Originally published in Antitrust News & Notes February 2012

Gunnison Energy Corporation (GEC), SG Interests I Ltd., and SG Interests VII Ltd. (SGI) were required to pay a total of $550,000 to the United States for antitrust and False Claims Act violations related to an agreement not to compete in bidding for four natural gas leases sold at auction by the U.S. Department of Interior's Bureau of Land Management (BLM). The DOJ press release noted that the U.S. Attorney's Office for the District of Colorado has entered into separate settlement agreements with the companies to resolve these claims.

According to the complaint filed by the Antitrust Division of the DOJ, GEC and SGI were separately developing natural gas resources in Western Colorado. In 2005, GEC and SGI entered into a written agreement under which they agreed that only SGI would bid at the auctions and then assign an interest in the acquired leases to GEC. The department determined that the agreement was not part of any procompetitive or efficiencyenhancing collaboration, and alleged that because both companies were not competing in the bidding process, the United States received less revenue from the sale of the four leases than it would have had SGI and GEC competed at the auctions.

We do not have all of the facts in the GEC/SCI matter, so it is difficult to know whether this was just a "naked agreement not to compete" as the DOJ seems to suggest or whether GEC and SCI believed they were forming a legitimate joint venture in which the non-compete arrangement was ancillary to other expected procompetitive joint-venture benefits. However, it is important to remember that any agreement or joint venture that results in a reduction in the number of bidders or divides markets by area or customer (including AMIs or non-compete agreements) can raise antitrust concerns. These arrangements may be perfectly okay under antitrust law, but the analysis is always very fact-dependent. If you have any questions, please do not hesitate to contact one of the antitrust lawyers here at the firm.

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