[Federal Register Volume 61, Number 242 (Monday, December 16, 1996)]
[Notices]
[Pages 66044-66046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31804]


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FEDERAL TRADE COMMISSION
[File No. 951-0130]


SoftSearch Holdings, Inc.; GeoQuest International Holdings, Inc.; 
Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

[[Page 66045]]

unfair or deceptive acts or practices and unfair methods of 
competition, this consent agreement, accepted subject to final 
Commission approval, would require, among other things, Dwight's 
EnergyData, Inc., a subsidiary of SoftSearch and the largest supplier 
of U.S. gas and oil production data, to license its data to a 
Commission-approved buyer, which will operate as an independent 
competitor. The agreement settles allegations that Dwight's merger with 
its major competitor Petroleum Information Corporation, a subsidiary of 
GeoQuest International, could create a monopoly for production and well 
history data, in violation of federal antitrust laws.

DATES: Comments must be received on or before February 14, 1997.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: William J. Baer, Federal Trade 
Commission, H-374, 6th and Pennsylvania Ave., NW, Washington, DC 20580. 
(202) 326-2932.
George Cary, Federal Trade Commission, H-374, 6th and Pennsylvania 
Ave., NW, Washington, DC 20580. (202) 326-3741

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Sec. 2.34 of the 
Commission's rules of practice (16 CFR 2.34), notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of sixty (60) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the accompanying complaint. An electronic copy of the 
full text of the consent agreement package can be obtained from the 
Commission Actions section of the FTC Home Page (for December 5, 1996), 
on the World Wide Web, at ``http://www.ftc.gov/os/actions/htm.'' A 
paper copy can be obtained from the FTC Public Reference Room, Room H-
130, Sixth Street and Pennsylvania Avenue, NW., Washington, DC 20580, 
either in person or by calling (202) 326-3627. Public comment is 
invited. Such comments or views will be considered by the Commission 
and will be available for inspection and copying at its principal 
office in accordance with Sec. 4.9(b)(6)(ii) of the Commission's rules 
of practice (16 CFR 4.9(b)(6)(ii)).

Analysis To Aid Public Comment on the Provisionally Accepted 
Consent Order

    The Federal Trade Commission (``Commission'') has accepted for 
public comment from SoftSearch Holdings, Inc. (``SoftSearch''), and 
GeoQuest International, Inc. (``GeoQuest''), an agreement containing 
consent order. This agreement has been placed on the public record for 
sixty (60) days for receiving comments from interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will review the agreement 
and the comments received, and will decide what additional action to 
take.
    The proposed merger involving GeoQuest and SoftSearch may be 
anticompetitive. Both firms, through Petroleum Information Corporation 
(``Petroleum Information'') and Dwight's EnergyData (``Dwight's''), 
their respective subsidiaries, collect and distribute certain data to 
the petroleum industry relating to oil and gas well drilling and 
production. The proposed consent order would require the respondents to 
license the Dwight's database to HPDI, L.L.C., (``HPDI''), a Texas 
limited liability corporation currently engaged in the collection and 
distribution of similar data. HPDI could use Dwight's data to compete 
with the merged companies. Should the Commission determine, after the 
public comment period, that granting a license to HPDI will not be 
effective in maintaining competition after the merger, the Commission 
may appoint a trustee to license the data to a purchaser other than 
HPDI. The purpose of this analysis is to elicit public comments on all 
aspects of the complaint and the proposed remedy.
    Dwight's and Petroleum Information are engaged in the business of 
selling petroleum data. One type of data, known as ``well data,'' 
includes a variety of geological and other types of information derived 
from, or related to, the drilling of specific oil and gas wells. 
Another type of data, known as ``production data,'' deals with volumes 
of oil and gas produced over time from specific wells or leases. 
Purchasers use this data in a variety of ways, including evaluating 
potential production and reserves of geological formations and finding 
patterns of oil and gas production for future exploration and 
development.

The Commission's Investigation and Concerns

    Potential anticompetitive problems in the sale or license of this 
data could result from a merger of Dwight's and Petroleum Information. 
They are by far the two largest data vendors, and offer the most 
thorough sets of petroleum data in the United States. The draft 
complaint alleges that the proposed merger would eliminate direct, 
ongoing competition between the respondents in the distribution of well 
and production data and lead to anticompetitive increases in the prices 
charged for well and production data. The proposed complaint also 
alleges that substitutes for the data provided by respondents are 
economically infeasible, and that the proposed merger would cause 
customers to pay more, receive less, or both.
    Rivalry in innovation and product quality might deteriorate. The 
respondents compete in being the first to the market in offering 
product enhancements to meet the changing needs of petroleum data users 
and timely delivery of accurate data. The respondents have assembled 
their databases from different sources of information. The respondents 
presently compete to offer the most complete and accurate information 
for a particular customer's needs.
    The respondents have asserted that there are efficiencies or cost 
reductions from assimilation of separate databases into a common 
computer format and reduction of redundant personnel. They also assert 
that devoting resources to finding and resolving discrepancies can 
improve the accuracy of the data when Dwight's and Petroleum 
Information report different data for the same well or lease, and that 
such efforts are not feasible absent the merger. Presently, in order to 
ensure access to the most complete and accurate data, customers must 
buy both companies' products. Finally the respondents claim that many 
customers will save substantial resources by reducing their internal 
computer support that currently services two sets of data.
    Even if the respondents are correct in their analysis, the draft 
complaint alleges that the merger as originally proposed presented 
risks of increased prices or other anticompetitive behavior. Entry by 
others into this business would be unlikely to offset this behavior. 
The proposed complaint alleges that entry by others into this business 
would be unlikely to offset this behavior. Entry is very difficult 
because of the extensive nature of the Dwight's and Petroleum 
Information databases. Information for pre-1970s wells, for example, 
would be practically impossible to duplicate.

[[Page 66046]]

The Proposed Consent Order

    The draft complaint alleges that SoftSearch and GeoQuest violated 
Section 5 of the Federal Trade Commission Act by agreeing, in July 
1995, to merge the businesses of Dwight's and Petroleum Information and 
that the merger, if consummated, would violate section 7 of the Clayton 
Act. The draft complaint alleges relevant markets are the provision of 
well data and the provision of production data in the United States. 
The draft complaint alleges that the merger may substantially lessen 
competition by eliminating direct competition between Dwight's and 
Petroleum Information; increasing the likelihood that respondents will 
unilaterally exercise market power; and increasing the likelihood of, 
or facilitating, collusion or coordinated interaction. The draft 
complaint alleges that each of these effects increases the likelihood 
that the prices of well data and production data will increase, and 
services to customers of well data and production data will decrease.
    The Agreement Containing Consent Order would, if finally issued by 
the Commission, settle charges alleged in the draft Complaint.
    The order accepted for public comment contains provisions that 
would permit the proposed merger to occur, thus allowing customers to 
realize the alleged benefits described above. However, the proposed 
order would require the respondents to license a set of complete data 
currently sold by Dwight's to a third company, that could resell the 
data in competition with the merged Petroleum Information/Dwight's, 
thus preserving competition. In addition to obtaining a license to the 
complete Dwight's database, the third party would also receive the 
right to distribute well coordinate information generated by Tobin Data 
Graphs, LLC, a firm affiliated with Dwight's. The purpose of the 
proposed order is to create a viable and competitive vendor of data now 
sold by the respondents.

The Licensee and Trustee Provisions of the Proposed Order

    HPDI has been provisionally approved as the licensee under the 
order of Dwight's data. The identification of a specific licensee in 
the proposed consent order will allow the public to comment on the 
effectiveness of the proposed relief in the context of a specific 
proposed licensee (Exhibit A to the proposed consent order). It also 
minimizes the delay in restoring competition, allegedly lost as a 
result of the transaction and, thus, lessens the risk that the 
licensing provision will fail.
    HPDI is a Texas limited liability corporation organized on August 
24, 1994. HPDI provides limited production data to firms engaged in gas 
or oil gathering and transportation. Few, if any, current HPDI 
customers use that data to assist in decisions relating to exploration 
or production of oil and gas resources.
    HPDI, like Dwight's and Petroleum Information, obtains its 
production data from governmental agencies. HPDI obtains current 
production data from files maintained by the states of Alaska, 
Colorado, Kansas, Louisiana, New Mexico, Oklahoma, Oregon, South 
Dakota, and Texas. It also obtains data from the Minerals Management 
Service for the Gulf Offshore. HPDI converts disparate data formats of 
the various government agencies into a single format and provides the 
data to users on window-based CD-ROMs. HPDI's database covers only 
those years for which the government agencies have put data into a 
machine-readable (as opposed to written on paper) format. HPDI's Texas 
data, for example, dates from 1974. This means that HPDI lacks 
historical production data for many wells, which has impeded HDPI's 
expansion into serving the exploration and production segment of the 
oil and gas industry, the primary customer base for Dwight's and 
Petroleum Information. The license provided by the proposed order would 
supply HPDI with this historical data.
    Capitol Appraisal Group, Inc. (``CAG''), a Texas corporation, owns 
the majority of HPDI. CAG appraises oil and gas leases for Texas 
counties and other Texas taxing jurisdictions. In its appraisal 
business, CAG uses the Texas state oil production records and processes 
oil and gas data on its computer mainframe. CAG supplies HPDI with 
office space, computer programming and processing capacity, and 
financing.
    HPDI is a recent entrant to the business of selling petroleum data. 
HPDI has experience collecting, processing, and distributing production 
data derived from the computerized records of various state and federal 
government agencies. HPDI believes that it could integrate Dwight's 
data into its current CD-ROM products within sixty days after the 
effective date of a Commission order. HPDI plans to update virtually 
all of the Dwight's production and well data that is available from 
governmental agencies. In the future, HPDI may collect additional well 
data directly from oil companies (so-called ``scouting data''), 
although it does not have any experience in collecting and distributing 
such scouting data.
    If the Commission, after review of the public comments, determines 
not to approve HPDI as the licensee, it may appoint a trustee to divest 
the data to another person. The proposed order provides for the 
appointment of Ben C. Burkett, II, of Burkett Consulting, Dallas, 
Texas, as a trustee to license Dwight's database.
    Mr. Burkett has for more than fifteen years been an independent 
corporate finance and merger/acquisition consultant to clients in the 
oil and gas and other industries. Before forming his consulting firm, 
Mr. Burkett was a co-founder and director of Lear Petroleum Corp. 
Before that time, he was an employee with Mesa Petroleum Co. and 
Shamrock Oil and Gas Corp.
    As a consultant, Mr. Burkett has managed initial public offerings 
of stock, facilitated a variety of mergers and acquisitions, and 
managed the restructuring and turnaround of companies in the oil and 
gas and chemical industries. In the mid-1980s, Mr. Burkett advised the 
prior owners of Dwight's on a financial restructuring of the company.
    A separate agreement with SoftSearch (``Asset Maintenance 
Agreement'') requires respondents to preserve Dwight's data in the form 
now available. SoftSearch has therefore agreed to maintain and update 
the data until the Commission accepts or rejects the proposed order.

Solicitation of Public Comments

    The purpose of this analysis is to invite public comment concerning 
the consent order. The Commission is particularly interested in 
receiving comments on the efficacy of the remedy if the Commission 
should approve HPDI as the licensee of Dwight's database and on the 
expression of interest by alternative potential licensees.
    This analysis is not an official interpretation of the agreement 
and order and does not modify their terms in any way.
Donald S. Clark,
Secretary.
[FR Doc. 96-31804 Filed 12-13-96; 8:45 am]
BILLING CODE 6750-01-P