Federal Merger Review Authorities and Electric Utility Restructuring
CRS Report for Congress
Federal Merger Review
Electric Utility Restructuring
Updated January 23, 2004
Aaron M. Flynn
American Law Division
Janice E. Rubin
American Law Division
Michael V. Seitzinger
American Law Division
Congressional Research Service ˜ The Library of Congress
Federal Merger Review Authorities and Electric Utility
Reform of federal agency oversight of electric utility mergers is among the
issues addressed in the conference report of H.R. 6, the Energy Policy Act of 2003.
The current version of the bill would repeal the Public Utility Holding Company Act
of 1935 (PUHCA), fundamentally altering the current regulatory system by curtailing
Securities and Exchange Commission (SEC) involvement in the merger oversight
process. The conference report also incorporates provisions from both the House and
Senate versions of the bill, including changes to the merger review process conducted
by the Federal Energy Regulatory Commission (FERC) and the antitrust agencies.
This report will explain the regulatory environment now in place and address some
of the proposed changes to current merger review procedures; it will be updated as
Under current law, the primary agencies responsible for merger oversight are the
SEC, FERC, the Department of Justice (DOJ) and the Federal Trade Commission
(FTC). Each agency’s role in merger oversight is governed by agency specific
federal statutes, providing oversight responsibilities differing in purpose and
SEC responsibilities are governed by PUHCA, which defines and regulates
public utility holding companies, subjecting such entities to, among other things,
merger, acquisition, and holdings regulation. The SEC reviews a transaction and its
resulting business combinations to insure that they comport with the public interest.
Both the House and Senate versions of the energy bill would have repealed PUHCA,
removing SEC oversight, and transferred certain SEC responsibilities to FERC and
state regulators. The conference report adopts these provisions as well.
Section 203 of the Federal Power Act subjects all mergers of public utilities
within FERC jurisdiction to FERC review, often the most extensive agency review
undertaken. Without FERC approval, the transaction cannot occur. Under current
law, FERC’s jurisdiction attaches whenever a particular size or type of transaction
is proposed. FERC reviews these transactions to insure they will secure adequate
service and coordinates the public interest with the interest of regulated facilities.
The conference report version would amend the transactions which fall under FERC
jurisdiction and require future studies of FERC’s oversight responsibilities with an
emphasis on streamlining the process as a whole.
DOJ and FTC enforce the generally applicable antitrust laws. These laws
prevent transactions that would substantially impede competition and can require
premerger notification. Neither of these acts would be directly affected by any
provision in the currently pending legislation. However, as mentioned above, the
conference report may anticipate potential alterations to merger review authority by
SEC Review Under the Public Utility Holding Company Act...........2
The Federal Energy Regulatory Commission and Merger Review........5
Antitrust Review by DOJ and FTC................................8
Overlapping Jurisdiction of FERC, DOJ and FTC...................10
Federal Merger Review Authorities and
Electric Utility Restructuring
Disagreement over environmental and electric utility restructuring issues had
stalled comprehensive energy reform legislation for several years prior to the recent
cascading power outages.1 The power blackout of August 14, 2003, however,
provided new impetus for Congressional action regarding electricity regulation
reform.2 Among the current issues is federal oversight of electric utility mergers.3
The H.R. 6 conference report (108th Congress) combines provisions from the earlier
House and Senate versions of the legislation and would fundamentally change the
current regulatory system by, inter alia, repealing the Public Utility Holding
Company Act of 1935 (PUHCA) and modifying the oversight responsibilities of the
primary regulators.4 A brief overview of the current system and the changes that
would be wrought by the bill follows.
Under current law, four federal agencies – the Federal Energy Regulatory
Commission (FERC), the Securities and Exchange Commission (SEC), the
Department of Justice (DOJ), and the Federal Trade Commission (FTC)–regularly
play significant roles in electric utility merger oversight.5 Each agency approaches
the merger process from a different perspective, pursuant to the dictates of various
The SEC’s role is governed by the PUHCA,6 which grants the SEC the authority
to regulate mergers, acquisitions, and the holdings of “public utility holding
companies.”7 FERC generally undertakes the most extensive and substantive review
of utility mergers and does so pursuant to section 203 of the Federal Power Act
1 Samuel Goldreich, Blackout Turns Spotlight on Energy Overhaul Bill, CQ TODAY, Aug.
18, 2003, at 1,4, available at [http://www.cq.com/display.do?dockey=/usr/local/cqonline
/ docs/html/news/108/news/108-0000007 99450.html @a llnews&me tapub=CQ-
3 See Energy Policy Act of 2003, H.R. 6 (Conference Report), 108th Cong. §§ 1291, 1292
5 Nuclear Regulatory Commission review of transactions involving nuclear facilities and
Internal Revenue Service review of transaction tax consequences have been excluded
because they are not pertinent to this discussion.
6 15 U.S.C. §§ 79 et seq.
7 E.g,., 15 U.S.C. §§ 79b, i, j, k, l.
(FPA).8 DOJ and FTC are both charged with enforcing the applicable antitrust
statutes, § 7 of the Clayton Act9 and the premerger provisions of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976.10
SEC Review Under the Public Utility Holding Company Act
As mentioned above, the conference report of H.R. 6 would repeal PUHCA.
The following summarizes the Act as it currently exists.
PUHCA regulates holding companies which have subsidiaries that are electric
utility companies or that are engaged in the retail distribution of natural gas or
manufactured gas. The Act defines a holding company as:
(A) any company which directly owns, controls, or holds
with power to vote, 10 per centum or more of the outstanding
voting securities of a public-utility company or of a company
which is a holding company by virtue of this clause or clause (B)
of this paragraph, unless the Commission [Securities and
Exchange Commission], as hereinafter provided, by order
declares such company not to be a holding company; and
(B) any person which the Commission determines, after
notice and opportunity for hearing, directly or indirectly to
exercise (either alone or pursuant to an arrangement or
understanding with one or more other persons) such a
controlling influence over the management or policies of any
public-utility or holding company as to make it necessary or
appropriate in the public interest or for the protection of
investors or consumers that such person be subject to the
obligations, duties, and liabilities imposed in this chapter upon
Under PUHCA all holding companies which have subsidiaries that are engaged
in the electric utility business or in the retail distribution of natural or manufactured
gas must register with the SEC if they engage in interstate commerce.12 Several
kinds of holding companies are exempt under the Act from the registration and
regulation requirements. These exemptions include: 1) a predominantly intrastate
holding company which substantially carries on its business in the state in which it
and all of its subsidiaries are organized and derives a material part of its income from
such intrastate activity; 2) a holding company which is predominantly a public utility
company and whose operations do not extend beyond the state in which it is
8 16 U.S.C. §§ 791a et seq; 16 U.S.C. § 824.
9 15 U.S.C. § 18.
10 15 U.S.C. § 18a (Title II of P.L. 94-435).
11 15 U.S.C. § 79b(a)(7).
12 15 U.S.C. § 79d.
organized and states contiguous to it; 3. a holding company which is only incidentally
a holding company; 4. a holding company that is only temporarily a holding company
because of acquiring securities for liquidation or distribution; and 5. a holding
company that does not derive a material part of its income from a subsidiary whose
principal business is that of a public utility company.13
Holding companies required to register with the Securities and Exchange
Commission must disclose information concerning the company’s operations and a
description of its management structure. Among the items required by the
registration statement are the charter or articles of incorporation, bylaws, rights of the
different classes of securities, underwriting arrangements under which the securities
have been offered, directors and officers, material contracts, balance sheets, and
profit and loss statements.14
However, PUHCA goes beyond the disclosure-type requirements of the
Securities Act of 193315 and the Securities Exchange Act of 1934.16 PUHCA also
places substantive requirements upon the operations of a registered holding company.
Holding companies not exempt from PUHCA registration have two other
requirements–geographical integration and corporate simplification.17
The geographical integration requirement provides that a holding company is
limited to a single integrated electric or gas utility system and other businesses which
are reasonably incidental or economically necessary or appropriate to the operations
of the integrated public utility system. The SEC will permit a registered holding
company to continue to control one or more additional public utility systems if it
finds that each of the additional systems cannot be operated as an independent system
without the loss of “substantial economies”; the additional systems are located in one
state, in adjoining states, or in a contiguous foreign country; and the continued
combination of the systems is not so large as to impair the advantages of localized
management, efficient operation, or the effectiveness of regulation.18
Corporate simplification under PUHCA requires the elimination of corporate
structures or companies which unduly or unnecessarily complicate the structure of
a holding company system or which unfairly or inequitably distribute the voting
power among security holders of a holding company system. Further, the SEC is
required to take whatever action is necessary to ensure that a holding company ceases
13 15 U.S.C. § 79c(a).
14 15 U.S.C. § 79e(b).
15 15 U.S.C. §§ 77a et seq.
16 15 U.S.C. §§ 78a et seq.
17 15 U.S.C. § 79k. It should be noted that exempt companies will themselves comply with
the geographic integration and corporate simplification requirements. Should an exempt
holding company fail to meet the requirements, it would become a registered company under
PUHCA and be subject to these same regulations.
18 15 U.S.C. § 79k(b)(1).
to be a holding company concerning each of its subsidiary companies “which itself
has a subsidiary company which is a holding company.”19
PUHCA was not intended to eliminate all holding companies. Those remaining
public utility holding companies, however, must adhere to certain constraints. For
example, registered holding companies must obtain SEC approval before they or
their subsidiaries acquire any subsidiaries, utility assets, or any other interest in any
business.20 SEC approval is also usually required before any person owning 5
percent or more of the voting securities of a public utility or holding company
acquires 5 percent or more of any other public utility.21
Argument over the continuing relevance of PUHCA has been ongoing for some
time. There has been some agreement in Congress that, if not repealed, PUHCA, at
least, requires significant modernization, with the regulated entities and the SEC
itself recommending repeal on several occasions.22 Consumer groups and some state
regulators, on the other hand, have claimed that PUHCA continues to serve a
valuable purpose and should not be changed.23 PUHCA was originally enacted in the
wake of the stock market collapse of 1929 to deal with abuses stemming from
consolidated ownership of utility and non-utility interests.24 Supporters of repeal
have argued that the conditions that originally necessitated PUHCA’s enactment no
longer exist in the current market and that, even if they should arise again, state and
other federal regulators are equipped to efficiently regulate financial transactions
without SEC involvement. Additionally, supporters of repeal argue PUHCA prevents
regulated companies from fully and beneficially participating in the electric power
industry.25 Opponents of PUHCA repeal argue that PUHCA protects consumers and
19 15 U.S.C. § 79k(b)(2).
20 15 U.S.C. § 79i(a)(1).
21 15 U.S.C. § 79i(a)(2).
22 Lifting PUHCA Restrictions: Joint Hearing Before the Subcomm. on Energy and Power
and the Subcomm. on Telecommunication and Finance of the House Comm. on Energy and
Commerce, 103d Cong., 2d Sess. 16 (1994). For SEC support of repeal, see, SEC, The
Regulation of Public-Utility Holding Companies (1995); see also U.S. Securities and
Exchange Comm’n, Statement Concerning Proposals to Amend or Repeal the Public Utility
Holding Company Act of 1935 (1982); see also S. 1977, 97th Cong., 2d Sess. (1982); H.R.
Hearing Before the Subcomm. on Securities of the Senate Comm. on Banking, Housing and
Urban Affairs, 97th Cong., 2d Sess. (1982).
23 Rates & Regulation: Senate Panel to Mark Up PUHCA Real Bill; One CEO Sees Votes
for Passage, ELECTRIC UTILITY WK., April 23, 2001, available at 2001 WL 10440035;
PUHCA Bandied About at Workshop; DOE Opposes Stand-Alone Repeal, INSIDE F.E.R.C.
24 See 15 U.S.C. § 79(a)(c); Joris M. Hogan & Rodrigo J. Howard, Viable Deal Formats for
Merging Utilities, MERGERS & ACQUISITIONS, 41 (Sept./Oct. 1996).
25 See, e.g., Richard F. Vander Venn, “Michigan is Now Entering a New Electrical Energy
Field: Competition, 78 MICH. B. J. 164, 168 (1999). For additional information see CRS
Report RL32728, Electric Utility Regulatory Reform: Issues for the 109th Congress, by
the economy by effectively limiting opportunities for cross-subsidization and the
likelihood that public utility holding companies will enter into risky business
t ransact i ons. 26
Questions concerning whether PUHCA should be repealed alone or in
conjunction with comprehensive energy regulation reform have often contributed to
no final action on past attempts at PUHCA repeal. In addition, there has been
concern over the resulting roles of federal and state regulators if repeal were to take
pl ace. 27
The current version of H.R. 6 would repeal PUHCA in conjunction with other
comprehensive energy industry reforms. The bill would grant FERC and state
regulators access to the books and records of public utility holding companies and
their affiliates and provides that FERC “shall have the same powers as set forth in
section 306 through 317 of the Federal Power Act (16 U.S.C. 825e-825p) to enforce
[these provisions].”28 Section 1292 of the bill would also amend section 203(a) of
the FPA, directly placing review of public utility holding company mergers within
the ambit of FERC jurisdiction.29 The earlier Senate version of the bill would have
provided for a Government Accounting Office study on anticompetitive practices
following PUHCA repeal and would have requested recommendations for any further
legislative action to correct them, a provision the conference report does not
The Federal Energy Regulatory Commission and Merger
Section 203 of the Federal Power Act31 requires FERC to approve any merger
attempted by the public utilities within the agency’s jurisdiction before the
transaction can occur, and the section authorizes what is often the most extensive
26 See, e.g., Michael E. Stern & Margaret M. Mlycznak Stern, “A Critical Overview of the
Economic and Environmental Consequences of Deregulation of the U.S. Electric Power
Industry,” 4 ENVTL. L. 79 (1997).
27 Practicing Law Institute, “Recent Developments Affecting the Work of the Securities and
Exchange Commission–December 29, 2000,” 11234 PLI/CORP 797, 909-915, (March
28 Energy Policy Act of 2003, H.R. 6 (Conference Report), 108thCong. §§ 1264, 1265, 1270
29 Energy Policy Act of 2003, H.R. 6 (Conference Report), 108th Cong. § 1292(a)(2) (2003).
For additional information see CRS Report RL32033, Omnibus Energy Legislation (H.R.
30 Energy Policy Act of 2003, H.R. 6 (Senate version), 108th Cong. § 235 (2003).
31 16 U.S.C. §§ 791a et seq.
agency review undertaken.32 Under current law, FERC’s jurisdiction attaches
whenever a regulated utility:
(1) Proposes a transfer of its own assets valued over $50,000;
(2) Attempts to merge or consolidate; or
(3) Moves to acquire another public utility’s securities.33
Under current law, FERC reviews the above-mentioned transactions to insure
that they will be consistent with the “public interest,” a term that has never been34
explicitly defined. Still, FERC’s FPA-based public interest standard establishes a
somewhat different set of review principles than those used by the antitrust35
agencies. Whereas DOJ and FTC look for utility compliance with the terms of the
antitrust statutes, which generally punish anti-competitive behavior, FERC’s review
process can potentially condition or prevent a proposed transaction in the absence of
Until 1996, FERC followed the guidelines set forth in In re Commonwealth37
Edison Co. when reviewing merger applications. The nonexclusive factors
included: a potential merger’s effect on the operating costs and rate levels of the
newly formed company, the effect on competition in the industry, the reasonableness
of the purchase price, whether the merger was voluntary on the part of the involved
companies, the effect on federal and state regulation, and the contemplated
accounting treatment of the merged entity.38
32 16 U.S.C. § 824b. This section states: “No public utility shall sell, lease, or otherwise
dispose of the whole of its facilities subject to the jurisdiction of the Commission, or any
part thereof of a value in excess of $50,000, or by any means whatsoever, directly or
indirectly, merge or consolidate such facilities or any part thereof with those of any other
person, or purchase, acquire, or take any security of any other public utility, without first
having secured an order of the Commission authorizing it to do so.... [I]f the Commission
finds that the proposed disposition, consolidation, acquisition, or control will be consistent
with the public interest, it shall approve the same.”
35 The courts have held that the public interest standard requires an application of antitrust
principles. Gulf States Utils. Co. v. FPC, 411 U.S. 747, 760 (1973); Kansas City Power &
Light Co. v. FPC, 554 F.2d 1178, 1184 (D.C.Cir. 1977). FERC has complied with these
rulings but also weighs “other important public interest considerations.” Utah Power &
Light Co., 45 F.E.R.C. ¶ 61,095, at 61, 283 (1988).
36 Albert A. Foer and Diana L. Moss, Electricity in Transition: Implication for Regulation
and Antitrust, 24 ENERGY L. J. 89, 100 (2003).
37 In re Commonwealth Edison Co., 36 F.P.C. 927 (1966).
38 Id. at 14-15.
In 1996, as policy was shifting toward the creation of a competitive electric
industry, FERC altered its merger review policy, setting forth its revised position in
Order 592.39 FERC’s revised position limits review to prospective effects on
competition, rates, and regulation.40 As to competition, the Commission adopted the
guidelines generally used by DOJ and FTC in evaluating antitrust concerns.41
However, several differences remain between FERC review and the analysis
conducted by its antitrust counterparts. The analysis of merger impact on rates and
federal and state regulation stems from the public interest standard and does not have
immediate corollaries in antitrust review, as the FERC standard is geared to assess
merger impact from consumer rate protection, state interest, and regulatory efficiency
points of view.42 In addition, unlike the antitrust agencies, under FERC review the
burden of proving consistency with the merger guidelines falls upon the regulated
Debate over the extent to which FERC should continue to review electric utility
mergers has accounted for a portion of the controversy surrounding the new energy
legislation.44 Proponents of FERC’s continuing role in merger review cite the
agency’s expertise in the field and its specialized review focus based upon a public
interest standard. Proponents also argue that, until the market has been competitive
for a sufficiently long time, the antitrust agencies will be poorly equipped to
accurately gauge a participant’s market power.45 Those opposed to FERC’s
involvement cite the development of competition in the industry as making agency
involvement beyond DOJ/FTC antitrust oversight unnecessarily duplicative.
Opponents also argue that the increased transaction costs of multiple agency review
39 Inquiry Concerning the Commission’s Merger Policy Under the Federal Power Act: Policy
Statement, Order No. 592, 61 Fed. Reg. 68,595 (1996), FERC Statutes and Regulations ¶
(hereinafter “1996 Policy Statement”).
40 Id. at 61 Fed. Reg. 68606.
41 Id.; U.S. Department of Justice and Federal Trade Commission, Horizontal Merger
Guidelines, 57 Fed. Reg. 41,552, revised 41 Trade Reg. Rep.(CCH) ¶ 13,104 (Apr. 8, 1997).
Additionally, FERC has issued a final rule implementing this policy at 18 C.F.R. § 33
(2003). These regulations set out the filing requirements for mergers and other transactions
in an attempt to streamline the review process.
42 1996 Policy Statement, 61 Fed. Reg. 68596.
43 5 U.S.C. § 556(d) (2003)(“Except as otherwise provided by statute, the proponent of a rule
or order has the burden of proof.”).
44 See Samuel Goldreich, Blackout Turns Spotlight on Energy Overhaul Bill, CQ TODAY,
Aug. 18, 2003,at 1,4, available at [http://www.cq.com/display.do?dockey=/usr/local
/cqonline/docs/html/news/108/news/108-00000 0 799450.html @a llnews&me tapub=CQ-
45 See, e.g., Joel I. Klein (then Assistant Attorney General in charge of the Antitrust
Division), Making the Transition from Regulation to Competition: Thinking About Merger
Policy During the Process of Electric Power Restructuring, Address Before the FERC (Jan.
and the regulatory uncertainty that stems from the “public interest” standard are
further indications that the system is not optimally structured.46
The conference report combines elements from both the House and Senate
versions of H.R. 6. The current bill would not fundamentally alter FERC’s review
process or mission, although it would amend the considerations and types of
transactions FERC must take into account. Section 1292 of the proposed legislation
would effect the following changes:
(1) Increase FERC’s jurisdictional amount from $50,000 to $10,000,000 for
transactions disposing of a utilities’ own facilities or for a utility’s acquisition of
an interest in another utility;
(2) Require FERC review of any merger or consolidation involving an electric
utility acquisition of existing electricity generating facilities; and
(3) Require review of holding company acquisitions and mergers as the SEC47
currently does under PUHCA.
Additionally, section 1291 would require analysis by DOE, FERC, and DOJ to
determine which, if any, of FERC’s current oversight responsibilities are duplicative
of the authority of other agencies or authority already vested in FERC by other
sections of the FPA.48 While this analysis would not in itself substantially alter the
current regulatory scheme, it could lead to a more significant change in the future.
Antitrust Review by DOJ and FTC
DOJ and FTC each enforce the Clayton Act and Hart-Scott-Rodino Antitrust
Improvements Act, both of which will generally apply to electric utility mergers.
Accordingly, in addition to whatever review is required by FERC, mergers in the
energy industry are reviewed from the perspective of their compliance with the
requirements of antitrust/economic market-based concerns by DOJ and FTC. Section
7 of the Clayton Act prohibits mergers or acquisitions which “substantially” lessen
competition or which “tend to create a monopoly”; the Premerger Notification
provisions of the Hart-Scott-Rodino Act require that certain mergers and acquisitions
(those meeting applicable size and other criteria) be notified to both the Attorney
General and the Chairman of the Federal Trade Commission prior to consummation49
of the transaction. The Premerger Notification statute prohibits the consummation
46 Martin A. Marquis, DOJ, FTC and FERC Electric Power Merger Enforcement: Are There
Too Many Cooks in the Merger Review Kitchen?, 33 LOY. U. CHI. L. J. 783, 788-89
47 Energy Policy Act of 2003, H.R. 6 (Conference Report), 108th Cong. § 1292 (2003).
48 Energy Policy Act of 2003, H.R. 6 (Conference Report), 108th Cong. § 1291 (2003).
49 The requirement that parties to a proposed merger notify the Attorney General and the
of any transaction covered by it prior to the expiration of a statutorily specified
“waiting period” unless the reviewing agency grants an “early termination.”50
Implied exemptions from the antitrust laws, except when application of the
antitrust laws would frustrate another congressionally mandated policy or scheme,
are not assumed (e.g., merger transactions are not presumed exempt from antitrust
challenge by DOJ or the FTC because they have been approved by, in this case,
Repeals of the antitrust laws by implication from a regulatory statute are strongly
disfavored, and have only been found in cases of plain repugnancy between the51
antitrust and regulatory provisions.
Moreover, 16 U.S.C. section 2603 currently states that “[n]othing in this [Public
Utility Regulatory Policies] Act ... affects
(1) the applicability of the antitrust laws to any electric utility ..., or
(2) any authority of the Secretary or of the [Federal Energy Regulatory]
Commission under any other provision of law (including the Federal Power Act
[15 U.S.C.A. § 791 et seq.] and the Natural Gas Act (15 U.S.C.A. § 717 et seq.)
respecting unfair methods of competition or anticompetitive acts or practices.
Chairman of the FTC prior to the consummation of the transaction – premerger review -
does contain some exemptions, although none pertaining to the electric utility industry (see,
e.g., 15 U.S.C. §§ 18a(c)(7) and 18a(c)(8)); but even those exemptions pertain only to the
requirement that documents relating to a future, proposed merger transaction be filed with
the Attorney General and the FTC, and not to the mergers themselves.
50 15 U.S.C. §§ 18a(b)(1),(2).
51 Otter Tail Power Co. v. U.S., 410 U.S. 366, 372 (1973) quoting United States v.
Philadelphia National Bank, 374 U.S. 321, 350-51 (1963). See also National Gerimedical
Hospital and Gerontology Center v. Blue Cross, 452 U.S. 378, 388-389 (1981): “’Implied
antitrust immunity is not favored, and can be justified only by a convincing showing of clear
repugnancy between the antitrust laws and the regulatory system,’” quoting from United
States v. National Association of Securities Dealers, 422 U.S. 694, 719-720 (1975); “[Our
earlier] holdings [including Otter Tail] are based on the guiding principle that, where
possible, ‘the proper approach ... is an analysis which reconciles the operation of both
statutory schemes with one another, rather than holding one completely ousted,’” quoting
from Silver v. New York Stock Exchange, 373 U.S. 341, 357 (1963); “Repeal is to be
regarded as implied only if necessary to make the [subsequent law] work, and even then
only to the minimum extent necessary,” quoting from Silver at 357.
Overlapping Jurisdiction of FERC, DOJ and FTC
As noted supra at pp. 5-8, mergers in the electric utility industry are also
reviewed by FERC pursuant to 16 U.S.C. section 824b. This section requires a
“public utility” subject to FERC jurisdiction to secure FERC approval before
undertaking action to “sell, lease, or otherwise dispose of” its facilities, merge, or
consolidate; FERC’s approval must be granted provided that it finds that the
proposed transaction would be “consistent with the public interest.”
While an industry-specific regulatory agency is presumed to have the expertise
to know whether a particular proposed transaction would be in the “public interest”
or would further the “public convenience and necessity,” the regulatory agency may
have neither the expertise or the inclination to evaluate the antitrust/economic market
implications of a transaction. In any event, there is no requirement that a regulatory
agency utilize the antitrust laws, although it may be encouraged to consider them, or
at least the competitive consequences of a transaction. Similarly, although the
antitrust agencies possess expertise concerning the likely competitive or market
aspects of utility mergers, they may not be steeped in the intricacies of the electric
utility industry itself: “... while the Justice Department and the Commission have
shared jurisdiction in this area, our statutory responsibilities and missions are52
somewhat different.” Thus, while DOJ, FTC and FERC each utilize the DOJ/FTC
Horizontal Merger Guidelines (Guidelines),53 and theoretically at least, all are
proceeding from the same assumptions, and will, on the basis on the Guidelines, all
reach the same conclusion with respect to particular merger transactions, the differing
prisms through which the Guidelines are necessarily filtered may produce differing
results; and that has been generally accepted:
Activities which come under the jurisdiction of a regulatory agency nevertheless
may be subject to scrutiny under the antitrust laws.
In California v. FPC, 369 U.S. 482, 489 ... the Court held that approval of
an acquisition of the assets of a natural gas company by the Federal Power
Commission pursuant to § 7 of the Natural Gas Act “would be no bar to (an)
antitrust suit.” Under § 7, the standard for approving such acquisitions is “public
convenience and necessity.” Although the impact on competition is relevant to
the Commission’s determination, the Court noted that there was “‘no pervasive
regulatory scheme” including the antitrust laws that ha(d) been entrusted to the
Commission.’” Id. at 485. Similarly, in United States v. Radio Corporation of
America, 358 U.S. 334 ...  the Court held that an exchange of radio
stations that had been approved by the Federal Communications Commission as54
in the ‘public interest’ was subject to attack in an antitrust proceeding.
52 Klein, supra, note 46.
53 Promulgated in 1992 and revised in 1997 to take account of possible efficiencies resulting
from a merger transaction. FERC utilizes the Guidelines to further its examination of
utilities’ market power.
54 Otter Tail Power Co. v. U.S., supra, note 4 at 372, 373 (parts of citations omitted;
A further point concerning the respective abilities of FERC and the antitrust
agencies to address adequately the issue of market power in a restructured electric
power industry which may have important consequences in a future, deregulated
electric utility industry has been noted by DOJ: There is no concept of “no fault”
monopolization in antitrust law; the mere fact that an entity is a particular size is, by
itself, of no antitrust significance; the antitrust agencies may not, therefore, order the
divestiture (restructuring) of any entity deemed to be “too big” unless that entity has
achieved or is maintaining its monopoly position by virtue of something violative of
the antitrust laws. The Antitrust Division has expressed some thoughts on its
inability to challenge market structure in the electric utility industry and a possible
means of addressing that concern:
In other words, to whatever extent restructured electric power markets are
too highly concentrated to yield pricing at or near competitive levels, the
antitrust laws provide no remedy. To address these kinds of structural
problems, some states have encouraged or required divestiture as part of
their restructuring efforts, and these divestiture efforts have progressed
substantially. In support and furtherance of such efforts, the Antitrust
Division suggested in testimony before the House Judiciary Committee last
June that Congress might want to look into providing authority to order
divestiture in any federal restructuring legislation. Such authority, if
conferred, would presumably go to the [Federal Electric Regulatory]
The current bill would not directly affect either of the antitrust statutes. It may,
however, anticipate alterations to the current scheme of merger review: Section 1291
would require FERC, the Secretary of Energy, and the Attorney General to conduct
a study of whether FERC merger review authority under section 203 of the Federal
Power Act is “duplicative of authorities vested in other agencies of Federal and State
55 Klein, supra, note 46 (emphasis added), referencing the suggestion put forth in the June
Antitrust Division, Department of Justice, before the House Committee on the Judiciary,
during the hearing, “Legislative and Oversight Hearing on Antitrust Aspects of Electricity
Deregulation,” 105th Cong.
56 Energy Policy Act of 2003, H.R. 6 (Conference Report), 108th Cong. § 1291 (2003).