[DOCID: f:hr160.110]
From the House Reports Online via GPO Access
[wais.access.gpo.gov]
110th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 110-160
======================================================================
NO OIL PRODUCING AND EXPORTING CARTELS ACT OF 2007
(NOPEC)
_______
May 21, 2007.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Conyers, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
SUPPLEMENTAL VIEWS
[To accompany H.R. 2264]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the bill
(H.R. 2264) to amend the Sherman Act to make oil-producing and
exporting cartels illegal, having considered the same, reports
favorably thereon with an amendment and recommends that the
bill as amended do pass.
CONTENTS
Page
The Amendment.................................................... 2
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 3
Hearings......................................................... 6
Committee Consideration.......................................... 6
Committee Votes.................................................. 6
Committee Oversight Findings..................................... 6
New Budget Authority and Tax Expenditures........................ 6
Congressional Budget Office Cost Estimate........................ 6
Performance Goals and Objectives................................. 7
Constitutional Authority Statement............................... 8
Advisory on Earmarks............................................. 8
Section-by-Section Analysis...................................... 8
Changes in Existing Law Made by the Bill, as Reported............ 8
Supplemental Views............................................... 10
The Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``No Oil Producing and Exporting
Cartels Act of 2007'' or ``NOPEC''.
SEC. 2. SHERMAN ACT.
The Sherman Act (15 U.S.C. 1 et seq.) is amended by adding after
section 7 the following:
``Sec. 7A. (a) It shall be illegal and a violation of this Act for
any foreign state, or any instrumentality or agent of any foreign
state, to act collectively or in combination with any other foreign
state, any instrumentality or agent of any other foreign state, or any
other person, whether by cartel or any other association or form of
cooperation or joint action--
``(1) to limit the production or distribution of oil,
natural gas, or any other petroleum product;
``(2) to set or maintain the price of oil, natural gas, or
any petroleum product; or
``(3) to otherwise take any action in restraint of trade
for oil, natural gas, or any petroleum product;
when such action, combination, or collective action has a direct,
substantial, and reasonably foreseeable effect on the market, supply,
price, or distribution of oil, natural gas, or other petroleum product
in the United States.
``(b) A foreign state engaged in conduct in violation of subsection
(a) shall not be immune under the doctrine of sovereign immunity from
the jurisdiction or judgments of the courts of the United States in any
action brought to enforce this section.
``(c) No court of the United States shall decline, based on the act
of state doctrine, to make a determination on the merits in an action
brought under this section.
``(d) The Attorney General of the United States may bring an action
to enforce this section in any district court of the United States as
provided under the antitrust laws.''.
SEC. 3. SOVEREIGN IMMUNITY.
Section 1605(a) of title 28, United States Code, is amended--
(1) in paragraph (6), by striking ``or'' after the
semicolon;
(2) in paragraph (7), by striking the period and inserting
``; or''; and
(3) by adding at the end the following:
``(8) in which the action is brought under section 7A of
the Sherman Act.''.
Purpose and Summary
With control of 40% of the world's production, OPEC has
substantial influence over the price of oil. OPEC member
nations have extensive oil reserves and therefore can readily
increase supply and lower prices. In addition, many of the non-
OPEC oil-producing countries--such as the United States--have
large private oil-producing sectors. These companies have very
little spare production capacity and cannot easily increase
production in the event of shortages or otherwise expand to
increase market share. \1\
---------------------------------------------------------------------------
\1\ U.S. Energy Information Administration, Country Analysis Briefs
--Non-OPEC Fact Sheet, Nov. 2005, at http://www.eia.doe.gov.
---------------------------------------------------------------------------
H.R. 2264, the ``No Oil Producing and Exporting Cartels Act
of 2007 or `NOPEC,' '' deems it to be illegal and a violation
of our Nation's antitrust law for any foreign state, or any
instrumentality or agent of any foreign state, to act
collectively whether by cartel or any other form of cooperative
action to limit the production or distribution of oil, natural
gas, or any other petroleum product or to set the price of such
commodities. The bill exempts OPEC and other Nations from the
provisions of the Foreign Sovereign Immunities Act to the
extent those governments are engaged in price-fixing and other
anticompetitive activities with regard to pricing, production,
and distribution of petroleum products. It also makes clear
that the so-called ``act of state'' doctrine does not prevent
courts from ruling on antitrust charges brought against foreign
governments, and that foreign governments are ``persons''
subject to suit under the antitrust laws. Finally, it
authorizes the Department of Justice to bring lawsuits in
Federal court against oil cartel members.
Background and Need for the Legislation
BACKGROUND ON OPEC
The Organization of Petroleum Exporting Countries (OPEC)
produces approximately 40% of the world's petroleum. The OPEC
countries include Algeria, Indonesia, Iran, Iraq, Kuwait,
Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates,
and Venezuela. OPEC states that its mission ``to coordinate &
unify the petroleum policies of Member Countries & ensure the
stabilization of oil prices in order to secure an efficient,
economic & regular supply of petroleum to consumers, a steady
income to producers & a fair return on capital to those
investing in the petroleum industry.'' \2\
---------------------------------------------------------------------------
\2\ See http://www.opec.org/home.
---------------------------------------------------------------------------
OPEC, to fulfill its stated mission, has taken steps
throughout the years to control the supply and price of crude
oil in an effort to ``stabilize'' prices and secure ``a steady
income to producers.'' To this end, OPEC has undertaken
numerous actions, as a matter of routine, to fix supply and
prices. These actions, as compiled by the United States Energy
Information Administration, include the following concerted
actions taken in recent years:
<bullet> LSeptember 24, 2003: OPEC decides to lower its
production quota from 25.4 million barrels per day to
24.5 million barrels per day, effective November 1,
2003.
<bullet> LFebruary 10, 2004: OPEC decides to lower
OPEC's production quota from 24.5 million barrels per
day to 23.5 million barrels per day, effective April 1,
2004.
<bullet> LMarch 31, 2004: OPEC re-confirms the new
production ceiling of 23.5 million barrels per day
effective April 1, 2004, which was agreed upon on
February 10, 2004.
<bullet> LJune 3, 2004: OPEC decides to increase its
production quota to 25.5 million barrels per day
effective July 1, 2004, and to 26.0 million barrels per
day effective August 1, 2004.
<bullet> LSeptember 15, 2004: OPEC decides to increase
its production quota to 27.0 million barrels per day
effective November 1, 2004.
<bullet> LDecember 10, 2004: OPEC decides to output
quotas unchanged, but pledges to cut overproduction
over quota levels by 1 million barrels per day
effective January 1, 2005.
<bullet> LJanuary 30, 2005: OPEC decides to leave its
target production levels unchanged, and to temporarily
suspend its price band mechanism.
<bullet> LMarch 16, 2005: OPEC decides to increase its
production quota to 27.5 million barrels per day
effective immediately.
<bullet> LJune 15, 2005: OPEC decides to increase its
production quota to 28 million barrels per day
effective July 1, 2005 and authorizes an additional
500,000 barrels per day increase in its quotas ``should
oil prices remain at current levels or continue to rise
further.'' OPEC also decides to replace its previous
OPEC reference basket of seven crude oils with a new
one consisting of eleven crude streams, effective June
16, 2005.
<bullet> LSeptember 19, 2005: OPEC agrees to make
available to the market all of the spare capacity in
member countries (estimated at 2 million barrels per
day by OPEC), should it be called for, for a period of
3 months, starting October 1, 2005.
<bullet> LDecember 12, 2005: OPEC decides to leave
output quotas unchanged.
<bullet> LJanuary 31 , 2006: OPEC decides to leave
output quotas unchanged.
<bullet> LMarch 8, 2006: OPEC decides to leave output
quotas unchanged.
<bullet> LJune 1, 2006: OPEC decides to leave output
quotas unchanged. \3\
---------------------------------------------------------------------------
\3\ U.S. Energy Information Administration, Country Analysis
Briefs--OPEC, Aug. 6, 2006, at http://www.eia.doe.gov.
Even though OPEC controls ``only'' 40% of the world's
production, its influence over prices is substantial. First,
the OPEC countries have extensive reserves and can easily
increase supply and lower prices. Second, many of the non-OPEC
oil-producing countries--such as the United States--have large
private oil-producing sectors. These companies have very little
spare production capacity and cannot easily increase production
in the event of shortages or otherwise expand to increase
market share. \4\
---------------------------------------------------------------------------
\4\ U.S. Energy Information Administration, Country Analysis
Briefs--Non-OPEC Fact Sheet, Nov. 2005, at http://www.eia.doe.gov.
---------------------------------------------------------------------------
ANTITRUST ANALYSIS
If private actors collusively controlled supply and prices
in the manner that OPEC member nations do, there is no question
that their conduct would be illegal as a per se violation of
the Sherman Act, and that they would be subject to criminal and
civil liability. \5\ Typically, however, foreign states are
immune from suit in Federal court. Section 1604 of title 28 of
the United States Code provides that a ``foreign state shall be
immune from the jurisdiction of the courts of the United States
and of the States [with specific exceptions].'' \6\
---------------------------------------------------------------------------
\5\ Section 1 of the Sherman Act provides in pertinent part:
Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce
among the several States, or with foreign nations, is
declared to be illegal. Every person who shall make any
contract or engage in any combination or conspiracy hereby
declared to be illegal shall be deemed guilty of a felony
---------------------------------------------------------------------------
[punished as provided by law].
15 U.S.C.A. Sec. 1 (2006).
Although Sec. 1 of the Sherman Act provides criminal penalties for
price-fixing and other restraints of trade, other provisions of the
antitrust laws provide for civil enforcement. For example, section 15
of the Clayton Act provides, in pertinent part:
That the several district courts of the United States are
hereby invested with jurisdiction to prevent and restrain
violations of this Act, and it shall be the duty of the
several district attorneys fo the United States, in their
respective districts, under the direction of the Attorney
General, to institute proceedings in equity to prevent and
restrain such violations.
15 U.S.C.A. Sec. 25 (2006).
---------------------------------------------------------------------------
\6\ 28 U.S.C.A. Sec. 1604 (2006)
---------------------------------------------------------------------------
One exception to sovereign immunity applies where the suit
``is based upon a commercial activity carried on in the United
States by the foreign state; or upon an act performed in the
United States in connection with a commercial activity of the
foreign state elsewhere; or upon an act outside the territory
of the United States in connection with a commercial activity
of the foreign state elsewhere and that act causes a direct
effect in the United States.'' \7\
---------------------------------------------------------------------------
\7\ 28 U.S.C.A. Sec. 1605(a)(2) (2006).
---------------------------------------------------------------------------
Although the coordination of oil production by the OPEC
countries as a means of controlling price levels would appear
to be a ``commercial activity''--and therefore not protected by
sovereign immunity--a district court in 1979 held otherwise.
The district judge concluded that the act of an OPEC member
nation ``establishing the terms and conditions for removal of
natural resources from its territory'' was a ``governmental
activity,'' not a commercial activity within the meaning of the
exception to the principles of foreign sovereign immunity. \8\
The court dismissed the antitrust suit brought by a labor union
against OPEC. One purpose of H.R. 2264 is to reaffirm that the
antitrust laws do indeed apply to the OPEC nations in their
role as commercial actors, engaging in such collusion, where
such conduct impacts the United States.
---------------------------------------------------------------------------
\8\ International Ass'n of Machinists v. Organization of Petroleum
Exporting Countries, 477 F.Supp. 553, 568 (C.D. Cal 1979). The district
judge reasoned, ``This Court agrees that this `commercial activity'
should be defined narrowly. . . . From the evidence presented to this
Court, it is clear that the nature of the activity engaged in by each
of these OPEC member countries is the establishment by a sovereign
state of the terms and conditions for the removal of a prime natural
resource to wit, crude oil from its territory.'' Id. at 567.
---------------------------------------------------------------------------
The other obstacle to antitrust lawsuits against OPEC is
the ``act of state'' doctrine, which commands courts to avoid
review of the actions of foreign governments and to defer
certain disputes with foreign government to the political
branches of the government. This doctrine was cited by the
Ninth Circuit in affirming the dismissal of the case discussed
above. \9\
---------------------------------------------------------------------------
\9\ The Ninth Circuit rested its decision not on the grounds that
sovereign immunity precluded the suit, but on the ``act of state
doctrine.''
---------------------------------------------------------------------------
H.R. 2264 minimizes any ``act of state'' doctrine concerns
with bringing an antitrust action against the OPEC nations,
because it entrusts to the Executive Branch the discretion
whether to bring charges under this provision. \10\ A court's
concern about insinuating itself in matters properly within the
bailiwick of the political branches is mitigated when Congress,
by this legislation, and the Executive Branch, by bringing the
action, explicitly authorizes judicial involvement.
---------------------------------------------------------------------------
\10\ Rus the bill authorizes only the Department of Justice to
enforce NOPEC, the Executive Branch necessarily will consider the
foreign policy implications of such a suit before bringing charges.
---------------------------------------------------------------------------
The NOPEC legislation was first introduced in the 106th
Congress, and has been reintroduced in every Congress since. It
was reported by the Senate Committee on the Judiciary, with
considerable bipartisan support, in the 106th Congress, again
in the 108th Congress, and again in the 109th Congress. In the
109th Congress, the bill passed the Senate as a provision in
the Energy Policy Act of 2005. In the 110th Congress, the
Senate Committee on the Judiciary ordered the bill favorably
reported on April 25, 2007, by unanimous consent.
Hearings
On May 16, 2007, the Antitrust Task Force of the Committee
on the Judiciary held an oversight hearing on the subject of
market failure in the oil industry and the possible uses of the
antitrust laws to restore competition in that industry, during
which the NOPEC legislation was a major topic of discussion.
Witnesses at the hearing included Representatives Bart Stupak
(D-MI) and Heather Wilson (R-NM); Richard Blumenthal, Attorney
General for the State of Connecticut; Dr. John Felmy, chief
economist at the American Petroleum Institute; and Mark Cooper,
director of research for the Consumer Federation of America.
Committee Consideration
On May 17, 2007, the Committee met in open session and
ordered the bill, H.R. 2264, favorably reported with an
amendment, by voice vote, a quorum being present.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that there
were no recorded votes during the Committee's consideration of
H.R. 2264.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 2264, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 18, 2007.
Hon. John Conyers, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2264, the No Oil
Producing and Exporting Cartels Act of 2007.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Daniel
Hoople, who can be reached at 226-2860.
Sincerely,
Peter R. Orszag,
Director.
Enclosure
cc:
Honorable Lamar S. Smith.
Ranking Member
H.R. 2264--No Oil Producing and Exporting Cartels Act of 2007.
H.R. 2264 would seek to prohibit foreign states from
working collectively to limit the production, set the price, or
otherwise restrain the trading of petroleum and natural gas
when such actions affect U.S. markets. The bill would authorize
the Department of Justice (DOJ) to enforce the legislation by
filing antitrust actions in federal courts. The bill also would
provide that foreign states that restrain trade in petroleum
and natural gas would not be immune from the judgment of U.S.
courts under the doctrine of sovereign immunity.
CBO cannot estimate a precise cost of implementing H.R.
2264 because we have no basis for assessing the likelihood that
the Administration might initiate antitrust actions against
foreign states under the bill. Based on information from DOJ on
the costs of investigations of alleged antitrust violations,
CBO estimates that similar investigations to those that might
be brought under H.R. 2264 could cost up to $4 million per
year, subject to appropriation of the necessary funds.
H.R. 2264 could result in the collection of additional
criminal or civil penalties. Collections of criminal fines are
recorded in the budget as revenues, which are deposited in the
Crime Victims Fund and later spent. Civil fines are also
recorded as revenues. CBO cannot estimate the impact of H.R.
2264 on direct spending and revenues because we cannot
determine whether DOJ would file suit against alleged
violators, whether the agencies would win such legal action, or
how much in penalties might be collected by federal agencies.
In any case, enacting those provisions would either have no
significant net impact on the deficit or would reduce future
deficits (through collections of civil fines).
H.R. 2264 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on State, local, or tribal governments.
On May 4, 2007, CBO transmitted a cost estimate for S. 879,
the No Oil Producing and Exporting Cartels Act of 2007, as
ordered reported by the Senate Committee on the Judiciary on
April 25, 2007. The two bills are similar, and our cost
estimates are the same.
The CBO staff contact for this estimate is Daniel Hoople,
who can be reached at 226-2860. This estimate was approved by
Peter H. Fontaine, Deputy Assistant Director for Budget
Analysis.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
2264 enables the United States Department of Justice to bring
lawsuits in Federal court against nations that engage in
conduct designed to fix the price of oil.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8, clause 3 of the
Constitution.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 2264 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI.
Section-by-Section Analysis
The following discussion describes the bill as reported by
the Committee.
Sec. 1. Short title. This section sets forth the short
title of the bill as the ``No Oil Producing and Exporting
Cartels Act of 2007 or (NOPEC).''
Sec. 2. Sherman Act. Section 2(a) makes it illegal for any
foreign state, or instrumentality or agent of any foreign
state, to act collectively with others to: (1) limit the
production of, (2) set or maintain the price of, or (3)
otherwise retrain trade for oil, natural gas, or any other
petroleum product, when such action has a direct, substantial,
and reasonably foreseeable effect on the market, supply, price,
or distribution of oil, natural gas, or other petroleum
product. In substance, this clarifies that the Sherman Act
reaches international state actors in the petroleum production
business.
Subsection (b) provides that a foreign state engaged in
conduct under subsection (a) shall not be immune under the
doctrine of sovereign immunity from the jurisdiction or
judgments of the courts of the United States. Subsection (c)
provides that the courts shall not decline to hear cases
brought under section 2 based on the ``act of state'' doctrine.
Subsection (d) provides that the Attorney General of the United
States may bring an action to enforce this section.
Sec. 3. Sovereign Immunity. Section 3 amends the Foreign
Sovereign Immunity Act, 28 U.S.C. Sec. 1605(a), to make it
explicit that sovereign immunity does not protect a country for
actions brought under new section 7A of the Sherman Act.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
SHERMAN ACT
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That this
Act may be cited as the ``Sherman Act''.
* * * * * * *
Sec. 7A. (a) It shall be illegal and a violation of this
Act for any foreign state, or any instrumentality or agent of
any foreign state, to act collectively or in combination with
any other foreign state, any instrumentality or agent of any
other foreign state, or any other person, whether by cartel or
any other association or form of cooperation or joint action--
(1) to limit the production or distribution of oil,
natural gas, or any other petroleum product;
(2) to set or maintain the price of oil, natural
gas, or any petroleum product; or
(3) to otherwise take any action in restraint of
trade for oil, natural gas, or any petroleum product;
when such action, combination, or collective action has a
direct, substantial, and reasonably foreseeable effect on the
market, supply, price, or distribution of oil, natural gas, or
other petroleum product in the United States.
(b) A foreign state engaged in conduct in violation of
subsection (a) shall not be immune under the doctrine of
sovereign immunity from the jurisdiction or judgments of the
courts of the United States in any action brought to enforce
this section.
(c) No court of the United States shall decline, based on
the act of state doctrine, to make a determination on the
merits in an action brought under this section.
(d) The Attorney General of the United States may bring an
action to enforce this section in any district court of the
United States as provided under the antitrust laws.
* * * * * * *
----------
SECTION 1605 OF TITLE 28, UNITED STATES CODE
Sec. 1605. General exceptions to the jurisdictional immunity of a
foreign state
(a) A foreign state shall not be immune from the
jurisdiction of courts of the United States or of the states in
any case--
(1) * * *
* * * * * * *
(6) in which the action is brought, either to
enforce an agreement made by the foreign state with or
for the benefit of a private party to submit to
arbitration all or any differences which have arisen or
which may arise between the parties with respect to a
defined legal relationship, whether contractual or not,
concerning a subject matter capable of settlement by
arbitration under the laws of the United States, or to
confirm an award made pursuant to such an agreement to
arbitrate, if (A) the arbitration takes place or is
intended to take place in the United States, (B) the
agreement or award is or may be governed by a treaty or
other international agreement in force for the United
States calling for the recognition and enforcement of
arbitral awards, (C) the underlying claim, save for the
agreement to arbitrate, could have been brought in a
United States court under this section or section 1607,
or (D) paragraph (1) of this subsection is otherwise
applicable; [or]
(7) Not otherwise covered by paragraph (2), in
which money damages are sought against a foreign state
for personal injury or death that was caused by an act
of torture, extrajudicial killing, aircraft sabotage,
hostage taking, or the provision of material support or
resources (as defined in section 2339a of title 18) for
such an act if such act or provision of material
support is engaged in by an official, employee, or
agent of such foreign state while acting within the
scope of his or her office, employment, or agency,
except that the court shall decline to hear a claim
under this paragraph--
(A) * * *
(B) Even if the foreign state is or was so
designated, if--
(i) * * *
(ii) neither the claimant nor the
victim was a national of the United
States (as that term is defined in
section 101(a)(22) of the Immigration
and Nationality Act) when the act upon
which the claim is based occurred[.];
or
(8) in which the action is brought under section 7A
of the Sherman Act.
* * * * * * *
Supplemental Views
The Organization of Petroleum Exporting Countries (OPEC)
sits atop the world's supply of oil. Founded in Baghdad in
1960, OPEC members' national oil ministers meet regularly to
discuss prices and set crude oil production quotas. OPEC's
member nations include Iran, Iraq, Kuwait, Saudi Arabia,
Venezuela, Qatar, Indonesia, Libya, the United Arab Emirates,
Algeria, and Nigeria. Together they control roughly 40% of
world oil production, and about \2/3\ of the world's proven oil
reserves. The Federal Trade Commission has found that ``OPEC .
. . continues to have a significant influence on world crude
oil prices, even though coordination among its members to
reduce output is imperfect.'' \1\
---------------------------------------------------------------------------
\1\ Federal Trade Commission, The Petroleum Industry: Mergers,
Structural Change, and Antitrust Enforcement 5 (2004).
---------------------------------------------------------------------------
Many of the OPEC regimes are either totalitarian or
unstable states. Some are openly hostile to American interests.
Few would seriously argue that the presence of such a cartel is
beneficial to the United States.
H.R. 2264, the ``No Oil Producing and Exporting Cartels Act
of 2007 or `NOPEC,' '' is an effort to end the collusive
behavior of OPEC by subjecting it to U.S. antitrust laws. H.R.
2264 does this by amending the Sherman Antitrust Act (15 U.S.C.
Sec. 1 et seq.) to make it illegal for foreign countries to
collude to restrain output or fix prices of oil, gas, or any
petroleum product, and would give authority to the U.S.
Attorney General to enforce the provisions. The bill is a
response to the Ninth Circuit's decision in International
Association of Machinists and Aerospace Workers v. OPEC, which
held that the countries constituting OPEC could not be held
liable for antitrust violations because of the act of state
doctrine.\2\ As such, the bill explicitly eliminates the
concepts of sovereign immunity and the act of state doctrine as
OPEC's defenses to an antitrust suit.
---------------------------------------------------------------------------
\2\ 649 F.2d 1354 (9th Cir. 1981).
---------------------------------------------------------------------------
H.R. 2264, while well intentioned, could have a litany of
consequences for America, both at home and abroad. I have
requested that GAO study the impact that the bill may have on
U.S. foreign policy, our trade balances, and our ability to
station troops in the Middle East. In addition, this bill could
lead to a number of retaliatory actions by these foreign
governments, including an oil embargo like the one that
occurred in 1973 and the seizure of U.S. assets abroad. At my
request, the GAO will study the likelihood of such retaliatory
actions and their impact on the U.S. economy. Separate and
apart from those concerns, the costs of enforcing a judgment
against a foreign state-owned entity are unknown and might not
be worth the effort.
Finally, I would like to note the importance of regular
order in the consideration of such important legislation. The
Antitrust Task Force held one hearing on gas prices the day
before the markup of this legislation. At that hearing, which
was repeatedly interrupted by votes on the floor and other
procedural anomalies, the legislation received scant attention.
In fact, one of the witnesses observed that there was little
that Congress could do to impact the price of gasoline in the
short term. Given the potential wide-ranging impacts that this
bill could have on the American economy and its extremely
limited value in reducing the price of gasoline in the short
term, I think it would have been wise to give it more thorough
and deliberate consideration.
Lamar Smith.
<all>