Federal Register, Volume 74, Number 76, April 22, 2009, Pages 18285-18448 Page: 18,313
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Federal Register/Vol. 74, No. 76/Wednesday, April 22, 2009/Proposed Rules
standard under SEC Rule 10b-5.96 The
Commission discusses in further detail
the intended application of the term
"knowingly" in Section IV.D.2.b.1.
4. Section 317.2(d): "Person"
Section 317.2(c) of the initially
proposed Rule defined the term
"person" to mean: "any individual,
group, unincorporated association,
limited or general partnership,
corporation, or other business entity." 97
PMAA and Navajo Nation were the only
commenters to address this definition,
and both agreed that the definition is
appropriate.98 The Commission believes
that this definition is consistent with
the jurisdictional reach of the FTC
Act,99 as well as with prior usage in
other FTC rules.100 Therefore, the
initially proposed definition of
"person" is retained without
modification and set forth in Section
317.2(d) of the revised proposed Rule.
5. Section 317.2(e): "Petroleum
Section 317.2(d) of the initially
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."101 The
initially proposed Rule also defined
"petroleum distillates" to include
"finished fuel products, other than
'gasoline,' produced at a refinery or
blended in tank at a terminal."102 Two
commenters supported the proposed
definition of "petroleum distillates,"103
while another asked whether the
definition of "petroleum distillates"
included heavy fuel oils (e.g., No. 5 and
No. 6 fuel oils).104 Another commenter
96 73 FR at 48329 (citing SEC v. Steadman, 967
F.2d 6436, 641-42 (D.C. Cir. 1992)); see also
Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d
1033, 1045 (7th Cir. 1977), cert. denied, 434 U.S.
97 73 FR at 48325.
98 PMAA at 3 ("The definition of... 'person' ...
seem[s] appropriate."); Navajo Nation at 8 (adopting
the FTC's proposed definition of "person" in its
recommended rule text).
99 See 73 FR at 48325.
100oo See, e.g., Telemarketing Sales Rule, 16 CFR
310.2(v); Disclosure Requirements and Prohibitions
Concerning Franchising, 16 CFR 436.1(n).
1o1 73 FR at 48325.
102 73 FR at 48325.
103 PMAA at 3 ("The definition of... 'petroleum
distillates' ... seem[s] appropriate."); Navajo Nation
at 8 (adopting the FTC's proposed definition of
"petroleum distillates" in its recommended rule
104 Sutherland at 7.
argued that any final rule should reach
biodiesel and other renewable fuels.105
The definition of "petroleum
distillates" now in revised proposed
Rule Section 317.2(e) remains
unchanged from the initially proposed
Rule. The Commission clarifies that the
term "petroleum distillates" 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. The definition, therefore,
does not include heavy fuel oils.
As discussed in the definition of
"gasoline," the Commission tentatively
has determined not to extend the
definition of "petroleum distillates" to
include renewable fuels, such as
biodiesel. To do so would expand the
reach of the revised proposed Rule
beyond the products-"crude oil[,]
gasoline or petroleum distillates"
expressly specified in Section 811 of
EISA. The Commission further
addresses the intended application of
the revised proposed Rule to conduct
implicating non-covered products, such
as renewable fuels, in its discussion of
the "in connection with" language in
Section IV.D.2.a.2. below.
6. Section 317.2(f): "Wholesale"
Section 317.2 (e) of the initially
proposed Rule defined the term
"wholesale" to mean "purchases or
sales at the terminal rack level or
upstream of the terminal rack level.
Transactions conducted at wholesale do
not include retail gasoline sales to
consumers."106 A few commenters
generally agreed with the Commission's
proposed definition,107 and two
commenters, MS AG and PMAA,
expressly supported including sales at
the terminal rack level.108 PMAA
asserted that manipulation at the rack
level would directly affect "the
thousands of PMAA members whose
trucks load at these terminal racks tens
of thousand times each day. "109
Other commenters, however, opposed
including transactions at or downstream
of the terminal rack level, and they
proposed revising the definition of
"wholesale" to limit its meaning to
o105 ATA at 3.
106 73 FR at 48326.
107 See, e.g., Navajo Nation at 8 (adopting the
FTC's proposed definition of "wholesale" in its
recommended rule text); PMAA at 3 ("PMAA is in
agreement with the Commission's definition of
o108 MS AG at 3; PMAA at 3; see also IPMA at
4 (agreeing that "'wholesale' means purchases at the
terminal rack or upstream of the terminal rack");
Platts (Kingston), Tr. at 154 (stating that "[w]hen I
hear wholesale, I tend to think of [it] as rack").
109 PMAA at 3.
purchases or sales of product in "bulk"
quantities.110 A few commenters argued
that, although the term by definition
included rack sales, public policy
considerations supported limiting its
scope. These commenters contended
that "rack pricing decisions are
qualitatively different from those that
arise in market-based bulk
transactions,"111 and that rack pricing
practices were unlikely to affect overall
price levels in markets served by a
terminal or group of terminals.112 They
further argued that applying the Rule to
rack transactions "could jeopardize the
ability of wholesale suppliers to
respond to market conditions," and
would also impose significant
compliance burdens on the industry.113
The Commission finds the arguments
advocating the exclusion of rack sales
from the definition of "wholesale" to be
unpersuasive, and at this time
tentatively has determined not to limit
the definition to bulk volume sales. As
the Commission stated in the NPRM,
and as some commenters conceded,
terminal rack sales are "wholesale"
transactions as that term is commonly
defined.114 Excluding rack sales from
the definition would place the revised
proposed Rule at odds with the express
language of EISA, which directs the
Commission to prohibit manipulative
conduct in wholesale markets.
Moreover, prohibited conduct may in
fact occur at the terminal rack level in
connection with wholesale petroleum
transactions, to the detriment of
consumers. Such a determination
requires analysis on a case-by-case
110 API and NPRA, for example, suggested that
the Commission limit the term "wholesale" to
"bulk purchases or sales in contract quantities of
20,000 barrels or more, delivered or received via
pipeline, marine transport or rail, at or near a
location for which a price publication firm
publishes a reference price." API at 30; NPRA at 30-
31, see also SIGMA at 3 (suggesting that the
Commission define "wholesale" to include only
"transactions involving quantities of product equal
to or greater than the minimum pipeline tenders or
barge volumes via which a terminal or terminal
cluster receives supplies").
111 API at 29; NPRA at 30.
112 SIGMA at 2 (contending that although
"[p]articular pricing practices at the rack level may
have an impact on a particular supplier's
customers," such practices would likely not "alter
overall price levels in the markets served out of a
terminal or terminal cluster"); see also API at 30;
NPRA at 30 n.46 ("Wholesale rack prices are
limited to a relatively small geographic area.").
113 Additionally, API and NPRA argued that the
Commission already has a price monitoring
program for terminal rack pricing in place and it
has not identified a "problem at the wholesale rack
level that would suggest a regulatory remedy is
required." API at 29-30; NPRA at 30.
114 73 FR at 48326; see NPRA at 30; API at 29-
30 (stating that its reasons for excluding practices
at the terminal rack level and below "from the
scope of the Rule are not definitional, but rather
based on public policy").
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United States. Office of the Federal Register. Federal Register, Volume 74, Number 76, April 22, 2009, Pages 18285-18448, periodical, April 22, 2009; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc132938/m1/35/: accessed May 26, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.