[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