Antitrust Law Daily Wrap Up, ANTITRUST—DCColo: Revised Consent Decrees Resolving Challenge to Bidding Practices at Federal Auctions Approved, (Apr 26, 2013)

By Jeffrey May, J.D.

The federal district court in Denver this week approved revised consent decrees that resolve a Department of Justice antitrust action challenging an allegedly anticompetitive bidding agreement for mineral rights leases (U.S. v. SG Interests I Ltd., April 22, 2013, Matsch, R.). In a December 2012 decision, the court rejected the initial settlement as inadequate.

In February 2012, the Justice Department brought an action against SG Interests I, Ltd. and SG Interests VII, Ltd. (SGI), and Gunnison Energy Corporation (GEC) for colluding in bidding at oil and gas lease auctions conducted in 2005 by the U.S. Department of Interior’s Bureau of Land Management (BLM). GEC allegedly agreed with the two SGI limited partnerships that only the SGI companies would bid at the auctions and then assign an interest in the acquired leases to GEC. As a result of the alleged agreement, the BLM received lower bid payments. The government also alleged False Claims Act (FCA) violations for false statements made to the government in connection with the agreement not to compete.

Under the terms of the original proposed consent decree, which was filed along with the government’s complaint, the companies agreed to pay a total of $550,000 to settle all government charges. The government's net recovery would have been $390,000, however, because it had agreed to compensate a whistleblower—a former Gunnison employee—who asserted a claim pursuant to the qui tam provisions of the FCA. The court rejected the settlement "for nothing more than the nuisance value of this litigation" as not in the public interest.

In a March 6, 2013, filing, the Justice Department moved for entry of modified final judgments with SGI and GEC. These settlements required SGI and GEC each to pay the United States $275,000 to resolve the antitrust case. Under new settlements of the FCA action, SGI and GEC agreed to pay $206,250 and $245,000, respectively. As a result, the government was to receive a total $1,001,250 from the defendants, in contrast to the total of $550,000 under the original proposed settlements.

In addition, the revised settlements require the defendants to notify the government for a period of five years of any joint bidding at oil and gas lease auctions conducted by the BLM. The inclusion of the monitoring provisions in the revised settlements was intended to address the district court's concerns about deterrence of future anticompetitive conduct.

The court concluded that the revised final judgment with SGI and the revised final judgment with GEC in the antitrust case were in the public interest. The judgments will expire in five years.

The case is No. 12-CV-00395-RPM.

Attorneys: Sarah L. Wagner for U.S. Department of Justice. L. Poe Leggette (Fulbright & Jaworski, LLP) for SG Interests I, Ltd. Timothy R. Beyer (Bryan Cave) for Gunnison Energy Corp.

Companies: Gunnison Energy Corp.; SG Interests I Ltd.; SG Interests VII Ltd.

Cases: Antitrust AntitrustDivisionNews ColoradoNews