Chesapeake Energy

While reviewing dozens of e-mails exchanged between the top officials of Chesapeake Energy Corporation (NYSE:CHK) and EnCana Corporation (NYSE:ECA). Reuters found that the two rivals shared confidential information that gave Chesapeake an upper hand in Michigan land deal and sent the prices to record lows.

The e-mails were exchanged between Chesapeake CEO Aubry McClendon, one of his deputies, and the head of Encana’s US operations, Jeff Wojahn. Reuters cites an e-mail sent by McClendon to his deputy on June 16, 2010 saying “It is time to smoke a peace pipe with Encana if we are bidding each other up”. In response, the deputy said that he had already contacted Encana to discuss how they could avoid bidding each other up in Michigan. Again, McClendon sent a ‘Thank You” e-mail. The land prices discussed in the exchange fell from $1,413 in June to $46 in the October.

The antitrust investigators argue that asking your competitor if they will lease or exit the market, is a collusion. The Justice Department and Michigan authorities are probing the matter to find whether two energy giants have violated any laws by planning to suppress the prices. The Justice Department began probing into matter earlier this month.

According to US Antitrust Law, exchanging information is not illegal, unlike price-fixing and bid-rigging. However, the courts found that it is anti-competitive when information is exchanged privately. Some of the antitrust law experts have downplayed the issue by saying that it might simply be an effort to gather market intelligence.

Both the companies acknowledged that they held talks, but it was to discuss if they can bid jointly in the auction, which was completely legal. Spokespersons from both the companies said that the companies couldn’t reach an agreement.

Reuters found in May that Chesapeake CEO McClendon had raised $1.5 billion from one of the companies, which Chesapeake Energy Corporation (NYSE:CHK) conducted businesses. Later, CEO McClendon was also found to operate a private hedge fund with $200 million assets from Chesapeake headquarters. Over the past several months, the company and CEO in particular have come over intense scrutiny over various allegations.