Change of Heart

In Washington this week, just as a grand jury was about to consider the Government's criminal case against five big oil companies* on cartel charges, the U.S.

suddenly changed its course. The Government, which planned to base its case on a 900-page report by the Federal Trade Commission (TIME, Sept. 1), had hoped to get a criminal indictment charging the companies with splitting most of the free world's oil output between them, and fixing prices among themselves to eliminate competition. But this week the U.S. unexpectedly offered to drop the criminal charges, provided the companies would produce the voluminous records needed so that the Government could go ahead with a civil suit.

The decision to drop the criminal action was made by the National Security Council, top U.S. policymaking body, at the request of the State and Defense Departments. These top agencies reasoned that a criminal indictment against the companies would 1) discourage U.S. private investment abroad at precisely the time when it is needed the most, and 2) provide any foreign oil-producing nation with an excuse to break its U.S. contracts at will.

The oil companies agreed with all that, but not with the idea of automatically subjecting themselves to a civil suit even though the Government indicated it was willing to settle a civil case by an out-of-court consent decree. Oil company law yers, after a stormy meeting with Attor ney General James McGranery, called the offer "outrageous blackmail" and said they would never accept such an "insulting" proposal. Meanwhile, the companies, except Gulf, were still awaiting trial of another suit charging them with over pricing oil sold to ECA.

* Jersey Standard, Standard of California, Socony-Vacuum, Texas Co., Gulf.

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