

J. Thomas Rosch 

I concur in the form of the Oil Price 

Manipulation Rule that the Commission 

has adopted. In doing so, however, I 

want to make it clear that I agree with 

Commissioner Kovacic’s misgivings. 

The ‘‘conduct’’ prong of the Rule does 


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40704 Federal Register / Vol. 74, No. 154 / Wednesday, August 12, 2009 / Rules and Regulations 

1 In addition to the text of Section 811, which 

reflects congressional intent that the Commission 

look to SEC Rule 10b-5 in crafting a market 

manipulation rule, I also find the statements of Sen. 

Cantwell (the bill’s sponsor) which are consistent 

with this text persuasive. See 151 Cong. Rec. 

S10238 (daily ed. Sept. 20, 2005) (statement of Sen. 

Cantwell introducing S. 1735, a bill to Improve the 

Federal Trade Commission’s Ability to Protect 

Consumers from Price-Gouging During Energy 

Emergencies, which was reintroduced in the 110th 

Congress as S.1263); New Haven Bd. of Educ. v. 

Bell, 465 U.S. 512, 526-27 (1982) (‘‘Although the 

statements of one legislator made during debate 

may not be controlling, Senator Bayh’s remarks, as 

those of the sponsor of the language ultimately 

enacted’’ – in a context where ‘‘no committee report 

discusses the provisions’’ – ‘‘are an authoritative 

guide to the statute’s construction.’’ ). 

not require proof of an exercise of 

market power having an adverse impact 

on the market as a whole, as is normally 

required in challenges to conduct under 

the Sherman Act. Further, it is not clear 

that the state of mind that must be 

proved establishes a sufficient limiting 

principle. On the other hand, although 

the ‘‘omissions’’ prong of the Rule does 

arguably require proof that the omission 

adversely impacts the market as a 

whole, like Rule 10b-5 it does not 

require proof of the state of mind that 

the ‘‘conduct’’ prong requires and hence 

may not establish a sufficiently limiting 

principle either. The net result is that 

the Rule may chill oil companies from, 

among other things, voluntarily 

providing their data to independent 

data-reporting firms, as they do now, for 

fear that they may be held liable for an 

inadvertent omission. That would be 

unfortunate because at least in some 

circumstances, having abundant data of 

that sort can be pro-competitive. See 

United States v. United States Gypsum 

Co., 438 U.S. 422 (1978); see also U.S. 

Dep’t of Justice and Federal Trade 

Comm’n, Statement of Antitrust 

Enforcement Policy in Health Care, 

Statement 6 (‘‘Provider Participation in 

Exchanges of Price and Cost 

Information’’) (August 1996), available 

at (http://www.usdoj.gov/atr/public/ 

guidelines/0000.pdf). It would be 

especially unfortunate if the Rule were 

interpreted or applied so as to permit 

follow-on private actions. 

All of this said, however, Congress 

apparently intended that the 

Commission fashion a Rule that goes 

beyond the Sherman Act and that 

resembles SEC Rule 10b-5. See Federal 

Trade Commission, Prohibitions on 

Market Manipulation in Subtitle B of 

Title VIII of the Energy Independence 

and Security Act of 2007, at 14 n.44 

(July 28, 2009).1 I believe that we must 

adhere to the Congressional intent in 

this regard. In exercising prosecutorial 

discretion, however, I, for one, intend to 

keep these misgivings in mind. 

Federal Register 

Attachment A 

RNPRM Commenters 

Association of Oil Pipe Lines 

(‘‘AOPL’’) 

American Petroleum Institute and the 

National Petrochemical and Refiners 

Association (‘‘API’’) 

Argus Media Inc. (‘‘Argus’’) 

Air Transport Association of America, 

Inc. (‘‘ATAA’’) 

Maria Cantwell, United States 

Senator, State of Washington (‘‘Senator 

Cantwell’’) 

Canadian Association of Petroleum 

Producers (‘‘CAPP’’) 

Consumer Federation of America, 

Mark Cooper, Director of Research 

(‘‘CFA’’) 

New York City Bar Association 

Committee on Futures & Derivatives 

Regulation (‘‘CFDR’’) 

U. S. Commodity Futures Trading 

Commission, Terry S. Arbit, General 

Counsel (‘‘CFTC’’) 

Michael Greenberger (‘‘Greenberger’’) 

Illinois Petroleum Marketers 

Association (‘‘IPMA’’) 

International Swaps and Derivatives 

Association, Inc. (‘‘ISDA’’) 

Futures Industry Association, CME 

Group, Managed Funds Association, 

Intercontinental Exchange, Inc., 

National Futures Association (‘‘MFA’’) 

Platts (‘‘Platts’’) 

Petroleum Marketers Association of 

America (‘‘PMAA’’) 

Society of Independent Gasoline 

Marketers of America (‘‘SIGMA’’) 

Sutherland Asbill & Brennan LLP 

(‘‘Sutherland’’) 

Federal Register 

Attachment B 

NPRM Commenters 

Association of Oil Pipe Lines 

(‘‘AOPL’’) 

American Petroleum Institute (‘‘API’’) 

Argus Media Inc. (‘‘Argus’’) 

American Trucking Associations, Inc. 

(‘‘ATA’’) 

Air Transport Association of America, 

Inc. (‘‘ATAA’’) 

Andrew Boxer, Ellis Boxer & Blake 

(‘‘Boxer’’) 

Sharon Brown-Hruska, National 

Economic Research Associates, Inc. 

(‘‘Brown-Hruska’’) 

California Attorney General, Edmund 

G. Brown Jr. (‘‘CA AG’’) 

Canadian Association of Petroleum 

Producers (‘‘CAPP’’) 

Consumer Federation of America, 

Mark Cooper, Director of Research 

(‘‘CFA1’’; ‘‘CFA2’’) 

New York City Bar Association, 

Committee on Futures & Derivatives 

Regulation (‘‘CFDR’’) 

U. S. Commodity Futures Trading 

Commission, Terry S. Arbit, General 

Counsel(‘‘CFTC (Arbit)’’) 

U. S. Commodity Futures Trading 

Commission, Bart Chilton, 

Commissioner (‘‘CFTC (Chilton)’’) 

John Q. Public (‘‘Consumer’’) 

Flint Hills Resources, LP (‘‘Flint 

Hills’’) 

Winfried Fruehauf, National Bank 

Financial (‘‘Fruehauf’’) 

James D. Hamilton, University of 

California, San Diego (‘‘Hamilton’’) 

Illinois Petroleum Marketers 

Association (‘‘IPMA’’) 

International Swaps and Derivatives 

Association, Inc. (‘‘ISDA’’) 

Futures Industry Association, CME 

Group, Managed Funds Association, 

Intercontinental Exchange, Inc., 

National Futures Association (‘‘MFA’’) 

Michigan Petroleum Association/ 

Michigan Association of Convenience 

Stores (‘‘MPA’’) 

Mississippi Attorney General, Jim 

Hood (‘‘MS AG’’) 

Lisa Murkowski, United State 

Senator, State of Alaska (‘‘Murkowski’’) 

Timothy J. Muris and J. Howard 

Beales, III (‘‘Muris’’) 

Navajo Nation, Resolute Natural 

Resources Company, and Navajo Nation 

Oil and Gas Company (‘‘Navajo Nation’’) 

Nebraska Petroleum Marketers & 

Convenience Store Association 

(‘‘NPCA’’) 

National Petrochemical and Refiners 

Association (‘‘NPRA’’) 

Craig Pirrong, The University of 

Houston: Bauer College of Business 

(‘‘Pirrong’’) 

Plains All American Pipeline, L.P. 

(‘‘Plains’’) 

Platts (‘‘Platts’’) 

Petroleum Marketers Association of 

America (‘‘PMAA’’) 

Society of Independent Gasoline 

Marketers of America (‘‘SIGMA’’) 

Sutherland Asbill & Brennan LLP 

(‘‘Sutherland’’) 

David J. Van Susteren, Fulbright & 

Jaworski LLP (‘‘Van Susteren’’) 

Federal Register 

Attachment C 

Workshop Participants 

American Bar Association Section of 

Antitrust Law’s Fuel & Energy Industry 

Committee (‘‘ABA Energy’’): Bruce 

McDonald, Jones Day LLP 

Association of Oil Pipe Lines 

(‘‘AOPL’’): Linda G. Stuntz, Stuntz, 

Davis & Staffier, PC 

American Petroleum Institute (‘‘API’’): 

Jonathan Gimblett, Covington & Burling 

LLP 


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Federal Register / Vol. 74, No. 154 / Wednesday, August 12, 2009 / Rules and Regulations 40705 

American Petroleum Institute (‘‘API’’): 

Robert A. Long, Jr., Covington & Burling 

LLP 

Argus Media Inc. (‘‘Argus’’): Dan 

Massey 

Consumer Federation of America 

(‘‘CFA’’): Mark Cooper 

New York City Bar Association, 

Committee on Futures & Derivatives 

Regulation (‘‘CFDR’’): Charles R. Mills, 

K&L Gates 

CME Group (‘‘CME’’): De’Ana Dow 

Flint Hills Resources, LP (‘‘Flint 

Hills’’): Alan Hallock 

International Swaps and Derivatives 

Association, Inc. (‘‘ISDA’’): Athena Y. 

Velie, McDermott, Will & Emery LLP 

Futures Industry Association, CME 

Group, Managed Funds Association, 

Intercontinental Exchange, Inc., 

National Futures Association (‘‘MFA’’): 

Mark D. Young, Kirkland & Ellis LLP 

Resolute Natural Resources Company 

(‘‘Navajo Nation’’): James Piccone 

Navajo Nation Oil and Gas 

Corporation (‘‘Navajo Nation’’): Perry 

Shirley 

National Petrochemical and Refiners 

Association (‘‘NPRA’’): Susan S. 

DeSanti, Sonnenschein Nath & 

Rosenthal LLP 

National Petrochemical and Refiners 

Association (‘‘NPRA’’): Charles T. 

Drevna 

Craig Pirrong, The University of 

Houston: Bauer College of Business 

(‘‘Pirrong’’) 

Platts (‘‘Platts’’): John Kingston 

Petroleum Marketers Association of 

America (‘‘PMAA’’): 

Robert Bassman, Bassman, Mitchell & 

Alfano, Chtd. 

Society of Independent Gasoline 

Marketers of America (‘‘SIGMA’’): James 

D. Barnette, Steptoe & Johnson LLP 

Society of Independent Gasoline 

Marketers of America (‘‘SIGMA’’): R. 

Timothy Columbus, Steptoe & Johnson 

LLP 

David J. Van Susteren, Fulbright & 

Jaworski LLP (‘‘Van Susteren’’) 

Federal Register 

Attachment D 

ANPR Commenters 

American Bar Association/Section of 

Antitrust Law (‘‘ABA’’) 

Association of Oil Pipe Lines 

(‘‘AOPL’’) 

American Petroleum Institute and the 

National Petrochemical and Refiners 

Association (‘‘API’’) 

Patrick Barrett (‘‘Barrett’’) 

Lawrence Barton (‘‘Barton’’) 

Dave Beedle (‘‘Beedle’’) 

Stanley Bergkamp (‘‘Bergkamp’’) 

Louis Berman (‘‘Berman’’) 

Bezdek Associates, Engineers PLLC 

(‘‘Bezdek’’) 

Katherine Bibish (‘‘Bibish’’) 

John Booke (‘‘Booke’’) 

Bradley (‘‘Bradley’’) 

Jeremy Bradley (‘‘J. Bradley’’) 

Charles Bradt (‘‘Bradt’’) 

Wendell Branham (‘‘Branham’’) 

Lorraine Bremer (‘‘Bremer’’) 

Gloria Briscolino (‘‘Briscolino’’) 

Rick Brownstein (‘‘Brownstein’’) 

Byrum (‘‘Byrum’’) 

Canadian Association of Petroleum 

Producers (‘‘CAPP’’) 

Jeff Carlson (‘‘Carlson’’) 

Jacquelynne Catania (‘‘Catania’’) 

Marie Cathey (‘‘Cathey’’) 

New York City Bar, Association 

Committee on Futures & Derivatives 

Regulation (‘‘CFDR’’) 

U. S. Commodities Futures Trading 

Commission (‘‘CFTC’’) 

Manuel Chavez (‘‘Chavez’’) 

Michael Chudzik (‘‘Chudzik’’) 

D. Church (‘‘Church’’) 

Earl Clemons (‘‘Clemons’’) 

Dan Clifton (‘‘Clifton’’) 

Kim Cruz (‘‘Cruz’’) 

Jerry Davidson (‘‘Davidson’’) 

Don Deresz (‘‘Deresz’’) 

Charlene Dermond (‘‘Dermond’’) 

Kimberly DiPenta (‘‘DiPenta’’) 

Penny Donaly (‘‘Donaly1’’) 

Penny Donaly (‘‘Donaly2’’) 

Penny Donaly (‘‘Donaly3’’) 

Penny Donaly (‘‘Donaly4’’) 

Deep River Group, Inc. (‘‘DRG’’) 

Harold Ducote (‘‘Ducote’’) 

Mary Dunaway (‘‘Dunaway’’) 

Econ One Research, Inc. (‘‘Econ One’’) 

Terri Edelson (‘‘Edelson’’) 

Kevin Egan (‘‘Egan’’) 

DJ Ericson (‘‘Ericson’’) 

Mark Fish (‘‘Fish’’) 

Flint Hills Resources, LP (‘‘Flint 

Hills’’) 

Bob Frain (‘‘Frain’’) 

Joseph Fusco ( ‘‘Fusco’’ ) 

Tricia Glidewell (‘‘Glidewell’’) 

Robert Gould (‘‘Gould’’) 

James Green (‘‘Green’’) 

Michael Greenberger (‘‘Greenberger’’) 

Christine Gregoire, Governor, State of 

Washington (‘‘Gregoire’’) 

Hagan (‘‘Hagan’’) 

Toni Hagan (‘‘Toni’’) 

Charles Hamel (‘‘Hamel’’) 

Chris Harris (‘‘Harris’’) 

Thomas Herndon (‘‘Herndon’’) 

Johnny Herring (‘‘Herring’’) 

Hess Corporation (‘‘Hess’’) 

David Hill (‘‘Hill’’) 

Hopper (‘‘Hopper’’) 

Sharon Hudecek (‘‘Hudecek’’) 

IntercontinentalExchange, Inc. 

(‘‘ICE’’) 

Institute for Energy Research (‘‘IER’’) 

Independent Lubricant Manufacturers 

Association (‘‘ILMA’’) 

Illinois Petroleum Marketers 

Association (‘‘IPMA’’) 

International Swaps and Derivatives 

Association, Inc. (‘‘ISDA’’) 

Micki Jay (‘‘Jay’’) 

Kenneth Jensen (‘‘Jensen’’) 

Paul Johnson (‘‘Johnson’’) 

Tacie Jones (‘‘Jones’’) 

Joy (‘‘Joy’’) 

John Kaercher (‘‘Kaercher’’) 

Kas Kas (‘‘Kas’’) 

Kipp (‘‘Kipp’’) 

Paola Kipp (‘‘P. Kipp’’) 

Jerry LeCompte (‘‘LeCompte’’) 

Kurt Lennert (‘‘Lennert’’) 

Loucks (‘‘Loucks’’) 

Robert Love (‘‘Love’’) 

R. Matthews (‘‘Matthews’’) 

Catherine May (‘‘May’’) 

Mike Mazur (‘‘Mazur’’) 

Sean McGill (‘‘McGill’’) 

Kathy Meadows (‘‘Meadows’’) 

Futures Industry Association, CME 

Group, Managed Funds Association, 

IntercontinentalExchange, National 

Futures Association (‘‘MFA’’) 

Bret Morris (‘‘Morris’’) 

Theresa Morris-Ramos (‘‘MorrisRamos’’) 

Scott Morosini (‘‘Morosini’’) 

Timothy J. Muris and J. Howard 

Beales, III (‘‘Muris’’) 

Navajo Nation Resolute Natural 

Resources Company and Navajo Nation 

Oil and Gas Company (‘‘Navajo Nation’’) 

Laurie Nenortas (‘‘Nenortas’’) 

James Nichols (‘‘Nichols’’) 

Virgil Noffsinger (‘‘Noffsinger’’) 

Noga (‘‘Noga’’) 

Richard Nordland (‘‘Nordland’’) 

National Propane Gas Association 

(‘‘NPGA’’) 

Kerry O’Shea, (‘‘O’Shea’’) 

Jeffery Parker (‘‘Parker’’) 

Pamela Parzynski (‘‘Parzynski’’) 

Brook Paschkes (‘‘Paschkes’’) 

Brijesh Patel (‘‘Patel’’) 

Stefanie Patsiavos (‘‘Patsiavos’’) 

P D (‘‘PD’’) 

Guillermo Pereira (‘‘Pereira’’) 

James Persinger (‘‘Persinger’’) 

Mary Phillips (‘‘Phillips’’) 

Plains All American Pipeline, LLP 

(‘‘Plains’’) 

Platts (‘‘Platts’’) 

Betty Pike (‘‘Pike’’) 

Petroleum Marketers Association of 

America (‘‘PMAA’’) 

Joel Poston (‘‘Poston’’) 

Radzicki (‘‘Radzicki’’) 

Gary Reinecke (‘‘Reinecke’’) 

Steve Roberson (‘‘Roberson’’) 

Shawn Roberts (‘‘Roberts’’) 

Linda Rooney (‘‘Rooney’’) 

Mel Rubinstein (‘‘Rubinstein’’)secret 

(‘‘secret’’) 

Joel Sharkey (‘‘Sharkey’’) 

Society of Independent Gasoline 

Marketers of America (‘‘SIGMA’’) 

Daryl Simon (‘‘Simon’’) 

David Smith (‘‘D. Smith’’) 


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Donald Smith (‘‘Do. Smith’’) 

Mary Smith (‘‘M. Smith’’) 

Donna Spader (‘‘Spader’’) 

Stabila (‘‘Stabila’’) 

Alan Stark (‘‘A. Stark’’) 

Gary Stark (‘‘G. Stark’’) 

Robert Stevenson (‘‘Stevenson’’) 

Ryan Stine (‘‘Stine’’) 

Maurice Strickland (‘‘Strickland’’) 

Sutherland, Asbill, and Brennan, LLP 

(‘‘Sutherland’’) 

L. D. Tanner (‘‘Tanner’’) 

Dennis Tapalaga (‘‘Tapalaga’’) 

Tennessee Oil Marketers Association 

(‘‘TOMA’’) 

Theisen (‘‘Theisen’’) 

Greg Turner (‘‘Turner’’) 

U. S. citizen (‘‘U.S. citizen’’) 

U. S. Department of Justice, Criminal 

Fraud Section (‘‘USDOJ’’) 

Jeff Van Hecke (‘‘Van Hecke’’) 

Louis Vera (‘‘Vera’’) 

Thomas Walker (‘‘Walker’’) 

Victoria Warner (‘‘Warner’’) 

Lisa Wathen (‘‘Wathen’’) 

Watson (‘‘Watson’’) 

Gary Watson (‘‘G. Watson’’) 

Joseph Weaver (‘‘Weaver’’) 

Webb (‘‘Webb’’) 

Vaughn Weming (‘‘Weming’’) 

Douglas Willis (‘‘Willis’’) 

[FR Doc. E9–19257 Filed 8–11–09: 8:45 am] 

BILLING CODE 6750–01–S 


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